Switching to solar energy comes with a host of benefits, including massive energy savings. What’s more, it’s also possible to get paid for producing extra electricity.

Through net metering or net energy metering (NEM), customers can sell their excess solar energy to electric companies. But what is net metering exactly, and how does it work? Here’s what you need to know.

What Is Net Metering?

Net metering is a utility rate program or billing mechanism that credits solar energy system owners for generating excess electricity. You can also think of it as a billing agreement between customers producing their own electricity and their utility companies.

Under net metering, customers can receive net metering credits in exchange for offloading extra unused energy into the grid. They can use these credits during times when electricity use exceeds the solar energy system’s output.

Most states offer net metering, but there’s currently no national standard for it. Therefore, compensation for solar customers varies widely depending on state legislation and implementation policies.

How Does Net Metering Work?

When there’s net metering in a solar panel system, any excess electricity is returned to the grid. The electricity meter runs backward when the system produces more electricity than the household’s current energy usage. If you consume more electricity than your system produces, you pull back electricity from the grid.

The amount of electricity solar panels generate varies throughout the year. With net metering, you can account for the seasonal differences in solar production. Then, the credits you earn from excess electricity can be used at a later date.

How Do Electricity Bills Work with Net Metering?

After figuring out what net metering is, it’s natural to be curious about what this would mean for electricity bills.

Homes with solar panel systems often have a surplus of electricity in the summer and consume more energy from the grid in the winter. This means you can draw from the buildup of extra hot weather credits when winter comes.

At the end of one billing cycle, you pay the net difference between what you put into the grid and what you take from it. In other words, you don’t pay for the electricity you generate and consume. You’ll only buy electricity from utilities when you produce less energy than you use in a month.

What Are the Benefits of Net Metering?

For many customers, the top benefit of net metering is the considerable reduction in utility bills. The reduction in energy expenses can amount to thousands of dollars over the life of the solar panel system. Furthermore, solar power is both clean and efficient.

The electric grid and utility companies also have much to gain from net metering. Solar panel owners help disperse power to other customers nearby as they contribute electricity to the grid.

When energy demand is high, a net metering arrangement will help alleviate the stress. Utility companies also have access to energy that costs less than that from distant power plants.

Want to learn more about what net metering is? Contact Smart Wave Solar today for any questions you may have.