Net energy metering (NEM) or simply net metering is a service to an electric consumer under which electric energy generated by that electric consumer from an eligible on-site generating facility and delivered to the local distribution facilities may be used to offset electric energy provided by the electric utility to the electric consumer during the applicable billing period.[1]
Net metering policies can vary significantly by country and by state or province: if net metering is available, if and how long you can keep your banked credits, and how much the credits are worth (retail/wholesale). Most net metering laws involve monthly roll over of kWh credits, a small monthly connection fee,[2] require monthly payment of deficits (i.e. normal electric bill), and annual settlement of any residual credit. Unlike a feed-in tariff (FIT), which requires two meters, net metering uses a single, bi-directional meter and can measure current flowing in two directions.[3] Net metering can be implemented solely as an accounting procedure, and requires no special metering, or even any prior arrangement or notification.[4]
Net metering is a policy designed to foster private investment in renewable energy.
Net metering originated in the United States, where small wind turbines and solar panels were connected to the electrical grid, and consumers wanted to be able to use the electricity generated at a different time or date than when it was generated. Minnesota is commonly cited as passing the first net metering law, in 1983, and allowed anyone generating less than 40 kW to either roll over any kilowatt credit to the next month, or be paid for the excess. In 2000 this was amended to compensation "at the average retail utility energy rate". This is the simplest and most general interpretation of net metering, and in addition allows small producers to sell electricity at the retail rate.[5]
Utilities in Idaho adopted net metering in 1980, and in Arizona in 1981. Massachusetts adopted net metering in 1982. By 1998, 22 states or utilities therein had adopted net metering. Two California utilities initially adopted a monthly "net metering" charge, which included a "standby charge", until the PUC banned such charges.[6] In 2005, all U.S. utilities were required to offer net metering "upon request". Excess generation is not addressed. As of 2015 43 U.S. states have adopted net metering, as well as utilities in 3 of the remaining states, leaving only 4 states without any established procedures for implementing net metering.[7]
Net metering was slow to be adopted in Europe, especially in the United Kingdom, because of confusion over how to address the value added tax (VAT). Only one utility company in Great Britain offers net metering.[8]
The United Kingdom government is reluctant to introduce the net metering principle because of complications in paying and refunding the value added tax that is payable on electricity, but pilot projects are underway in some areas.
In Canada, some provinces have net metering programs.
In the Philippines, Net Metering scheme is governed by Republic Act 9513 (Renewable Energy Act of 2008) and it's implementing rules and regulation (IRR). The implementing body is the Energy Regulatory Commission (ERC) in consultation with the National Renewable Energy Board (NREB). Unfortunately, the scheme is not a true net metering scheme but in reality a net billing scheme. As the Dept of Energy's Net Metering guidelines say, "
“Net-metering allows customers of Distribution Utilities (DUs) to install an on-site Renewable Energy (RE) facility not exceeding 100 kilowatts (kW) in capacity so they can generate electricity for their own use. Any electricity generated that is not consumed by the customer is automatically exported to the DU’s distribution system. The DU then gives a peso credit for the excess electricity received equivalent to the DU’s blended generation cost, excluding other generation adjustments, and deducts the credits earned to the customer’s electric bill.” [9]
Thus Philippine consumers who generate their own electricity and sell their surplus to the utility are paid what is called the "generation cost" which is often less than 50% of the retail price of electricity.