Net metering is a system that allows homeowners with solar panels to send the excess energy they produce back to the grid in exchange for credits. These credits can then be used to offset the electricity they consume from the grid when their panels aren't generating enough power, like at night or on cloudy days. It's been a key incentive for many to adopt solar energy, as it helps reduce electricity bills and shortens the payback period of solar installations.
But as we step into 2024, many people are asking: is net metering still as beneficial as it used to be? With changes in policies, evolving energy costs, and new solar technologies, it's worth taking a closer look at whether this program still makes sense for solar homeowners today.
Is Net Metering Worth It in 2025?
In 2025, net metering will still be a viable option, though with some changes. Starting January 1, Illinois will modify its policy, offering new solar customers credits only for the supply portion of their electricity bill, not the full retail rate. They will also receive a Distributed Generation Rebate of at least $300 per kilowatt. Existing solar customers will keep their current benefits for the life of their systems. Meanwhile, California's 2022 reform reduced compensation for new solar customers to address cost shifts to non-solar users, with a projected $8.5 billion annual cost by 2024.
In Germany, all electricity providers will offer dynamic tariffs by 2025, promoting off-peak usage and optimized energy consumption through smart meters.
For homeowners with high energy consumption or who live in states with favorable policies, net metering can still offer substantial savings. It's especially valuable for those who produce more energy than they consume during peak sunlight hours. But for those in areas where net metering rates have been lowered, other options, like solar batteries or energy storage, might be more beneficial. (If you are interested in home energy storage batteries, you can check out our home energy storage series)
Why Are Some People Against Net Metering?
There has been growing opposition to net metering, especially from utility companies, due to concerns about revenue loss and cost shifting.
1. Cost Shifting to Non-Solar Customers:
Critics argue that net metering can lead to a redistribution of grid maintenance costs. Solar customers reduce their utility bills through credits, contributing less to the fixed costs of maintaining the electrical grid. Consequently, these costs transferred to non-solar customers, resulting in higher electricity rates for those who do not have solar installations.
2. Financial Impact on Utilities:
Utilities express concerns that net metering reduces their revenue, as customers generate a portion of their own electricity. This reduction can impact the utilities' ability to invest in infrastructure and maintain reliable service, leading to increased rates for all customers to compensate for the shortfall.
3. Equity and Fairness Issues:
There is a perception that net metering primarily benefits more affluent individuals who can afford the upfront costs of solar installations. This situation may exacerbate economic disparities, as lower-income households, unable to invest in solar, might bear a disproportionate share of grid maintenance costs.
Which Is Better: Net Metering or Net Billing?
Net metering and net billing both allow solar homeowners to earn credits for the excess energy they produce, but the key difference lies in how these credits are valued.
Net Metering Advantages
With net metering, you receive credits at the full retail rate of electricity for the energy you send back to the grid. This means you are effectively compensated at the same rate you pay for electricity when you use it. For homeowners in states that still offer full retail net metering, this is highly beneficial as it maximizes savings by lowering electricity bills and reducing the payback period for solar systems.
Net Billing Advantages
Net billing, on the other hand, compensates you for your excess energy at a rate that’s usually lower than the retail price, closer to the wholesale price of electricity. While this might sound less attractive, net billing is often designed to be more sustainable long-term for utilities and non-solar customers. Some programs even offer time-of-use rates, where you can receive higher credits during peak demand hours, making it more flexible depending on your energy usage habits.
Which Should You Choose?
For those who live in states that still offer full retail net metering, it's the better option as it provides higher financial returns. However, if you're in an area where net billing is the norm or the only option, it can still offer solid benefits, especially when paired with solar batteries or energy storage systems to make the most of peak rates. You can check out our article: Net Metering vs Solar Battery Storage for more information.
