On sunny days, most residential solar systems are going to generate more energy than needed.
Which is a very good thing, indeed, since that surplus power can take up the slack at night and on other occasions when there's not enough sun for the job.
There is, of course, one problem here: in order to use that surplus solar energy later, you've got to have some way of storing it.
The obvious solution is installing a great big battery. And, if your solar system is "off-grid," that's going to be pretty much the only option you've got.
Those that go solar but remain connected to the grid, on the other hand, generally send their surplus solar power back into it—after which their local utility company sells it to other customers in their area.
How much a given utility has to pay for the solar energy they acquire from rooftop solar systems is decided at the state level.
Which brings us to today's topic, two crucial terms for anyone wondering how much money they can save on energy by transitioning to clean and renewable solar power: "net metering" and "net billing."
They stand for two very different ways states have fixed how much utilities have to pay solar-equipped homeowners and businesses for their surplus power.
And, though they may sound the same, which one your state enforces will have a huge impact on your return on investment for going solar.
Net Metering
If you live in a state that has adopted net metering, you'll be paid "the retail rate" for every kilowatt-hour (kWh) of surplus solar energy your solar systems send back into the grid.
That's the very same rate your utility company will be charging you when you need to draw power at night and at other times when there's not enough sun for your solar panels to run fully run your home.
In states that have adopted net metering, solar-equipped homes and businesses are usually given a credit for every kWh of surplus energy they send back into the grid that's equal to the amount they have to pay for one kWh when they need to draw power.
A sample Net Metering bill
Suppose you've transitioned to solar and during one monthly billing cycle:
You used a total of 800 kWh of power
Your solar panels produced 960 kWh, giving you a surplus of 160 kWh that was sent back to your utility.
If your state has net metering, you'll get compensated in the form of a credit that you can then use to pay subsequent bills. But here's the thing.
Because Pennsylvania has adopted net metering, the amount you're credited for the power you sent back into the grid has to equal what you'd be charged had you, instead, drawn power.
Since net metering requires that utilities pay exactly what they charge, that 160 kWh of surplus solar energy you sent back into the grid has—-in effect—been banked for you to use at a later date when there isn't enough sun for your solar system to fully run your home.
What happens if I don't use all my Net-Metering credits?
Most states that have adopted net metering have a yearly reckoning to deal with any unused solar energy credits you might have accrued.
How you're compensated for your unused solar energy credits varies from state to state.
If you're lucky enough to live in Pennsylvania, you'll get a cash payment for any solar energy credits left over when the fiscal year closes.
Net Billing
As with net metering, in states that have adopted net billing, solar-equipped homes and businesses are generally compensated for any surplus solar energy they send back into the grid in the form of a monthly credit.
The difference lies in what that credit is worth.
Instead of paying the "retail rate," states with net billing only require utilities to pay the "wholesale rate," which equals how much it costs them to generate power rather than the higher amount they actually charge.
If your retail rate is $0.12 per kWh, in states with net billing you might only wind up getting paid $.06 per kWh for the surplus solar energy your system produces.
Your surplus solar energy still gets banked. It's just that, for every two kWh of energy you bank you only get one kWh back. That obviously makes net billing a lot less financially advantageous than net metering.
Some states have neither
Getting paid less than you're charged may not sound all that great, but there are worse policies.
Some states don't require utility companies to pay anything at all for the surplus solar power they get from residential systems.
That makes Pennsylvania residents doubly lucky for living in a state that requires utility companies to pay the very same rate that they charge when their customers become energy producers by installing solar panels.