The Bottom Line
Net metering is a billing mechanism that credits Distributed Generation (DG) customers for electricity they supply to the grid. For net metering to work, the meter must be capable of flowing both forward and backward. Over a billing period, if the customer consumes more than they generate, they will owe the utility provider for the difference. Similarly, if the customer generates more than they consume over the period, they may receive a credit(amount varies by state). Thirty-eight states have net-metering policies and some utilities have voluntarily adopted them. However, the size of the renewable facilities that qualify varies by state.
For states and utilities that do not offer net metering, small renewable generation facilities are generally able to sell excess energy back to the utility at avoided costs under a federal law known as the Public Utilities Regulatory Policy Act of 1978 (PURPA). Avoided costs are generally defined as the price the utility would otherwise pay for electricity and varies widely across the country.
THE RELATIONSHIP BETWEEN NET METERING AND PURPA
In sum, with net metering, the difference in consumption and generation is netted over a billing period; with PURPA, it is netted instantaneously. This concept matters less to customers with consistently high electricity consumption because they are able to use all the output from the turbines in real time, but for those who do not, net metering allows the customer to more effectively and economically offset their consumption with the generation from the turbine. Learn more about billing from our Considering Wind video for the Energy Manager.
RENEWABLE ENERGY CREDITS
A Renewable Energy Credit(REC) is an intangible certificate that signifies one megawatt hour of electricity produced from a renewable resource. A REC can be bought and sold in the market and signifies the holder is responsible for creating a particular amount of renewable energy. States, regions, and private companies set standards for what qualifies as a REC and RECs must be certified to be sold in the market. Therefore, companies can own RECs without actually running on wind power. With a Wind for Industry® project, our customers not only benefit economically from the REC market, but they are legally “wind powered.”