How to Sell Electricity Back to the Grid

Solar energy is one of the most popular methods for generating renewable electricity. While solar technology exists in a variety of formats, photovoltaic (PV) cells are the most practical for small-scale production. PV cells are the active components of solar panels, using a semiconductor material (usually silicon) to loosen electrons from light rays. Magnets then guide the loose electrons into a current.

While solar energy is attractively abundant, it's also expensive to harness. A residential solar panel installation will typically cost somewhere in the neighborhood of $35,000. However, much of this cost will be offset over time by saving you money on your monthly electric bills.

Wind power offers another way to harness weather for energy production, and although they're not quite as common as solar energy systems, wind generators are actually more efficient. Wind power systems rely on wind turbines — windmills — that catch the wind with propeller-like blades. This turns a shaft within the turbine, which spins a generator to create electricity.

Like solar power, wind energy systems pose a significant financial investment. Would-be users may also face issues of land coding and push-back from neighbors opposed to a 100-foot-tall windmill across the street. However, for families or small farms with abundant land, a wind-powered system is a great way to take advantage of a free and infinite resource.

In biomass electricity systems, fuels are made from sources like plants, paper and manure. If you work a farm or deal with a high volume of the above kinds of waste, biomass systems offer a practical method for disposing of that waste while making you a little money back from the electric company. The catch? A relatively small percentage of people actually have access to high volumes of biomass material.

Once you've found the perfect renewable system for you, what happens next? Read on to find out.

Since renewable energy is so efficient, production systems like solar panels and wind turbines produce more electricity than a single entity could ever use. But why would utilities go through the trouble of purchasing this energy?

Well, because the government says so. In the U.S., the Public Utility Regulatory Policy Act (PURPA) dictates that electric utilities on the traditional power grid must purchase the excess electricity that renewable energy systems generate. It's a way of encouraging renewable energy production without requiring utilities to invest in expensive renewable systems themselves.

While renewable energy producers typically still take some conventionally produced electricity from the grid, they make up for a lot — if not all — of what they use by funneling the excess electricity that their own systems produce back into the grid. You can receive compensation for the energy you put into the grid in two ways.

Some small-scale entities or individuals who sell electricity back to the grid receive payment for their contributions from utilities at a wholesale rate, also called avoided cost — meaning the cost that the utility avoids by buying electricity from you instead of generating it themselves. This deal is called net process and sale, and it uses two unidirectional, or one-way, electricity meters: one to track how much electricity a seller takes from the grid for normal use, and another to monitor the energy they generate and funnel back to the grid.

If you were thinking that one bidirectional meter should be able to do the job of two unidirectional meters, you'd be right. Net metering is a process by which a single, bidirectional meter spins forward to track the electricity a seller takes from the grid and backward to meter the excess energy they produce. If you've taken out more electricity than you've produced at the end of the month, you'll owe the power provider the retail rate for that excess. However, if you've put in more than you've drawn from the grid, the power provider will pay you the retail instead of the wholesale rate for that excess energy.

Read on to find out how electricity is measured.

Sure, we know that electricity is technically a quantifiable resource. But it's a bit hard to conceptualize processes like buying and selling it because, well, we just can't see it. Renewable energy certificates, or RECs, help to bridge that gap. RECs are certificates issued by the government establishing ownership of renewable energy. One REC is issued for every 1,000 kilowatt-hours (kWh) of energy funneled back into the grid by a renewable source.

PURPA requires that utilities purchase a certain amount of their electricity from renewable sources. RECs essentially serve as proof that they've fulfilled this obligation. So although RECs won't charge your laptop or keep the lights on in your apartment, they allow renewable electricity producers to profit while giving traditional producers an easy way to go green — vicariously.

So how much money can you make selling electricity back to the grid? Since rates vary with the market value of electricity, there's no set dollar figure that you can expect to take home. However, some home producers make from $0.04 to $0.08 per kWh sold back to the grid.

Before you commit to an investment in renewable energy, make sure you have the full story. Here are a few things you should ask your electric company before getting started:

Still can't get enough? Check out lots more links about electricity resale on the next page.