Net metering, or net energy metering, is an electricity policy which allows utility customers to offset some or all of their energy use with self produced renewable energy. Net metering works by utilizing a meter that is able to spin and record energy flow in both directions. The meter spins forward when a customer is drawing power from the utility grid (i.e., using more energy than they are producing) and spins backward when energy is being sent back to the grid. At the end of a given month, the customer is billed only for the net energy used.

Net metering works only for grid-tied systems and what makes it so beneficial, besides offsetting a home’s energy consumption with a renewable source, is that excess energy sent to the utility can be sold back at retail price. Usually any surplus energy is credited on the customer’s account toward the next billing cycle. If at the end of the year a surplus remains, then the customer is paid for the difference.

Net metering is gaining recognition as a simple and effective renewable energy incentive. Several states have net metering laws. Before net metering, two meters were used to measure grid and homeowner energy flow. The customers were then forced to sell their excess production at a rate much lower than retail. Because net metering allows one meter to flow forward and backward, the customer is getting retail prices and surplus energy to the provider is banked for later usage when necessary.

This simple system is low-cost and easily administered. It is a valuable program for prospective investors in solar power and other renewable sources by allowing customers to maximize the value of their electricity production. The vast majority of states have net metering laws in effect to varying degrees. States such as California, New Jersey, and Colorado are known for their progressive programs. The easiest way to find out about net metering laws in your area is to ask your local solar supplier or installer.