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As renewable energy becomes increasingly popular, more people are looking to install solar panels on their roofs or wind turbines on their properties. This can generate more electricity than they use, leading to questions about how excess energy is handled. Three common methods of handling excess energy are net metering, gross metering, and net billing.
1. Net Metering
Net metering is a billing system used by utility companies to credit homeowners for the excess energy generated by their solar panels or wind turbines. With net metering, any excess energy produced by the homeowner is sent back to the grid and credited to their account. This means that when the homeowner uses more electricity than their system produces, they can draw on those credits to reduce their bill.
The advantages of net metering are that it allows homeowners to generate their own clean energy while still being connected to the grid. This means that they can use the grid as a backup when their system isn't generating enough energy, while also taking advantage of the grid to offset their energy costs.
It provides a financial incentive for homeowners to invest in renewable energy. By allowing homeowners to generate their own energy and receive credits for excess energy, net metering makes it more affordable for homeowners to invest in solar panels or wind turbines.
For example, if a homeowner generates 1000 kilowatt-hours (kWh) of electricity in a month and uses only 800 kWh, they will have a 200 kWh credit on their account. If the following month they generate 900 kWh and use 1100 kWh, they will have a 200 kWh deficit on their account, but they can use the 200 kWh credit from the previous month to offset the cost.
2. Gross Metering
Gross metering is a billing system where the utility company purchases all the energy generated by the homeowner's solar panels or wind turbines. This means that the homeowner is paid a fixed rate (also called as ‘feed-in tariff’ rate) for every kWh of energy they produce. With gross metering, homeowners don't receive a credit for excess energy sent back to the grid. Instead, they receive payment for all the energy they produce at a fixed rate per KW. This can be beneficial for homeowners who generate more energy than they use, as they can receive a steady income from their renewable energy system.
The disadvantages of gross metering are that homeowners are paid a fixed rate for all the energy they produce, regardless of whether they use it themselves or send it back to the grid. This means that if a homeowner generates a lot of energy but doesn't use much of it themselves, they may not receive as much financial benefit as they would with net metering.
Homeowners who use a lot of electricity may not benefit as much from this billing system, as they will have to pay for all the energy they use at the utility's retail rate, which is typically higher than the rate paid for excess energy in a net metering system.
For example, if a homeowner generates 1000 kilowatt-hours (kWh) of electricity in a month and uses only 800 kWh, they will be paid by the DISCOM for the 1000KW generated by their system at a fixed feed-in tariff rate (which is generally lower than the retail rate) and the consumer will have to pay a retail rate for the 800 KW of energy consumed. There is no credit system in this mechanism.
3. Net Billing
Net billing is a billing system that combines elements of both net metering and gross metering. Under net billing, the homeowner's electricity bill is calculated by subtracting the credit for excess energy from the total energy produced. Any remaining energy is then sold to the DISCOM by the consumer at a fixed rate. This system can be beneficial for homeowners who generate a significant amount of energy but also use a lot of electricity, as they can receive credit for excess energy while also being paid for all the energy they produce.
For example, if a homeowner generates 1000 kilowatt-hours (kWh) of electricity in a month and uses only 800 kWh, they will be paid by the DISCOM for the 200KW excess energy generated by their system at a fixed feed-in tariff rate (which is generally lower than the retail rate) at end of every billing cycle.
There is no credit system in this mechanism and hence the consumer can’t bank the energy credits as possible in the net metering arrangement. Instead, the excess energy produced by the system is sold to the DISCOM/ energy provider at a wholesale rate (which is lower than the rate at which the electricity is taken from the DISCOM).
4. Virtual metering
There are several consumers who wish to go solar but are not able to do so because of the unavailability of rooftop space. This problem is addressed by virtual metering.
Source: Case Study on Virtual Net metering (2018), Partnership To Advance Clean Energy Deployment (Pace-D), USAID and Ministry of New and Renewable Energy.
Virtual metering is a technique used in the energy industry to estimate the energy consumption or generation of a specific building or asset without the need for physical metering devices. Software is used to allocate credits to linked accounts. It allows customers to allocate their excess energy to other sites that they own. A single generation can be mapped to multiple consumers using this software billing method.
For example, if a standalone building with many apartments installs a rooftop solar. Virtual metering will allow credits to be allotted to each apartment. Similarly, the residents can install rooftop solar at a different locations and reap the benefits.
One of the key challenges in virtual metering is the accuracy of the data used to build the mathematical models. To ensure accurate results, it's essential to collect and analyse data from multiple sources and to continuously update and refine the models based on actual energy consumption and generation data
Net metering, gross metering, virtual metering and net billing are all methods of handling excess energy generated by renewable energy systems. Each has its advantages and disadvantages, and the best choice depends on the homeowner's energy needs, the size of their renewable energy system, and the availability of different billing systems in their area. Homeowners can consult with Frevolt, your end-to-end solar installation services provider.
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