In Focus: Net Metering and Production Based Incentives 0

Those who have already invested in solar energy or are considering making the green and clean switch are certainly interested in how to make it cost-effective and worthwhile. One way that owners can see a quicker return on their solar systems is by reimbursement of the energy produced from state or utility programs. Many people hear of a neighbor who “sells energy back to the utility company” and naturally become curious if it’s true and how that process might work.

Those who have installed solar already know that their new net-meter goes forward when energy from their utility company is used, and backward once their solar systems produce that energy. This offsetting effect lowers their utility bill or can practically eliminate it. But what if the solar system produces even more energy one month than the owners’ usage? Currently, a popular way solar system owners get the most from their panels is by net-metering, measuring energy production per month from the net-meter and any excess energy becomes an energy credit. Each utility company has their own policy on how to handle these credits. Sometimes they can be applied to the next month’s bill, and sometimes all the credits from the surplus energy are calculated at the end of the year to be reimbursed at a wholesale rate (per kW hour). If you’re curious about net-metering, check with your utility company on their own policies regarding surplus energy from a renewable source.

Net-metering is different from production-based incentives (PBIs), where homeowners can receive a payment based on how many kilowatt hours their system produces. For example, the New Jersey Board of Public Utilities pays solar system owners as much as $0.675/kWh, around four times what homeowners are used to paying them for energy in their pre-solar days. Many PBIs are in place to help states or utility companies reach their Renewable Portfolio Standard (RPS), which encourages a certain percentage (say 20%) of their energy to be from a clean, renewable source. Solar Energy Renewable Certificates (SRECs) are a way to measure clean energy production and these are awarded to homeowners and bought by electric suppliers in order to achieve these RPS requirements. Essentially, a system which supplies around 1,000 kWh/month of energy will earn a homeowner around $675 when the SRECs are purchased! Not all programs in place take the entire energy production- some may only calculate the SRECs based upon the surplus amount.
Feed-in Tariffs (FITs) are another PBI incentive for going solar. These programs offer a stable, long-term contract which typically guarantees payments for the total amount of electricity produced (not just the surplus) and access to the grid. A FIT program usually considers the cost of the investment compared to other renewable sources when determining the payout rates, meaning someone who spends more investing in solar PV panels would profit more than someone who paid less for wind power. The energy producers receive enough money over the time of their contract to cover the cost of their system, plus a reasonable profit. The main purpose of FITs is to encourage investment in the industry as well as decentralized energy production from diverse and renewable sources. Anyone willing to invest and generate energy can be eligible and help develop the industry with these 15-25 year contracts.

The Los Angeles City Council has just approved a FIT program where the Los Angeles Department of Water and Power will buy electricity from local rooftop solar PV producers. The program is starting out modest for its pilot phase, offering 10 MW, but is expected to increase the program to 150 MW of energy, all to be contributed by Los Angeles residents and companies. Many hope the implementation of this program will prompt a state-wide FIT, which could not only encourage success of California’s Renewables Portfolio Standard (RPS) Program, but create around 280,000 jobs over the next 10 years and add over $2 billion in additional tax revenue, according to a study at UC Berkeley’s Energy and Resources Group.

“Instead of sending hard-earned LADWP customer payments out of the state to buy more dirty coal, we’re hiring Los Angeles workers and using the famed Los Angeles sun to help our businesses produce clean, affordable solar power for Angelenos across the city,” said Evan Gillespie, the campaign representative with the Sierra Club in Los Angeles.

To read up on the details of federal and state incentives for renewable energy, visit

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Original Article on Cooler Planet

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