Key considerations in solar PPAs
As the world moves towards cleaner and sustainable energy solutions, solar energy is gaining significant popularity among both residential and commercial customers. With the adoption of solar energy systems, the concept of metering has gained significant importance. Solar energy customers have different metering options to choose from, including net metering, gross metering, and net billing. In this article, we will compare and contrast these three types of metering.
Net Metering: Net metering is a billing arrangement between the solar energy customer and the utility company that enables the customer to offset the energy used from the grid with the excess energy generated by their solar system. Under net metering, customers can export excess electricity back to the grid, and the utility company credits the customer’s account for the excess power supplied. The customers are billed only for the net energy consumed from the grid, which is the difference between the electricity supplied and the exported energy.
For example, if a customer has a 10 kW solar panel and generates 50 units of electricity on a sunny day but uses only 20 units, the extra 30 units of electricity are exported back to the grid. In such a case, the customer’s account will be credited for the 30 units of electricity. If the customer uses 40 units of electricity the next day, they will be billed only for the net energy consumption of 10 units (i.e., 40-30).
Gross Metering: Gross metering, on the other hand, is a billing arrangement where the customer’s entire solar energy production is measured and credited separately. Under this system, the solar energy generated is fed directly into the grid, and the customer is paid for the entire energy generated, regardless of how much energy is consumed. In other words, the customer is not charged for the energy consumed from the grid.
For example, if a customer has a 10 kW solar panel and generates 50 units of electricity on a sunny day, they will be paid for the entire 50 units of electricity generated, even if they consume only 20 units and export the remaining 30 units to the grid.
Net Billing: Net billing is a hybrid of net metering and gross metering. Under net billing, customers are billed only for the net energy consumed from the grid. The difference between net billing and net metering is that, under net billing, the excess energy exported to the grid is compensated at a lower rate than the retail price of electricity. This rate is usually decided by the utility company or state electricity regulatory commissions.
For example, if a customer has a 10 kW solar panel and generates 50 units of electricity on a sunny day and uses only 20 units, the extra 30 units of electricity are exported back to the grid. However, the compensation for these exported units is at a lower rate than the retail price of electricity. So, the customer’s account is credited for the excess energy supplied at a lower rate.
Comparison of Net Metering, Gross Metering, and Net Billing: The following table summarizes the key differences between net metering, gross metering, and net billing:
| Metering Type | Definition | Billing |
|---|---|---|
| Net Metering | Customer is billed for the net energy consumed from the grid after offsetting excess solar generation | Customer pays the retail rate for energy consumed, and credits are given at the retail rate for energy exported |
| Gross Metering | Customer is paid for the entire solar generation regardless of how much energy is consumed | Customer is not charged for energy consumed, and the customer is paid for the entire energy generated |
| Net Billing | Customer is billed for the net energy consumed from the grid after offsetting excess solar generation | Customer pays the retail rate for energy consumed, but credits are given at |