Both net metering and renewable energy credits are ways to trade energy back to the utility company. But each has a different payback plan to get the most financial benefit from your solar power installation. Which is better: a net meter or SREC?
They’re similar but not available in every location. You don’t get to choose if you want one or the other. In many places, the power company has a firm grip on the regulatory scope of consumer benefits. They’re both smart ways for grid-tied solar panel system owners to maximize the financial results of their solar system. However, they’re different in the ways they ultimately pay out.
Solar renewable energy credits, or SRECs (pronounced “ess-Rex”), put cash in your pocket. Net metering is credited against your utility account to potentially “zero out” your energy bills.
First, let’s break down the three different types of utilities and how to find applicable net meter agreements and SRECs.
- Investor-owned utilities (IOUs) are power companies owned by shareholders. For example, Duke Energy serves over 7 million customers in the Carolinas, Florida, Ohio, Kentucky, and Indiana. PGE has over 5 million customers in California. In the Midwest, MidAmerican Energy has 1.6 million customers in Illinois, Iowa, Nebraska, and South Dakota. Alliant Energy has about 5 million customers in Iowa and Wisconsin.
- There are almost 2,000 publicly owned utilities (POUs) that include federal, state, and municipal electric distributors. One of the largest, Los Angeles Dept. of Water and Power (LADWP) has 1.4 million customers. Municipal utilities are often operated at the city or county level.
- Cooperatives are not-for-profit member-owned utilities. Co-ops include RECs, or rural electric co-ops (not to be confused with SRECs, solar renewable energy credits). There are less than 1,000 co-ops in 47 states in the US.
You can find solar incentives and clean energy tax credits from every IOU, POU, REC, and co-op at DSIRE.
DSIRE is the Database of State Incentives for Renewables and Efficiency®. DSIRE maintains up-to-date energy policy information for all IOUs, POUs, co-op, muni-, city-owned, or regional utilities in the US. (You can also find valuable info on financial opportunities when upgrading energy efficiency at your home or business.)
Net meters are a bi-directional system of measuring the electricity sent or received from the power grid.
Every state and utility has different net meter rules. In Minnesota, every utility offers net metering to customers. In Arizona, it’s called “net billing,” but the result is about the same.
MidAmerican Energy customers in Iowa and Illinois are eligible for net metering. Each state has different rules for application and generating facility (solar power capacity) ratings.
Net metering was replaced by “cost-of-service” in Michigan. The new system allows utilities to determine their payout rate. Michigan, like many states, has a system-size requirements that splits at 20kW.
Another variable for net metering is time-of-use demand. You might receive an incentive to supply electricity to the grid during peak hours, between roughly 3 to 7 p.m. During peak hours, electricity is more valuable, so if you produce electricity then, and reduce consumption, it can be more lucrative. (Again, a battery system, like Generac or Tesla, can regulate your power. These backup systems operate by discharging automatically during peak use hours, charging during low demand time, or a blend of the two.)
What is a net meter?
Net metering is a credit but your earnings are applied to your bill, instead of receiving a check. The difference with net metering is that you won’t directly receive income per se.
In some places, the utility just takes this free energy and doesn’t give anything back. In fact, they’ll charge you monthly just for being connected to the power grid. Even if you never use their electricity, they impose a regular hookup charge anyway. (You might be asking, “How can I keep my excess energy and keep the lights on at night?” The answer is solar battery storage, like Generac PWRcell or Tesla Powerwall.)
Still, net metering saves money by lowering or even zeroing out your energy bill. Essentially, net metering is a system of credits and debits that is calculated based on how much energy your solar panels produce vs. how much energy you are consuming. By exporting your excess power back to the grid, you reduce future electric bills with net metering.
Like SRECs, the option for net metering is not available everywhere.
How does net metering work?
The best way to explain net metering is with an example.
Let’s say that in July your grid-tied solar system produced more energy than what your home used. That excess is supplied to the main utility grid for others to use and your account is credited (not paid, just credited with the excess amount produced).
In December, your energy needs may outweigh what your system produces. The credits earned over the summer cover the cost of pulling additional energy from the grid during winter.
These debits and credits will ebb and flow over the course of the year, keeping you from having to worry about monthly bills while ensuring you always have access to the energy you need. Once a year you can settle up with the utility company if you end up owing them anything.
Unlike an SREC, you won’t get cash for producing extra electricity. However, in some places you’re able to transfer your net metered earnings to another energy bill of your choice (another property, a family member, a school, etc.).
What is an SREC?
SRECs (Solar Renewable Energy Credits) are credits from a utility company for the production of clean solar energy.
Essentially, utility companies are mandated by state and federal governments to produce a certain amount of clean energy. The regulation is called the renewable portfolio standard (RPS). About 30 states have an RPS that require clean energy production. Many RPSs have a special solar energy bonus that targets electricity produced by solar power. Utilities must collect renewable energy certificates to prove they’re meeting the RPS. An SREC is one way they can count the renewable energy as their own.
Instead of adding a solar farm or wind turbines, utilities pay for the clean energy produced by homeowners.
The value of an SREC can vary year to year and by location. The value of a solar credit is set by market supply and demand.
Your state may not have an SREC program, but in a few places an SREC can be sold out of state. For example, Ohio utilities can purchase SRECs from contiguous states (Pennsylvania, Michigan, Indiana, Kentucky, and West Virginia). But New Jersey is a closed SREC market.
The nice part about SRECs is that you’re not “losing” or selling the actual energy back to the utility. You’re able to use all the energy you produce and get paid. The utility company pays you to take credit for the clean energy produced by your solar array. It’s a no-brainer for folks with grid-tied solar systems!
How do SRECs work?
In this example, a homeowner earns one SREC for every 1,000 kilowatt hours (kWh) that their solar panel system produces. On average, a system produces somewhere between 2 and 6 SRECs per year. The exact amount you are paid depends on the rate offered by your utility. Keep in mind SRECs are not available in all states. Contact our expert solar consultants to see if you’re eligible.
Basically, SRECs are a way to generate income with your solar panels.
SRECs are not selling energy back to the grid, that’s net metering. With an SREC, the electric company is buying the excess power you produce so they can take credit for the clean power your solar panels made.
Net Meter or SREC Wrap-up
A net meter or SREC are both great ways to monetize your solar energy, the difference is how you’re rewarded for producing excess energy. Both are nice financial benefits to producing clean energy, the difference is the payout or distribution.
Or use this mnemonic device to remember the difference:
“An SREC equals a check but the net meter is an energy bill defeater.”
Want to find more tax incentives, solar rebates, SRECs, and other financial benefits to going solar?
MOXIE maintains a solar tax incentive, rebate and net metering info page for every state we service.
But keep in mind, the laws change. Sometimes our tax credit, incentive, or solar rebate info is slightly out-of-date and behind the current law. The other challenging factor is that some utilities have their own rules. A state-wide SREC or net meter plan may not be available, but your city’s power or your regional utility company can have special opportunities that are different than the state-wide law. For up-to-the-minute, updated info on solar rebates and clean energy tax credits, visit DSIRE, the Database of State Incentives for Renewables and Efficiency®.
You don’t have to decide between net meter or SREC. The only decision you need to make is when to go solar.
Contact MOXIE today to learn how to start saving with clean energy now! We’ll help you find every applicable solar incentive or rebate.