Net Metering and Net Billing

Net metering policies allow end users to offset retail electricity purchases using output from on-site distributed generation systems. Net metering policies also allow end-users to receive a credit or payment for the net excess electricity that is generated and exported to the grid. Net metering credits can be used to offset retail electricity purchased during other time periods. The value of net metering credits or payments is often pegged to the retail electricity rate. The value of the excess generation has been a topic of much debate and can have a significant influence on the payback period for distributed generation systems.

Net billing is an alternative approach to net metering. Like net metering, end-users are able to offset retail electricity purchases under net billing. The primary difference between net billing and net metering is that there are differing rates used to value the excess energy fed into the grid and energy received from the grid under net billing. A wide variety of net metering, net billing and feed-in tariff policies is in place, as well as hybrid approaches that integrate various elements of these policies (Couture et al. 2015; Cox et al. 2015; Inskeep et al. 2015).

Good Practices

(Text drawn directly from Cox et al. 2015, a Clean Energy Solutions Center publication)

Design Simplified yet Robust Interconnection Standards

All renewable energy projects need the legal authority to interconnect to the grid. While larger projects may involve engineering studies and in-depth consultation with utilities and regulatory entities, small renewable energy projects do not normally need to be held to the same complex standards, with aggregate net metering approaches as a possible exception. Standardized interconnection policies are particularly important for distributed generation, as they ensure that all renewable electricity projects can connect to the grid if they meet certain technical requirements to ensure safety. The policies standardize connection procedures, technical requirements, and other issues. They also typically provide highly simplified and streamlined procedures and forms for small systems

Ensure Inclusive Eligibility

If the goal is for net metering to support energy portfolio diversity, a broad range of clean energy technologies, including combined heat and power, can be considered for eligibility. Net metering policies also provide more flexibility if all customer classes, including customers with third party owned systems, are eligible for participation. Extending net metering policies to all utilities provides a more robust opportunity for the market to develop. (Varnado and Michael 2009; Barnes and Varnado 2010; Barnes et al. 2013).

Set Appropriate Capacity Limits

Policymakers often set limits on the size of individual systems and on overall capacity allowed to be net-metered on the grid. Individual system limits based on on-site consumer loads rather than arbitrary caps expand the market to more applications. System-wide capacity caps account for engineering limits for grid stability, but caps that are more restrictive reduce the market potential. Both of these limits can also take into account broader policy goals. For example, if a net metering program is focused on deployment of small-scale residential PV, large-scale renewable energy projects could lead to the capacity cap being reached without meeting the broader policy goal of small-scale deployment. Thus, policymakers may also consider a tiered policy based on project size or complexity, especially for smaller-scale PV generation (Varnado and Michael 2009; Barnes and Varnado 2010; Barnes et al. 2013).

Design Appropriate Billing Approaches

An effectively designed net metering policy will allow customers with a renewable energy power system to consume power from the grid as needed to meet their load and to send power back to the grid when they produce more than they need. Under this approach, the customer is billed only for the “net” electricity that is used within a billing cycle. If a customer provides more power to the grid than is used during a billing cycle, the “excess” power can be rolled over to the next billing cycle. Customers can roll over excess credits for some period of time, often one year, at which point any remaining excess power will be reimbursed at a rate equal to or greater than the average wholesale rate of electricity. For any kilowatt-hours not compensated at the retail rate, effective policies address the ownership of RECs to ensure equitable treatment (California Center for Sustainable Energy and the Energy Policy Initiatives Center 2013). A long term plan should also be in place to revise and update net metering policies with increased uptake of on-site generation.

Consider Aggregate Net Metering Approaches

Aggregate net metering allows for aggregation of metering across various separate systems or across various customers for a single system. Allowing flexibility in configuration of the location of generation and which customers it serves can use solar resources more efficiently. Under this type of approach, community members and businesses can “subscribe” or purchase a certain amount of the power produced by PV systems in the community and thus receive credits on their utility bills for power produced. Such “community solar gardens” provide communities and local governments with an innovative approach to support more efficient system level outcomes (Barnes 2013). Aggregation can expand the customer base for solar since it allows solar use by customers who cannot install their own system due to a poor solar resource, lack of available space, rental restrictions, or other reasons.

Case Studies

Tags and Related Instruments

References and Additional Resources


Barnes, Chelsea. 2013. "Aggregate Net Metering: Opportunities for Local Governments." Prepared by North Carolina Solar Center for the U.S. Department of Energy SunShot Initiative. Raleigh, NC: North Carolina State University.

Barnes, Justin, and L. Varnado. 2010. "The Intersection of Net Metering & Retail Choice: An Overview of Policy, Practice, and Issues." Latham, NY: Interstate Renewable Energy Council.

Barnes, Justin, Thad Culley, Rusty Haynes, Laurel Passera, Joseph Wiedman, and Rosalind Jackson. 2013. "Best Practices in State Net Metering Policies and Interconnection Procedures." Latham, NY: Interstate Renewable Energy Council and San Francisco, CA: The Vote Solar Initiative.

Boekhoudt, Andre, and Lars Behrendt. 2014. "Taxes and Incentives for Renewable Energy." KPMG International Cooperative.

California Center for Sustainable Energy, and the Energy Policy Initiatives Center. 2013. "Best Practices for Interconnection Standards: Southern California Rooftop Solar Challenge." San Diego, CA: California Center for Sustainable Energy.

Couture, Toby D., David Jacobs, Wilson Rickerson, and Victoria Healey. 2015. "The Next Generation of Renewable Electricity Policy: How Rapid Change is Breaking Down Conventional Policy Categories." Golden, CO: National Renewable Energy Laboratory.

Cox, Sadie, Walters, T., Esterly, S. 2015. "Solar Power: Policy Overview and Good Practices." Golden CO: National Renewable Energy Laboratory.

Feldman, David, Anna M. Brockway, Elaine Ulrich, Robert Margolis. 2015. "Shared Solar: Current Landscape, Market Potential, and the Impact of Federal Securities Regulation." Golden, CO: National Renewable Energy Laboratory.

Inskeep, Benjamin,, Heather Calderwood, Ethan Case, Kate Daniel, Brian Lips, Autumn Proudlove, Achyut Shrestha, Kathryn Wright Ryan Cook Chad Laurent. 2015. The 50 States of Solar. USA. North Carolina Clean Energy Technology Center.

Varnado, L., and S. Michael. 2009. "Connecting to the Grid: A Guide to Distributed Generation Interconnection Issues." Latham, NY: Interstate Renewable Energy Council.


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