What Is Net Energy Metering?

Net Energy Metering (or NEM) gives you utility credit for your solar energy. The meter on your house will give you credit at the same rate as they are charging during the time of day the energy is produced.

NEM net energy metering net metering california

This allows electric utility customers to build energy credit for the extra solar energy they don’t use.

Your solar power system should be designed to generate more electricity than you use during the day so that you can use these credits at night. This gives you a Net-Zero bill.

The problem is, that you cannot generate solar energy during peak demand.

Net energy metering daily generation and consumption

Net energy metering yearly generation and consumption

How Does Solar Energy Work At Peak Hours?

  • Solar energy cannot be generated if the Sun isn’t shining on your panels.
  • When the sun goes down or is blocked, electricity is paid for by Net Energy Metering Credits.
  • NEM credits and energy consumption are settled in a True-Up Bill each year with a 12-month billing cycle.
  • Any additional NEM credits are paid back at the end of the year at much lower rates.

How Much Are Solar Net Energy Metering Credits Worth?

Net Energy Metering credit can be worth more or less depending on the time of day based on the Time-of-Use program. Net energy metering customers will receive the same amount of credit that the utility company charges for each kWh.

At the end of a customer's 12-month billing period, any balance of surplus electricity is trued-up at a separate fair market value, known as net surplus compensation (NSC).

The NSC rate is based on a 12-month rolling average of the market rate for energy. The rate is currently (2022) approximately $0.02 to $0.03 per kWh (PG&ESCESDG&E).

NSC net energy metering credit worth
Southern California Edison Net Surplus Compensation Rate (Nov. 2021 – May 2022)

During evening hours, customers are charged a higher rate. So 1 kWh at night is worth 2 kWh of credit generated during the day.

Rates will also change when there are fewer sunlight hours, like when the sun goes down at 5 PM in the winter months.

relationship between time of use rate and solar credit from excess solar power production

As you can see, credits you earn between 8 AM – 4 PM are not worth the same as energy consumed used between 4 PM – 9 PM.

Can Net Metering Provide A Monthly Paycheck?

No, this is false! Solar customers are usually put on a “True-Up” billing structure. True-up billing is an annual bill that calculates all of the energy you generate against all of the grid energy you use.

You are paid for your “net” energy use throughout the year, which should be a positive number. However, you will be compensated at wholesale rates (net surplus compensation rate-NSCR), which is generally 10% of the original value.

You might get a paycheck once a year, but it won’t be very big.

Read More:

What is Time-of-Use Rate?

Is Solar Energy Expensive?

Why Aren't My Solar Panels Producing 100%?

NEM 3.0 Update

Does Net Metering Work Off The Grid?

No, NEM does not work in an off-grid solar power system. You cannot gain credits for the electricity you send to the grid without being connected to the grid.

Net Metering is similar to using the grid as energy storage. Without access to the grid, you will need to have a battery to store your energy for use at night.

These rates are accurate as of May 24, 2022, but they won't last much longer. Get your solar panel system now and lock in these rates for 20 years or more.

Have question? Give us a call and speak with one of our solar experts.

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