Net Metering & Feed-In-Tariff (FIT)

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The feed-in tariff (FiT) and net metering are both methods by which a utility company compensates a homeowner or other producer for the energy fed back into the grid. Simply put, net metering requires one meter, FiT requires two.

Net metering simply “runs your electric utility meter backwards” when a homeowner’s solar panels are producing more electricity than the property is using, sending the excess energy back through transmission lines to other energy consumers. In contrast, implementing FiT requires two meters, one to measure consumption, the other to measure generation, which generally commands a higher price than the grid energy.

Net metering is simpler to implement: in most cases the existing meter can be used, but the price the utility pays for power is inherently the same as it sells it for. A wealth of additional local rules exist: utilities may cap the amount they will credit the homeowner, sometimes at zero. This is undesirable because it encourages homeowners to only install small solar generation systems to avoid producing more electricity than the property will use and thus “giving away” electricity. It also discourages energy efficiency.

Implementing a FiT is somewhat more complex, because a second meter and additional wiring is required. However, this second meter allows different pricing for consumption and generation. The price the utility pays for the excess electricity varies from place to place, but a typical scheme follows a 20-year schedule that pays a pre-defined price that gradually reduces year-on-year, offering the homeowner an attractive rate of return without significantly raising the overall cost of electricity.

Net Energy Metering (NEM)

Net Energy Metering, or “NEM”, is a special billing arrangement that provides credit to customers with solar PV systems for the full retail value of the electricity their system generates. Under NEM, the customer’s electric meter keeps track of how much electricity is consumed by the customer, and how much excess electricity is generated by the system and sent back into the electric utility grid. Over a 12-month period, the customer has to pay only for the net amount of electricity used from the utility over-and-above the amount of electricity generated by their solar system (in addition to monthly customer transmission, distribution, and meter service charges they incur).

How Net Energy Metering Works

At any time of the day, a customer’s solar system may produce more or less electricity than they need for their home or business. When the system’s production exceeds the customer demand, the excess energy generation automatically goes through the electric meter into the utility grid, running the meter backwards to credit the customer account. At other times of the day, the customer’s electric demand may be higher than the renewable energy system is producing, and the customer relies on additional power needs from the utility. Switching between solar system’s power and the utility grid power is instantaneous-customers never notice any interruption in the flow of power.

Benefits of Net Energy Metering

NEM is your gateway to optimizing the rate of return on your solar investment.

  • Allows customers to zero-out their bills.
  • Credits customer accounts at full retail rates.
  • Accurately captures energy generated and consumed, providing customers with annual performance data.

Payment for Net Surplus Generation

Customers that generate a net surplus of energy at the end of a twelve-month period can receive a payment for this energy under special utility tariffs called a Feed-In-Tariff (FIT). Check the tariff books for your utility for more information on net surplus generation rates.

Billing with Net Energy Metering

Under a net energy metering agreement, your utility will continue to read your meter monthly and you will receive a monthly statement indicating the net amount of electricity you consumed or exported to the utility grid during that billing period. If you are a residential or small commercial customer, you have the option of paying the utility for your net consumption monthly, or settling your account every 12 months. Contact your utility for billing options.


Most smaller electric customers have simple bidirectional meters-capable of spinning backwards to record energy flowing from their system to the utility grid-and are currently eligible for net energy metering. These basic meters are often referred to as “non-time-of-use meters” because they are incapable of recording when electricity was used: only how much was used. Some utilities may want two meters for net energy metering, one to measure electricity going from the grid to your home or business, and one to measure surplus energy going from your system to the grid.

Time-of-use (TOU) meters are more sophisticated, recording when electricity is used and allowing the utility to charge different rates at different times of the day or week.


You are eligible for net energy metering if you are a retail customer of an electric utility in California, you generate at least some of your electricity using solar or wind energy or other qualified generating technologies on your premise, and your generating system’s peak capacity output is 1,000 kW or less.

Additional and Future Pricing (Tariff) Options for Solar Systems

There are 3 major pricing or “tariff” options for solar customers:

  1. Net Energy Metering, which will include net surplus compensation by 2011 where customers can receive compensation at the end of the year if they produce more electricity with their solar system than they consume from the grid.
  2. Virtual Net Metering, which allows the electricity produced by a single solar installation to be credited toward multiple tenant accounts in a multifamily building without requiring the solar system to be physically connected to each tenant’s meter. For now, this program is only available as a pilot program to multifamily affordable housing, but the CPUC is currently considering expanding the program in the future.
  3. Renewable Energy Self-Generation – Bill Credit Transfer (RES-BCT), which enables solar customers transfer excess credits to another account. This works similar to net metering, but any production credits that normally would be received by the consumer can be transferred to another account.

Feed In Tariff (FIT)

A feed in tariff is an amount of money which is paid by the utility provider for energy produced by a (solar) renewable energy producer.  For example…

You own a 5 kW (Kilowatt) solar power plant which sits on your roof.
This installation produces 25 kWh (kilowatt hours) of energy every day.
In one month, your installation produces 750 kWh of energy.

If your local utility (Power Company) is required to pay you for the energy you produce – this is called a feed in tariff. If the feed in tariff from utility is 20 cents per kWh, then the amount of money your utility must pay you every month is calculated like this…

(energy produced X feed in tariff) = money

Or in this case…750 kWh X $0.20 = $150

The basic idea is that you can earn money, not only to pay for the installation, but also earn profit for making the investment in a clean and renewable energy source which supports the energy grid, stabilizes peak energy demands, offsets CO2 and other pollutants, and continues producing energy for the price you paid for the installation for the next 30-40+ years.

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