What is Net Metering and How Does it Work?

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Net Metering is now implemented in more than 30 states in the United States, in the sphere of renewable energy generation. It is a policy that allows private individuals to benefit from individual power generation which works in conjunction with the electric utilities. For example, a homeowner or business owner has a wind power generation system that is connected to the utility grid and produces enough power for their personal use as well as an additional surplus, in which they can profit from. The surplus electricity can be used by some other user, after it has been directed back into the utility distribution system. Therefore, unused energy can be redirected back into the grid for certain benefits to the energy generator owner. In effect, this extra power will enable the electric meter at the turbine owner's location of use to turn backward and offset their own consumption. They receive a 'credit' on future electricity bills or earn retail rates from the utilities, for the extra energy generated. This credited billing system can be monthly or even yearly and depends on the total consumption and production of energy. This proves as a huge incentive for people looking to invest in small scale renewable energy projects. Customers can now 'bank' on the power they generate, use it as per their convenience and boost the value of their produce.
One major advantage is that more often than not customers can take advantage of their existing meters to make use of net metering (though they do need to check with the concerned utility). Both residences and small business enterprises generally use a kilowatt hour meter to regulate the flow of electricity either forward or backward. Following the same system as a net metering process, the meter moves forward when the customer needs more power than is being produced and backward when there is a surplus of electricity.
In order to check whether a particular area offers this netting service, customers can check with their utilities, although most states require that at least some of the utilities offer a provision for the net metering system. Regulations do apply, as well as rules for rates and services in the case of state regulated utilities. Although a majority of the states do make provisions for net metering for wind energy generation systems, it may be limited to those of a smaller scale.
The Importance and Benefits of Net Metering:
As we know, the wind does not always have a consistent speed or volume at all given times; there is a definite variability factor. The amount of energy generated from a wind power project may not always be aligned with its demand and supply. Net metering helps balance out the fluctuations. Also, a customer can avoid costly battery and storage devices by using the net metering and grid system, enabling him to get the proper price for the energy produced.
Net metering is easy to use, uncomplicated, and economical. This system can be used to galvanize the growth and usage of small scale wind power generation. Using this renewable source of energy can be highly beneficial both economically and environmentally; not just on a local scale but in a vast global scenario.
Net metering cancels out the need for a second meter, thereby lessening installation costs borne by consumers. Customers get a better value for the energy they produce because it is in conjunction with the utilities and do not need to install a new meter.
Net metering isn't just beneficial to the customers but also to utilities and providers. The redirection of surplus energy from small scale wind power projects backing into the grid does help utilities to ease their supply loads. It also helps in eliminating costs like the administrative and meter accounting costs they would face if they bought modest amounts of surplus energy from small scale wind energy set-ups.
The costs of net metering:
Utilities end up accumulating less revenue because they are buying power at less than the wholesale price, and are consequently not earning more profits by selling power. However, utilities can offset some of the revenue lost through savings in administrative and accounting costs with the usage of net metering. The amount of revenue lost for the utility or money saved by the customer depends on varied factors; the most vital one being the actual amount of surplus electricity produced and harnessed.
Net metering is thus not only a benefit to consumers but it can be an efficient solution for the increasing demands and growing burden of the existing transmission lines. It can be used by state governments to increase energy independence and open up the market.

Vert Investment Group ("Vert") is a leading renewable energy investment advisory firm focused on small to medium-sized utility-scale generation projects in strong power markets. Vert utilizes its proven methodology, the Staged Progression Model, to guide development projects to construction ready and identify investment opportunities that generate out-sized returns.

By Joaquin Altenberg