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Since 2005, all public electric companies in the United States have been required by the Energy Policy Act to make net metering available to their customers. Net metering allows customers who generate electricity on-site to pay the utility only for the net energy used. A home with solar panels will alternate between pulling power from the grid and sending power to the grid. At the end of a billing period, if a customer provided surplus electricity to the grid, they are credited for that excess according to the specific policy of the utility. Net metering was created to foster renewable energy use; it was pioneered in the United States. Arizona net metering dates back to 1981.
Distributed solar power with net metering offers various benefits. Solar panels’ yield is highest during the day, when demand also is highest; this helps reduce the expensive electricity the utility might be forced to buy. Each home’s solar system delivers power in the same place it is needed, reducing demands on the transmission grid (costly to build and maintain). Net metering allows homes and businesses to lower their utility bills long-term. As part of the renewable energy economy, net metering spurs development of jobs and activity in the local solar industry.
However, some trade organizations and utilities in California and Arizona are arguing that net metering shifts grid-wide costs of generation, transmission and distribution onto customers who do not generate electricity locally. These anti-renewable groups are undermining the established policies enabling net metering. Because solar power homes still use the main grid at various times, the utilities argue that distributed power users are not paying the full cost of maintaining the grid. For example, a 2012 CPUC report on California net metering stated that non-solar customers will annually pay $287 more by 2020.
Advocates of renewable energy and net metering concede that the current business model of utilities is being challenged. These advocates believe that distributed solar power has substantial benefits — enjoyed by the community as a whole — that outweigh the drawbacks. Some of the benefits include economic and employment effects, public health, water savings, reduced grid strain and improved grid security.
While distributed solar power with net metering is growing significantly, there are less than a quarter million customers with such a setup. CA net metering is just 0.77% of all utility customers, while Arizona net metering represents less than 0.5% of all customers.
