If you’re considering solar, you’ll want to know about net energy metering. Net metering is one of the ways to sell solar power back to the grid. It’s a key part of the financial incentives that make solar so appealing.
These financial incentives are a big deal. In November 2021, Americans paid 14.12 cents per kilowatt-hour (kWh) for residential energy, a 6.1 percent increase from one year prior, according to the U.S. government. Meanwhile, between 2017 and 2021, U.S. consumer energy consumption increased by over 1,200 BTUs, leaving many Americans wondering: Is now the time to get solar energy?
It may well be. Before you make a final decision, though, you’ll need to know more about net metering. We’ll explain net metering, how it works, and how long solar takes to pay for itself.
What Is Net Metering?
Between 2010 and 2020, the number of residential solar panel owners jumped by more than 2 million U.S. residents, while residential solar panel energy production has generated nearly 18,000 megawatts of electricity. Much of this energy is going back into the grid, earning solar customers thousands of hours of energy credits for later use — a practice called net metering.
Residential Solar Panel Energy Production: 2010 to 2020
Net metering is the process whereby residential solar power owners send the extra energy their panels produce back to the local electric utility grid. In return, residents get an energy credit with the electric utility that they can use when needed.
How Does Net Metering Work?
Getting started with solar may feel daunting, but the net metering component is pretty straightforward. Depending on the size and capacity of a residential solar panel configuration, time of day, and weather conditions, it often produces more energy than a homeowner needs. When that occurs, net metering comes into play.
With net metering, excess energy produced by the solar panel system feeds directly into the public utility electric grid. The energy input from the residence causes the resident’s meter to spin backward, creating an energy credit on their utility account. In the evening, during poor weather, or when a consumer needs more energy than their solar system can produce, residents can use their credits from the grid to “buy back” the electricity they need from the public grid.
In short, net metering just means that energy flows back and forth as needed, and the meter tracks the net difference. Solar customers draw energy when they need it and send it back to the grid when they don’t, and then pay for (or, in some cases, profit from) the difference.
The Money Math of Net Metering: Does Solar Pay for Itself?
According to the U.S. Energy Information Administration, the average U.S home consumes 893 kWh per month. In comparison, the average residential solar panel system creates between 720 and 900 kWh per month, with peak production occurring during long, sunny summer days. Your energy use depends on the size of the residence and the number of people living there. Once you understand how much energy you consume, you’ll know what kind of solar system to purchase to cover your consumption.
Average Annual Consumer Electricity Consumption by Housing Unit Type
Unit type | Space heating | Air conditioning | Water heating | Clothes washer | Clothes dryer | Lighting |
|---|---|---|---|---|---|---|
Single-family homes (detached) | 3,940 | 2,621 | 3,372 | 62 | 817 | 1,316 |
Single-family homes (attached) | 2,578 | 1,590 | 2,782 | 50 | 615 | 971 |
Apartments in buildings with 2-4 units | 2,296 | 978 | 2,700 | 49 | 650 | 724 |
Apartments in buildings with 5 or more units | 1,529 | 840 | 2,404 | 50 | 652 | 666 |
Mobile homes | 3,888 | 1,810 | 3,843 | 60 | 731 | 836 |
If your solar system creates at least as much energy as you consume each month, and you participate in a net metering program with your local utility, you may pay little to nothing for energy from your local provider. That means your only energy cost is the cost of your solar panel system.
Luckily, the cost of purchasing a solar panel system is less than half of what it used to be just 10 years ago. Today, Americans spend about $15,000 on a solar power system, thanks to new technologies in solar design. The exact price will depend on the size of the system and your state of residence. How long it takes for solar to pay for itself depends on a few factors. But generally, it goes something like this:
Say you purchase a system for $15,000, and you receive a $3,000 solar incentive tax break, bringing your net cost to $12,000. If your new system offsets the $1,400 you would typically pay a utility company for electricity, your solar will pay for itself in about eight years.
Of course, each situation is different. Use this formula to figure out your own particular break-even point:
Solar panel cost — Tax incentive amount = End cost ➗ Offset energy cost per year = Number of years to break even
Is Net Metering a Good Reason to Go Solar?
Net metering is a great alternative to labor-intensive solar battery bank systems required to store excess energy generated by your solar panel system. By using net metering, you can lean on the public utility grid to store your extra energy for you while earning energy credits for later use. Other reasons to go solar include less reliance on the grid for electricity and the positive impact on the environment you’ll make by generating your own electricity and sharing excess electricity with others.
Want to know more about net metering and solar? Check out our guide to frequently asked questions on solar energy.