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Net MeteringCalifornia is one of forty states that offer net metering for the owners of solar power systems.[1] In addition to consumer rebates and tax credits, net metering is a key financial driver making solar power a cost-effective investment for consumers. Net metering is the ability for a solar system owner to “capture” all the electricity generated by their solar system without the use of a battery. With net metering, a solar system owner essentially uses the electric grid as their storage and back up power supply. In return, the electric grid benefits from a supply of pollution-free electricity during peak-demand time periods, such as hot summer afternoons. Here’s how it works: When a solar system generates more electricity than the residence or business is consuming at any point in time, the extra electricity is fed back to the grid where it is sold to other utility customers. When this happens, the solar system owner gets a credit for that excess power on their electric bill. In California, the value of this credit is the rate that the utility would have otherwise charged the customer for the electricity they provide at that point in time. For example, if a home generated an excess of a kilowatt of electricity between the hours of 4:00 and 5:00 pm on July 25th, the homeowner would get a credit on their electric bill valued at the price of electricity during that hour. In most places in California, electricity purchased during this peak-demand hour is several times higher than electricity purchased at midnight that same day resulting in a net financial benefit to the solar system owner and reflecting the value of peak, pollution-free electricity. Under net metering, the consumer installs a special electric meter that runs backwards during times of excess electricity generation and runs forward during times when the home or business is relying on the grid for power, such as at night. The consumer’s electric bill reflects the net difference between the two. If, at the end of the month, more electricity was generated by the solar system than was consumed, the credits are rolled forward to the next month for up to one year.[2] At the end of the year, the credits are erased and the credit tally begins anew. Some states require the utility company to purchase excess credits at year’s end at a wholesale power rate. Others require the credits to roll forward year to year. Neither of these options is required in California and is therefore not offered by the state’s utilities.[3] While all California utility companies must offer net metering (including municipal utilities), not all utilities allow time-of-use pricing (where the value of a kilowatt hour of electricity generated is higher during peak demand times than during off-peak times), and total enrollment in net metering is currently capped at 2.5 percent of a utility’s peak demand, a five-fold increase over previous limits thanks to SB 1. As more Californians install solar power, raising or eliminating the net-metering cap and expanding time-of-use billing will be necessary to ensure that solar is cost-effective for all consumers. [1] [1] For more information on other state programs see www.dsireusa.org. [2] Database of State Incentives for Renewable Energy, California Incentives for Renewable Energy: Net Metering, downloaded from www.dsireusa.org, 10 January 2005. [3] The logic behind the absence of this year-end purchase is that most systems should be sized to simply cover a home or businesses electricity demands and not more since solar power systems today are only economical for the consumer if measured against retail electricity prices (10-30 cents/kWh), as opposed to wholesale electricity prices (2-4 cents/kWh). However, even if a system is appropriately sized, the absence of this albeit small buy-back could serve as a disincentive for consumers to do more to conserve electricity. |