Net Metering is simply a policy that enables electricity customers to connect their own on-site generation system to the utility grid and receive credits on their electricity bills for their own renewable energy generation in excess of their electricity consumption that is exported to the electricity distribution network. The term net metering refers to the fact that the meter can measure the flow of electricity in two directions and it is also known as power banking since the consumers can “bank” the power they generate within the utility system by feeding the grid when excess power is produced and consume power from the grid at a later time when their production falls below consumption. This form of energy exchange is especially useful for intermittent renewable energy technologies such as solar.
In most utilities’ net metering systems, if the customer generates more electrical energy than he/she uses from the utility electrical system he/she will not be paid for that energy, but the customer receives only a kWh credit, which is applied to future bills. Whether the customer gets paid for that excess energy fed into the system depends on the net metering rules in the jurisdiction. While many different renewable energy sources may be eligible for net metering credits, solar rooftop installations are the most common and popular type of renewable energy source promoted with net metering. Many states have passed net metering laws and policies which allows utilities to offer net metering programs voluntarily or as a result of regulatory decisions.