Net metering is a popular and administratively simple policy option for U.S. states. Net metering allows electric customers who generate their own electricity using solar or other forms of renewable energy to bank excess electricity on the grid, usually in the form of kilowatt-hour (kWh) credits. These credits are used to offset electricity consumed by the customer at a different time during the same billing period (i.e., when the customer’s system is not generating enough electricity to meet the customer’s needs). In effect, the customer uses excess generation credits to offset electricity that the customer otherwise would have to purchase at the utility’s retail rate. Traditionally, net metering has been accomplished through the use of a single, conventional, bi-directional meter.
Policy experience with net metering lies squarely in the domain of states. Most states’ net metering policies were established through legislation. State laws commonly require the state public utilities commission to adopt administrative rules to implement net metering.
While some states’ net metering policies apply to customers of all types of utilities (e.g., investor-owned utilities, municipal utilities and electric cooperatives), others apply only to customers of investor-owned utilities. State policies vary widely by several other key criteria, including individual system capacity limit, aggregate system capacity limit, eligible customer types, eligible system types, treatment of net excess generation (at the end of a billing period), and ownership of renewable energy credits (RECs) associated with customer generation. The "Freeing the Grid" project provides a detailed breakdown of the individual components of each state's policy and an overall letter grade describing the overall quality of each, based on current best practices.
Status & Trends
More than 40 U.S. states plus the District of Columbia and four U.S. territories have established net-metering policies, and many have subsequently expanded their policies to accommodate expanding solar markets. Around 20 states (plus the District of Columbia and Puerto Rico) allow net metering for certain systems one megawatt (MW) or greater in capacity. At the upper end of the spectrum, Massachusetts allows net metering for certain systems up to 10 MW, and New Mexico allows net metering for certain systems up to 80 MW. In several states, including Arizona, New Jersey and Ohio, there is no stated capacity limit. In many cases, states limit systems to a certain percentage (e.g., 125%) of the customer’s load so that customers do not intentionally oversize their systems. Furthermore, some states have established individual system capacity limits that vary by utility type, system type or customer type.
Some states, such as California and Utah, have increased the aggregate capacity limit for net metering due to the rapidly growing popularity of grid-tied solar. Others, such as Pennsylvania, have either clarified or enhanced provisions governing the treatment of net excess generation at the end of a billing period. Many states now allow customers to carry net excess generation credits forward to the following billing period at the full retail value of a kWh, either indefinitely or during a 12-month period.
Notably, all state net-metering policies include solar as an eligible technology. In recent years, states have commonly extended net metering to other kinds of renewable energy systems as well. Almost all states that have addressed REC ownership for net-metered systems, including Arkansas, Colorado and Florida, have concluded that RECs belong to customers (as opposed to utilities). The issue of REC ownership is increasingly important as utilities seek to meet renewable portfolio standard (RPS) obligations. In some locations, RECs may be sold as a valuable commodity.
Several states, including Nevada and New Mexico, allow net metering for electric customers on a time-of-use (TOU) tariff. However, while this option could be economically beneficial for owners of solar energy systems in many situations, it has proven difficult to design TOU tariffs that actively promote solar generation. In some cases, the demand charges built into a TOU tariff are excessively high.
More recently, a handful of states have expanded net metering by allowing meter aggregation for multiple systems at different facilities on the same piece of property owned by the same customer. A small number of states (including California) allow “virtual” meter aggregation, where certain customers may net meter multiple systems at different facilities on different properties owned by the same customer. In addition, “community net metering” and “neighborhood net metering,” which allow for the joint benefits of a solar project by multiple users, is in effect or under development in a small number of states, including Massachusetts.
The Interstate Renewable Energy Council, Inc. (IREC) has established the following best practices for net metering policies:
DSIRE: Summary of Net Metering Policies in the U.S. DSIRE, 2012.
Model Net Metering Rules. Interstate Renewable Energy Council, Inc. (IREC), October 2009.
Freeing the Grid. 2013.
The Intersection of Net Metering and Retail Choice: An Overview of Policy, Practice & Issues. Justin Barnes and Laurel Varnado. Interstate Renewable Energy Council, Inc. (IREC), December 2010.
The Impact of Rate Design and Net Metering on the Bill Savings from Distributed PV for Residential Customers in California. Naïm Darghouth, Galen Barbose and Ryan Wiser. Lawrence Berkeley National Laboratory (LBNL), April 2010.
 Freeing the Grid 2011, Network for New Energy Choices, et al., October 2011.
Disclaimer: The information presented on the DSIRE web site provides an unofficial overview of financial incentives and other policies. It does not constitute professional tax advice or other professional financial guidance, and it should not be used as the only source of information when making purchasing decisions, investment decisions or tax decisions, or when executing other binding agreements. Please refer to the individual contact provided below each summary to verify that a specific financial incentive or other policy applies to your project.
While the DSIRE staff strives to provide the best information possible, the DSIRE staff, the N.C. Solar Center, N.C. State University and the Interstate Renewable Energy Council, Inc. make no representations or warranties, either express or implied, concerning the accuracy, completeness, reliability or suitability of the information. The DSIRE staff, the N.C. Solar Center, N.C. State University and the Interstate Renewable Energy Council, Inc. disclaim all liability of any kind arising out of your use or misuse of the information contained or referenced on DSIRE Web pages.