What is Net Metering and how Can it Help You?

If you have considered implementing PV Solar as your next energy conservation measure then you have probably heard the term Net Metering. What is net metering? According to The Solar Energy Industries Association, net metering is defined as.

“Net metering is a billing mechanism that credits solar energy system owners for the electricity they add to the grid”

Simply put, net metering is what the utility “credits” you for adding power back to the grid. This happens when your solar system is producing more power than your facility is consuming at any given moment. For example, if your business is closed or runs a smaller shift on the weekends, it becomes possible that you will be consuming less power than your PV system is producing.

In order to have net metering, your utility may have you sign a net metering agreement. This agreement allows the utility to credit you for the kWH delivered back to the grid.

Understanding Net Metering Utility Billing

If you decide to move forward with your PV system it becomes important to understand exactly how the utility invoices for power and how net metering will affect your energy costs. For commercial customers, most utilities charge two different energy rates, kWh and KW or demand. PV Solar may have an effect on the kWh being charged but it may have little effect on the demand charge. This is where it becomes critical to understand what is causing your energy costs.

You also need to understand your billing rate schedule. Utilities have a number of different rare schedules that create the costs structure of your energy. When you add PV solar and sign a net metering agreement, you may find yourself in another rate schedule or tariff.

Some solar companies like to change commercial customers from a flat rate schedule to a time of use schedule. This may appear to be a smart decision on the onset but some companies can end up paying higher energy costs if their facility does not fall into the benefits that time of use schedule can provide. It is important to do proper research and know when your energy consumption happens to prevent this from happening.

Sizing a solar system

Some companies tend to oversize a solar system to take more advantage of the credits that net metering can provide. There are a couple of things to consider before doing this, however:

  • cost of system
  • kWh consumption
  • utility rare changes
  • expiring credits

The cost of oversizing solar systems just to take advantage of Net metering credits can way outweigh the credits themselves. For example, if you oversize your system by as little as 10% you could add an additional 2 – 3 years before you get a return on investment.

As mentioned above, it is important t know how much kWh you consume in a typical year. Getting this data could be very time consuming and complex if you don’t already have an energy management system.

In the same regards, it Is important to know when you are consuming versus when you would be producing power through the solar system. Without proper data behind your facility, it becomes almost impossible to know if you will be getting any credits from the utility.

One big risk when it comes to net metering and solar PV is the utility itself. With most systems, you can expect a return on investment of anywhere between 5 and 15 years. The risk comes when you are counting on net metering to count toward your ROI, on any given year the utility can change rate tariffs, similar to what happened in Nevada in 2015. Also, if your energy consumption is demand heavy, you could be at risk of the utility dropping the cost of kWh and increasing the cost of KW. Any of these factors could cause your ROI to increase substantially.

The last thing to consider is the expiring net meter credits. Some utilities do not allow your “banked” net metering credits to roll over at the end of their fiscal year. This could mean that if you have an oversized system that generates too many credits you may never get any advantage of the system. This also becomes an issue if you have a seasonal business or a business that runs inconsistently.

The need for energy analytics

Like any energy conservation measure, it becomes critical to know not only what energy is being consumed but also when it is being consumed. Understanding the energy consumption, patterns, and costs of your energy decreases the risk of implementing energy conservation measures. This process of proper measurement and verification allows you to reach your goals of energy management faster and easier.

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