How Net Metering Works

What are the Benefits of Net Metering?

Net metering plugs the energy you make at home back into the grid.
Net metering plugs the energy you make at home back into the grid.
Christopher Furlong/Getty Images

The most obvious benefit of net metering is to consumers. If you install net metering in your home, you can reduce the amount of money you spend each year on energy. You can even make money if you produce more than you consume and your utility company pays you for that excess energy at the retail rate.

Here are a few other benefits of net metering:

  • The system is easy and inexpensive. It enables people to get real value for the energy they produce, without having to install a second meter or an expensive battery storage system.
  • It allows homeowners and businesses to produce energy, which takes some of the pressure off the grid, especially during periods of peak consumption.
  • Each home can potentially power two or three other homes. If enough homes in a neighborhood use renewable energy and net metering, the neighborhood could potentially become self-reliant.
  • It encourages consumers to play an active role in alternative energy production, which both protects the environment and helps preserve natural energy resources.
  • Homes that use net metering tend to be more aware of, and therefore more conscientious about their energy consumption.
  • It saves utility companies money on meter installation, reading and billing costs.

The amount of money homeowners can save with net metering depends on how much energy they produce. A 10-kilowatt residential wind energy system can save a consumer an estimated $10 to $40 a month [source: American Wind Energy Association].

Not everyone is sold on the idea of net metering, however. To the utility companies, the idea of consumers buying less power from them (and even having to pay consumers for the energy they produce) means shrinking profits. For that reason, they have opposed many proposed state legislations that would have made it easier for consumers to use net metering.

In the next section, you'll see which states have been successful in creating net metering regulations.