Net Energy Metering (NEM), commonly known as Net Metering, is a metering and billing arrangement designed to compensate distributed power generation (DG) systems for each generation exported to the utility grid. Net Power Metering is a metering mechanism that allows you to receive a credit for excess solar production on sunny days to offset the grid power you consume when your panels are not producing electricity.
Net metering is one method by which utilities compensate you for the electricity you generate and ensure that you receive something in exchange for the solar energy you produce but do not use.
Why does net metering exist?
Net metering policies were created with two main goals in mind: first, to promote wider usage of renewable energy across the nation and second, because utilities, and the electricity grid as a whole, can gain from the influx of free or extremely inexpensive solar energy onto the grid.
Solar energy can help balance the cost of purchasing electricity from other sources, particularly during the summer months when electricity is frequently the most expensive
What is virtual net metering?
Many states have virtual net metering, or VNEM, policies that allow you to take advantage of net metering even if you don't have solar installed on your property. In most cases, you can participate in virtual net metering by subscribing to a community solar farm in your area. The solar farm's electricity will be fed into the grid via virtual net metering, and the net metering credits will be shared among all subscribers. The energy generated by your share of the farm is sold at a discount to you, lowering your annual electricity costs by 5-15%.
The NEM customer is typically compensated per kilowatt-hour (kWh) for excess electricity exported to the grid by the utility. The level of compensation varies by location and is determined by state and local policies. In some areas, utilities may compensate NEM customers for excess generation at the full retail rate or a lower rate.
NEM policies frequently differ in the following areas:
Eligible Renewable Energy Technologies: NEM policies specify eligible renewable energy technologies such as photovoltaic, wind, geothermal electric, biomass, and fuel cells.
Program Size Caps: NEM program caps can be calculated in a variety of ways, including as a percentage of peak demand, load, or capacity. The total number of NEM systems installed in a region or utility service territory is limited by NEM program caps.
Customer Type: NEM policies specify eligible customer classes (e.g., residential, commercial).
Net Excess Generation: The manner in which consumers are given credit for net excess generation varies according to NEM policy. Depending on the policy and how the credits expire, the rate may vary.
NEM has the following advantages:
- From the standpoint of both the customer and the utility, NEM is a relatively simple billing concept.
- NEM does not necessitate changes to current retail rates.
- NEM frequently makes use of existing metering infrastructure.
- Customers receive excess electricity compensation through NEM, which raises the financial return on investment of their on-site DG systems.
The net metering policy smooth the electricity demand curve and allows utilities to better handle peak loads. Net metering reduces the strain on distribution systems and prevents losses in long-distance electricity transmission and distribution by encouraging generation near the point of consumption.