Definition
Net Energy Metering (NEM) is a system that helps customers reduce their dependence on fossil fuels by allowing them to use energy generated from renewable sources, like solar panels or wind turbines, to offset their electricity usage from the grid.
It also allows customers to receive credit for the excess energy they generate and return to the grid, making it cost-effective to transition to clean energy.
This gives customers greater control over their energy consumption, and helps support more sustainable energy practices while reducing greenhouse gas emissions associated with electricity generation.
How It Works
NEM works by connecting a customer's home or business to the electrical grid, allowing them to draw on power from the grid when necessary. In order to qualify for NEM, customers must have an eligible renewable generation source, like solar panels or wind turbines, connected to their electric meter.
When generating electricity from renewable sources, any excess power fed back into the grid is offset against the customer's electric bill.
For example, if a customer has a solar PV system that produces 1,000 kilowatt-hours (kWh) of electricity per month and their monthly electricity consumption is 800 kWh, the customer would only be billed for the net amount of 200 kWh consumed from the grid.
Additionally, customers who use less than what they currently generate will receive credit for any extra energy generated and returned to the grid.
For example, if a customer generates 1,000 kWh in a month but only uses 800 kWh, the additional 200 kWh would be credited to their account for future use.
This system gives customers greater control over their energy consumption and helps to support more sustainable energy practices.
History of NEM
The concept of net energy metering (NEM) has been around since the early days of the electricity grid.
NEM encourages the development of renewable energy resources and allows customers to generate their own electricity.
In the early 20th century, many electric utilities offered their customers "banking" arrangements where excess electricity could be stored on the grid for future use.
These arrangements were typically used by large industrial customers who had intermittent loads that did not match up with the baseload generation of the time.
Since then, it has been adopted by several other states and utilities across the country.
NEM 1.0 vs. NEM 2.0
NEM 1.0 applies to residents and businesses permitted to operate on or before June 30th, 2017. The policy in this version indicated that when 5% or more of the utility's grid was run on solar power, the program would hit a cap, and no more customers could go solar.
Fortunately, in NEM 2.0, the cap was terminated, and more customers could go solar. This version applies to residents and businesses authorized to operate on or after July 1st, 2017.
With NEM 2.0, customers will still be allowed to sell their excess solar energy back to the grid under updated policies. The customers will pay a one-time interconnection charge and monthly non-bypassable charges (NBCs).
Solar customers will also move to time-of-use (TOU) energy rates where utilities charge more during "peak time".
NEM Enrollment Eligibility
To be eligible for net energy metering, customers must have a suitable renewable generation source, like solar panels or wind turbines, connected to their electric meter.
In some cases, customers may also be required to have a back-up power source, like a generator or batteries, in case of power outages.
Billing Cycle
Net energy metering can typically be done monthly or annually, depending on the customer's preferences and their eligibility status with their local utility provider.
Monthly Billing
With monthly billing, customers are billed for their net energy consumption every month.
This means that if a customer generates more electricity than they use in a given month, the excess will be credited to their account and applied to the following month's bill.
Annual Billing
With annual billing, customers are billed for their net energy consumption every year.
This means that if a customer generates more electricity than they use in a year, the excess will be credited to their account and applied to the following year's bill.
Benefits of Net Energy Metering
There are several benefits associated with net energy metering, including:
Greater Control Over Energy Consumption
Net energy metering gives customers greater control over their energy consumption by allowing them to offset their electric bill with the electricity they generate from renewable sources.
Encourages Sustainability
By supporting renewable energy sources, net energy metering helps encourage more sustainable energy practices.
Cost Savings
Net energy metering can lead to cost savings for customers who generate their electricity from renewable sources.
Drawbacks of Net Energy Metering
There are also some drawbacks associated with net energy metering, including:
Requires Upfront Investment
Customers must make an upfront investment in order to take advantage of net energy metering, which can be a barrier for some individuals and businesses.
Incentive to Oversize Systems
Net energy metering may incentivize customers to install larger renewable generation sources than they actually need, resulting in wasted resources.
Other NEM Programs
In addition to the traditional net energy metering program, several other programs are available through local utilities that provide additional incentives for using renewable energy sources.
These include programs such as: virtual net energy metering (VNEM), net energy metering aggregation (NEMA), renewable self-generation bill credit transfer (RES-BCT), NEM fuel cell (NEMFC), and affordable solar housing programs.
Virtual Net Energy Metering (VNEM)
Virtual net energy metering (VNEM) is a program that allows customers to receive the full benefits of net energy metering without having to install their own renewable generation source.
Under this program, customers can subscribe to a share of the output from a nearby renewable generation facility and receive credits on their electric bill based on their share of the facility's output.
This allows customers to participate in the renewable energy market without making a large upfront investment for their own generation equipment.
Net Energy Metering Aggregation (NEMA)
Net energy metering aggregation (NEMA) is a program that allows multiple customer accounts to be bundled together and treated as a single entity for billing purposes.
This can be helpful for customers who do not have enough space to install their own renewable generation source, but still want to participate in net energy metering.
Renewable Energy Self-Generation Bill Credit Transfer (RES-BCT)
The renewable energy self-generation bill credit transfer (RES-BCT) program is designed to help customers offset the cost of their electric bill with the electricity they generate from renewable sources.
Under this program, customers can surrender their renewable energy credits to their utility provider to reduce their electric bill.
This program is available to customers who generate their own electricity from renewable sources, and those who purchase electricity from a renewable energy supplier.
NEM Fuel Cell (NEMFC)
The NEM fuel cell (NEMFC) program is an alternative to the traditional net energy metering program. It is designed specifically for customers who want to generate electricity using hydrogen fuel cells.
This program gives customers an option to take advantage of net energy metering without installing their own renewable generation source, as they can purchase emissions-free hydrogen from a supplier instead.
Affordable Solar Housing Programs
In addition to these programs, many local utilities also offer affordable solar housing programs that help offset the initial costs of installing a residential solar panel system.
These programs typically involve providing low-interest loans or other financial incentives to make owning a solar panel system more accessible for homeowners.
Final Thoughts
Net energy metering is a program that allows customers to offset the cost of their electric bill with the electricity they generate from renewable sources.
Overall, it is a valuable program that allows customers to take advantage of the benefits of renewable energy sources without making a large upfront investment.
While there are some potential drawbacks to this program, such as the incentive for customers to install oversized systems and the requirement for an initial investment, generally, it represents an important opportunity for individuals and businesses looking to reduce their environmental impact.
FAQs
1. What is net energy metering?
Net energy metering (or NEM) is a program offered by local utilities that gives customers access to the benefits of renewable energy generation.
2. How does net energy metering work?
Under the program, customers who install their own renewable generation source, such as solar panels, can receive credit on their electric bill for the electricity they produce.
3. What are the benefits of net energy metering?
The main benefit of this program is that it allows customers to offset their electric bill with the renewable energy they generate.
4. Are there any drawbacks to net energy metering?
One potential drawback of NEM is that it may encourage customers to install oversized systems to maximize their bill savings. Additionally, customers must make an initial investment to participate in the program.
5. What other programs are available under net energy metering?
Some other programs that are available under NEM include VNEM, NEMA, RES-BCT, and NEMFC.
