Net metering is a policy.
Utilities employing this policy allow homeowners to be reimbursed for the full value of the electricity that their solar energy system produces.
Net metering also refers to the method of accounting for a photovoltaic (PV) solar system’s electricity production. Homeowners with PV solar panel systems offset their electric bill with electricity produced by the PV system on their property.
As the homeowner’s PV system produces electricity, the kilowatts are used first to meet any immediate electric requirements (e.g., appliances, lights, air conditioner, spa, pool ) in the home and on the property. The excess electricity produced from the PV system then is fed into the utility grid for credit when the sun is not shining or periods of higher than normal electrical usage during the year.
Utilities employ this policy for a couple of reasons.
1. To avoid having to build infrastructure necessary to meet demand during peak usage periods. For example in the desert southwest when the temperatures soar in the summer nearly everyone with air conditioning turns it on. To avoid power outages utility companies must either build power plants to meet demand for 40-90 days out of the year, or pay outside companies for electricity at higher prices to meet demand. With sufficient numbers of solar systems within the utility providers grid, ideally,the utility provider is able to meet demand without capital expenditures for power plants or be forced to pay inflated prices to other electricity producers.
2. Statutes in an increasing number of states mandate that utilities must allow independent power producers to be interconnected with the utility grid, and utilities must reimburse solar producers for excess electricity they generate.