Does net metering for home solar create winners and losers?

net metering home solar electric grid costs lower-income customers

Homeowners with solar panels on their roofs may pay little or nothing on their electric bills. But that doesn’t mean they’re free of the grid and produce their own power around the clock. Instead, these homes supply electricity to the wider electric grid when the sun is shining, and buy electricity from the grid when it’s not.

To account for that, many states use a billing policy called “net metering.” Put simply, net metering is a math problem: each month, the utility calculates how much utility-generated electricity a customer used, then subtracts the solar electricity they supplied to the grid before calculating their bill. In effect, this means households with solar are paid the full retail rate for electricity, which is usually more than the utility would pay to a power plant. If a solar system produces a lot during the month, a customer’s electricity bill may be very small, even zero.

The challenge is that most people’s utility bills are designed to cover more than just the electricity itself. Utilities also have to build and maintain power lines, transformers, and the rest of the complex infrastructure that keeps our lights on. To cover these costs, most utilities charge each customer for a portion of grid maintenance based on their energy use. The costs of paying for the grid, plus a customer’s energy usage costs, together make up the “volumetric rate” most people pay on their energy bills. 

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