Last Updated: September, 2016
Net Metering is a billing method or a financial incentive provided by utilities to customers (commercial and residential) who have installed any form of small-scale distributed generation. This includes rooftop solar, small wind, biogas, micro-combined heat and power, micro turbines, or fuel cells.
The rooftop solar or other forms of small-scale distributed generation are connected the grid, and when they are generating more power than the customer is using, excess power is transferred onto the grid. Net-metered customers are credited for the excess power that is going back to the grid, offsetting the cost of power drawn from the utility as well as the cost of installed small scale renewable energy or other distributed generation systems.
Forty-one states and the District of Columbia currently have mandatory statewide net metering policies and three states have a voluntary net metering policy. Voluntary net metering policies are offered in those states that do not have a mandatory statewide net metering policy, but the state’s public utility or public service commission allows certain utilities to offer net metering to customers who generate excess power.
States set capacity limits to regulate the system size of net-metered installations. States have taken different approaches to capacity limits depending upon customer type, utility type, or technology/application type. The capacity limits are represented either in kilowatt (kW) or as a percentage. Some states also set aggregate capacity limits as a percentage of the utility’s peak load/demand during a specific period or a baseline year. Some net metering policies may also specify ownership of renewable energy credits (RECs), which can be important to meeting the state’s Renewable Portfolio Standard (RPS). See our RPS map for more information.