A Guide to Solar Billing Structures

Understand your utility bill and see how you can save with solar

Going solar saves you money through a utility offset – the portion of your monthly energy expenses that you can save by generating your own power rather than buying it from the utility. Depending on where you live and your utility provider, the billing structure used to account for your solar energy production can vary – and some billing structures are more valuable for homeowners than others. In this article we’ll help you understand the most important concepts for evaluating solar as an option for you.

Net Metering

Net metering is a billing structure in which you are credited for excess energy produced by your solar system that is fed back onto the grid. At certain times, your system will produce more power than you need at that moment – for instance, on a sunny afternoon when your house is empty because your family is at work and school. In these cases, your meter will spin backwards, tracking the energy fed back to the grid. The credits earned in this process can be used at times when your system isn’t producing as much, but your home needs power – such as at night or on cloudy days – allowing you to reap the benefits of your solar investment and avoid paying out-of-pocket for energy from the utility.

The value at which these credits are assessed and the time periods over which they can accumulate vary by state and utility. Some jurisdictions allow credits to “roll over” for up to a year (usually referred to as Annual Net Metering), enabling what’s known as the “solar harvest” in the spring and summer, where homeowners can accumulate credits for use in the less productive fall and winter months. Others only allow credits to roll over month to month (Monthly Net Metering) – this can still be very lucrative for homeowners, but is important to account for during the system design phase.

The majority of states have net metering policies for at least some utilities.

Net Billing

Under net billing, you “sell” the excess energy generated by your solar system back to the utility. However, that electricity is sold at a predetermined rate based on the so-called “avoided cost” – the cost that the utility company “avoids” by having you produce a certain amount of energy for them. This rate is typically lower than the rate you pay for electricity when buying from the utility. Another way to think of it is that while you pay the utility at the retail price for the electricity you use, the utility only has to pay you at the wholesale price for the electricity you produce.

Because of the similar terminology, it’s easy to get net billing and net metering confused. Although it’s generally not as lucrative as net metering, net billing can still offer value to homeowners who go solar.

Time of Use

Time of use is a system where utilities charge more for energy depending on the time of day it’s used. The objective of this is to reduce strain on the utility grid at “peak” times by disincentivizing customers from using electricity during those periods. While ordinarily you might expect to be charged the same flat rate for all the energy you consume, under time of use billing a utility might charge a higher price for energy consumed, for example, from 3pm to 8pm on weekdays.

Time of use charges apply to customers with solar panels and those without solar panels. However, going solar offers a unique value proposition to homeowners who live in an area with time of use billing because their solar system can produce energy during peak periods, reducing or eliminating the amount of energy homeowners have to buy from the utility at higher rates.

Demand Charges

Demand charges are additional fees that some utilities add on to the bill of customers who use a particularly large amount of energy. In theory this is another way of trying to reduce load on the grid and encourage energy-efficiency. Commercial and industrial customers are the most common recipients of demand charges, but it is possible for homeowners to be assessed demand charges, too – although it’s uncommon, some utilities do assess demand charges to homeowners who go solar. Often, the fee is calculated on the greatest energy usage over a set time period.

As with time of use billing, homeowners with high energy needs can save money by using solar and battery storage to offset the amount of energy they need to consume from the grid and “spread out” their stored solar power to lower their peak usage periods.

See How Much You Could Save

Zenernet energy consultants can help you understand all of the billing factors to consider based on your location and utility, so you can make an informed decision on whether going solar is a smart financial decision for you. Just gather a few months’ worth of utility bills so we can see how much energy you use and how much you’re currently paying, then schedule a no-pressure remote consultation to find out how you can get a better deal.

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