Net billing and net metering are two regularly used ways for compensating owners of solar energy systems for surplus electricity generated and fed back into the grid. In this article, we will look at the key distinctions between net billing Vs net metering. Individuals can choose the best solution for their personal circumstances and energy goals by understanding the differences between net billing and net metering.
Net Billing Vs Net Metering: Differences and Definition
Net metering and net billing are not the same things. Both systems compensate solar owners for transferring excess electricity to the grid, but the difference is in how participants are compensated. In general, net metering credits are equivalent to the retail rate of power (what you pay for electricity as a utility customer), while the wholesale rate is equal to net billing credits (what your utility company pays for electricity). Let’s take a look at Net Billing Vs Net metering in more detail.
What is Net Metering and Net Billing?
To understand the difference between Net Billing and Net Metering, you’ll need to understand what is net metering and net billing separately.
Net Metering
With net metering, you earn bill credits, but it is not always a monetary exchange. Rather, net metering credits are banked and used when you need to draw electricity from the grid on a gloomy day. Net metering credits are often a one-to-one exchange; a kilowatt-hour (kWh) produced by your solar panels is valued the same as a kWh provided by the grid. This simplifies your energy bill because you are simply charged for your net energy use, which is your energy consumption minus your energy production.
Net metering systems allow solar owners to store the energy generated by their solar panels. The one-to-one net metering arrangement increases the value of home solar installations. Utility companies, on the other hand, contend that because retail rates include business expenses in addition to the value of electricity, net metering credits are more than the value of electricity and delivery. After this, let’s see learn about the net billing definition.
Net Billing
Instead of banking the credits gained from your solar panels’ excess energy, net billing systems allow you to sell that energy to the utility, often at the wholesale rate. Net billing is a monetary exchange in which the energy produced by your home solar system is considered as if it were produced by a large-scale solar project. However, your compensation rate will be lower with net billing than with net metering. With this, you have learned what is net metering and net billing definitions.
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What are Different Types of Solar Compensation Programs?
After learning about what is net metering and net billing and the difference between net billing vs net metering, let’s learn about the different types of solar compensation programs. Net metering and net billing policies differ from one state to the next and from one utility to the next. As the renewables industry grows and matures, various types of net metering and net billing programs have emerged.
1. Net Metering in Retail
The classic net metering strategy in which participants receive bill credits for the energy produced by their solar panels at the retail rate of electricity is retail net metering. In general, this raises the value of home solar systems while decreasing revenue for utility corporations. Retail rates frequently include more than just energy costs; utility employees, maintenance, and other expenses are typically funded in part by retail supply revenue. As a result, several utility companies are attempting to change net metering laws in order to compensate solar energy system owners at rates far lower than the retail rate.
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2. Net Metering on a Virtual Basis
Participants in shared renewable energy projects, such as community solar, benefit from virtual net metering. It provides the same remuneration as net metering but does not necessitate the physical placement of the solar system on the participants’ premises. Subscribers to community solar, for example, are often assigned a piece of a large-scale solar array. When their piece of the array generates more energy than their home consumes, they will earn the same credit as if those panels were mounted on their roof through virtual net metering.
3. Avoided-Cost
Unlike most retail net metering plans, avoided-cost bill credits are not compensated one-to-one. Participants instead earn credits equal to the amount saved by the utility by not having to provide electricity to their houses. Because it is a monetary transaction rather than a one-to-one exchange, avoided-cost rates are defined as net billing rather than net metering. After this, let’s also learn what is net billing process.
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What is Net Billing Process?
The whole net billing process is as follows:
1. Net metering charges the owner for the net energy used, which is the difference between the total energy produced by the system and the total energy consumed. The difference between excess power exported back to the grid and total electricity consumed by the owner is accounted for via net metering. As a result, surplus energy generates money, while energy shortages are met by the system.
2. Regarding the kind of net meter that is used to record power, each state may have its own set of regulations. In some states, only one meter is required to measure the net amount of power utilized by the owner. Other states, on the other hand, require two meters to record the entire number of units consumed from the grid by the owner as well as the total quantity of power generated by the owner’s system.
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Net metering and net billing, in addition to the energy savings you gain from producing your own electricity with a residential solar panel system, increase the savings potential for solar panels. Instead of losing the excess electricity your system generates on a sunny day, you may store it and use it when you need it, such as on a cloudy day or at night. Net metering’s one-to-one exchange usually results in reduced electricity costs, a shorter payback period, and a higher return on investment.
Net billing can also help to shorten the payback period and increase overall savings, but it is less valuable for solar owners than net metering. You may always alter your consumption patterns and consider installing a solar battery to store your excess energy instead of relying on the utility to maximize your savings, independent of your local compensation scheme.
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