Net Metering

A tariff system based on an incentive (or payment scheme) for renewable energy whereby electricity produced in excess of the customer’s load is sold back to the interconnecting utility. The producer is generally compensated at the retail electricity rates, but concerns over the incidence of distribution costs have driven more systems to compensate producers at the avoided costs of generation. This typically requires more advanced metering technology. Net Metering is generally applicable to consumers who own relatively small renewable facilities. The system owner (of a solar or wind facility) receives a credit on her electricity bill. Unlike the case a Feed-in Tariff, the owner is not paid a prescribed amount per unit produced. Since most electricity meters can run in both directions, the meter serves as a mechanism for reducing bills and (possibly) making money for the small customer. To reduce transactions costs, the savings might be rolled over to the next month. Net metering could apply variable pricing using (more expensive) Time of Use meters.