Lately, we’ve been talking a lot about solar.
As public awareness of environmental struggles increases and the move toward alternative fuel sources becomes more interesting, greater numbers of people and businesses are looking to solar as a hopeful part of the solution.
However, decades of obscure news, deals, and promises surrounding the word “solar” have people confused.
What’s true about solar and what’s a myth?
Last week, we explored how solar actually works. This week, I’m going to demystify one of the biggest misconceptions about solar for you: net metering.
What Is Net Metering?
Many people have heard the bold claims that when you go solar, you’ll have the opportunity to make the energy company “buy back” any excess energy your roof produces and they start seeing dollar signs.
While it’s certainly an appealing scenario, that’s not really how it works. When people refer to this “buy back” program, what they’re actually referring to is net metering. In truth, it operates more like a credit system than a true source of profit.
Net metering is the utility company’s billing mechanism to make sure that you are fairly compensated for the excess energy your home’s solar power system produces without actually having to write you a check.
Think of it like a checking account. Each month, your solar power system captures, conditions, and converts sunlight into electricity. This is akin to any income you earn and deposit into your checking account.
Then, your building draws from that source of power so that you can keep warm in the winter, turn on the computer, and power the lights strung around your Christmas tree. This is akin to withdrawing funds from your checking account.
Oftentimes, particularly in the summer months, your solar power system will generate more electricity than your facility uses. When this happens, the excess energy has to flow somewhere, so it goes to the utility company, who uses it to power other parts of the grid. The excess energy is the net difference between what you “earned” and what you “spent.”
Earn. Spend. Net.
The utility company keeps track of what excess energy you’ve contributed and generates a credit to your utility bill.
Then, on days when your solar power system doesn’t generate enough energy to cover your usage – such as in the winter months when days are shorter and skies are cloudier – you can draw from that credit you’ve earned with the utility company to cover your electricity needs.
The Caveat
In most cases, net metering programs don’t provide the full retail value for the excess energy your roof generates and here in Texas, it’s up the Retail Electric Supplier (REP). For example, let’s say you generate $12 worth of kilowatt-hours (kWH). You most likely won’t receive a $12 credit on your energy statement.
In some areas, there are added benefits of going solar that could increase the number of credits you receive. For example, in Austin, residential solar power system owners receive a Value of Solar (VOS) credit for every kWh their roofs generate – not just the excess energy. With Austin’s VOS system, consumers receive 9.7 cents per kWh, as long as their systems meet certain standards for best practices.
Although net metering is not a one-to-one system or some sort of futuristic revenue stream, it’s still a highly viable method of saving money on your utility costs.
Net Metering Policies in Texas
While net metering follows the same basic principles everywhere, there are specific policies that govern the process, which are made on the state level. These policies vary widely, so it’s important to familiarize yourself with your state’s specific rules.
Net metering policies are constantly changing from state to state, making some states more solar-friendly than others. Currently, New Jersey is the most solar-friendly with exemplary sales tax and property tax exemptions, performance payments, and net metering values.
On the other hand, Louisiana is considered to be the least solar-friendly because the state recently did away with net metering policies that once benefited property owners and the electric grid. On a grade scale, Texas received a C on its 2018 solar report card and comes in 34th place in the ranking of the most solar-friendly states.
Ultimately, the goal of net metering policies is to encourage homeowners and business owners to install renewable energy systems and produce more clean energy. Ideally, net metering will help states achieve renewable portfolio standards (RPS), which are ever-changing and evolving.
The Power of REPs
Until there are national policies governing solar power and net metering – which could take more than a decade as America finds its footing with renewable energy in general – expect that net metering policies and the benefits of going solar will vary based on several factors.
In Texas, one of the largest factors affecting net metering policies comes down to the retail electric provider (REP). The policies are made at a state level and vary by utility. In deregulated areas, this means the net metering programs or lack thereof are up to the discretion of the REP. The REP you choose to work with can make a tremendous impact on how much going solar can actually save you.
For customers in deregulated areas in Texas, there are a handful of REPs with progressive net metering also know as “solar buyback” programs. Our friends at Sunfinity have compiled a great snapshot of REP programs for residential service.
With commercial service, there may be even more choices for maximizing value with net metering. For example, MP2 offers clients the option of whether excess generation is credited at full retail – buying down the retail rate – or credited on a performance basis at real-time prices.
Given that there are more than a dozen key factors that affect the long-term worth of a solar power system, it’s best to work with a trusted energy advisor to find the right fit for you.
Eventually, the hope is that emerging technologies such as solar power storage batteries – also known as microgrids – will further allow consumers to make moves away from being grid-tied, which ultimately provides you with the most freedom.
Until then, as solar energy policies are changing every year, you can have a profound impact on the future of Texas’s solar policies by becoming an informed voter, learning the lingo surrounding solar, and asking questions of energy experts.
What questions do you have about net metering and going solar? Let me know in the comments below or get in touch for a consult on your unique energy situation.
