How to Sell Electricity Back to the Grid

How much do you know about the power grid?
How much do you know about the power grid?
©AP Photo/Tony Fiorini

Did you know that the sun shines more energy onto the Earth's surface than all of its inhabitants use in an entire year? With growing concerns about dwindling resources like coal and oil, it's easy to see why green, clean and renewable power make up such a large part of the global conversation about energy -- especially because renewable systems are becoming increasingly practical for everyday citizens to install and use.

But environmental conservation isn't the only green reason to look into cleaner resources: Renewable energy could provide a substantial source of that other kind of green -- money -- for your household. With a little up-front cash and the right resources, individuals are making bank by selling electricity generated by renewable means back to the grid.

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The grid, also known as the power grid, is the network of generators, cables and other transmission equipment that brings electricity from the place it's produced to wherever you use it. Traditionally, the birthplace of electricity is a power plant, where generators powered by coal, oil or natural gas -- all finite resources that cannot be regenerated (unless you've got a few million years on your hands) -- create the electricity that turns on your coffee maker, charges your computer and even powers up your Prius.

The majority of the energy that's consumed worldwide comes from a grid like this. However, renewable energy (energy that is produced using resources that naturally renew themselves over a short period) offers an alternative to these traditional processes. Whether power companies produce it or pay everyday citizens to produce it for them, renewable energy can also become a part of the grid.

So how can you get your hands on some of this cash while doing the environment a favor? Read on to find out.

Renewable Energy Sources: Learn Your Options

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.

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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 in propellerlike 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.

Weather isn't the only natural force that produces renewable energy. Dairy farmers in Vermont are collaborating with utility companies on experimental but highly successful programs -- affectionately called "Cow Power" by one farm -- that utilize manure processing systems to put the methane gas created by cow emissions to work producing clean energy. This is one example of biomass electricity systems, in which 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 an immensely 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.

Governments and Renewable Energy

Since renewable energy is so efficient, production systems like solar panels and wind turbines produce a lot 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.

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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 and how much money you might make.

Sell Your Electricity Back to the Grid

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.

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.

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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, many home producers make around $3,000 per year from a combination of REC sales and governmental clean energy incentives.

Sounds great, right? But 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:

  • What kinds of systems can be connected to the grid? (Different utilities may have different restrictions on the types of generators that can be used. Your electric company's Web site should have a list of certified or pre-approved systems. If your system isn't on that list, you may still be able to connect, but with a few extra compliance steps. You should be able to find those on the Web site as well.)
  • What is the authorization process for connecting your system to the grid? What are some possible safety concerns?
  • What rate (usually paid per kWh) will you be paid for the electricity you produce?

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

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More Great Links

Sources

  • Brain, Marshall. "How Power Grids Work." HowStuffWorks. (Dec. 5, 2011) https://science.howstuffworks.com/environmental/energy/power.htm
  • Environmental Protection Agency. "Green Power Market." (Dec. 5, 2011) http://www.epa.gov/greenpower/gpmarket/index.htm
  • Environmental Protection Agency. "Renewable Energy Certificates (RECs)." (Nov. 23, 2011) http://www.epa.gov/greenpower/gpmarket/rec.htm
  • Gangemi, Jeffrey. "Selling Power Back to the Grid." Bloomberg Businessweek. Nov. 25,2011. http://www.businessweek.com/smallbiz/content/jul2006/sb20060706_167332.htm
  • Knier, Gil. "How do Photovoltaics Work?" NASA. (Dec. 6, 2011) http://science.nasa.gov/science-news/science-at-nasa/2002/solarcells/
  • Locke, Susannah. "How does solar power work?" Scientific American. Oct. 20, 2008. (Dec. 2, 2011) http://www.scientificamerican.com/article.cfm?id=how-does-solar-power-work
  • National Renewable Energy Laboratory. "Renewable Energy Basics." (Dec. 1, 2011) http://www.nrel.gov/learning/re_basics.html
  • Sewall, Adam. "How Much Do Solar Panels Cost?" Get Solar. Nov. 1, 2010. (Dec. 7, 2011) http://www.getsolar.com/blog/how-much-do-solar-panels-cost/12707/
  • Southern California Edison. "Renewable Energy." (Dec. 7, 2011) http://www.sce.com/PowerandEnvironment/Renewables/default.htm
  • Southern California Edison. "Assembly Bill 920: Frequently Asked Questions." (Dec. 11, 2011) http://www.sce.com/customergeneration/nem-ab920.htm#Q12
  • U.S. Energy Information Administration. "How much electricity does an American home use?" (Nov. 25, 2011) http://www.eia.gov/tools/faqs/faq.cfm?id=97&t=3
  • United States Department of Energy. "Frequently Asked Questions on Small Wind Systems." (Dec. 4, 2011) http://www1.eere.energy.gov/wind/small_wind_system_faqs.html#benefits
  • United States Department of Energy. "Metering and Rate Arrangements for Grid-Connected Systems." (Dec. 23, 2011) http://www.energysavers.gov/your_home/electricity/index.cfm/mytopic=10600