In this second video in a ten-part training series of key concepts for people looking to buy a solar system, Kerim Baran of SolarAcademy defines net metering, a program that benefits ratepayers who put solar on their homes. He also gives an overview of the impact such programs can have on utilities and the grid. The 3-minute video and transcript are below. The entire series can be viewed here.

Here is the video transcript:

Kerim Baran: I want to talk about the second concept in the series of 10 concepts to understand before buying solar. This one is called net metering. Net metering is generally a program rolled out by a utility company to benefit those rate payers who are putting solar on their homes and connecting it to the grid.

Generally, the way net metering programs work is that the utility company credits the homeowner or the rate payer for their entire production of energy during the daytime, when the sun is up and they generally do this credit in such a way that it benefits the homeowner at the retail price that they’re paying. So essentially getting your full credit for the high electricity price, the retail rate that they would be paying.

There’s been a number of net-metering programs over the past decade plus, California being one of the earliest markets to roll out these programs. There’s been net metering 1.0, 2.00 and 3.0, now in the design phase and there’s been slight changes to the way the consumers get these credits. At the best consumers get full credit for everything they produce.

Of course, that’s a great thing for the rate payers, consumers, homeowners, but it’s not necessarily the best thing for the utility company, especially as more and more homes put on solar. I think up until about 10% penetration, it actually benefits the utility company, but after 10% penetration, it can start causing some issues for balancing the grid and managing all the extra load that you get during the day. It might become more than the grid actually needs.

So hence the programs around net-metering 2.0 and 3.0 need to make sure everyone is benefiting, not only the homeowner, not only the rate payers, but also the utility companies from these programs. And given that there are 2,000 plus utility companies in the country, each one has their own net-metering program pretty much. Sometimes these things are decided on a state by state basis, but it is nevertheless a complicated process. Tools like Energy Toolbase, software tools, have built amazing businesses around essentially integrating all these unique rate programs into a software which can predict the value. It would be generated from a solar system depending on where they are in the country and which utility companies, that district, that home is in.