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Net Metering and Virtual Net Metering, Explained

Updated: Feb 29

Net Energy Metering (NEM) and its counterpart, Virtual Net Metering (VNM), are foundational elements of the solar market, offering distinct benefits and operational models to solar power producers and consumers. These mechanisms significantly increase the financial feasibility and attractiveness of solar projects, encouraging more widespread adoption of renewable practices by compensating consumers for the energy their array generates. Understanding NEM and VNM is crucial for solar developers, energy consumers, and stakeholders within the energy sector.


Remember that utilities track energy generation and usage through devices called ‘meters,’ which can range from analog meters physically checked at regular intervals to smart devices that send real-time data. NEM and VNM are methods of tracking a utility customer’s generation, so that the customer isn’t charged for energy they generated themself.


Why Does It Matter?


The truth of the matter is that the energy transition relies, in part, on making sure renewable energy technologies are accessible and financially appealing to consumers. In other words, if you install solar panels on your home, you want to know that you’re going to be credited for the energy your system generates. Especially when it comes to technologies like solar and wind, the power being generated at a given time may not exactly align with the power you’re actively using, and you don’t want any energy going to waste so that you can maximize the value of your system.


Net metering policies are a solution to this, creating pathways for compensation to consumers who want to make an investment to lessen their carbon footprint.


What Is Net Energy Metering?


Net Energy Metering, also known as Net Metering or NEM, is a solar incentive whereby households or businesses with on-property solar installations receive credits for the excess power that their panels generate. During times when solar production exceeds the property's energy needs, the excess power is exported back into to the public utility grid, effectively turning the meter backwards. This exchange allows consumers to receive bill credits for surplus energy generated, which can then be used to offset electricity drawn from the grid when the solar system's output is lower than the property's demand, such as during nighttime or cloudy days.

NEM encourages the adoption of solar energy by providing a direct financial incentive, as the savings on utility bills can significantly offset the cost of solar system installation. However, the specifics of NEM policies vary widely from one state to another, influenced by state legislation, regulatory decisions, and implementation policies. This variation affects how solar customers are compensated for the surplus energy they generate, thereby impacting the economic viability of solar investments in different regions.


What Is Virtual Net Metering?


In essence, VNM, sometimes referred to as Remote Net Metering (RNM), extends the benefits of net metering to customers who don’t have capacity to install their own solar array. The framework allows individuals to take a stake in an offsite energy generation system – say, one sited on a capped landfill or remote brownfield – and treat the resulting energy as if it has been generated onsite. This model is integral to community solar projects, where multiple participants can draw energy from a single solar facility. Subscribers receive credits on their electricity bills proportional to their share of the solar array, reducing their overall energy costs without hosting the solar panels themselves.


VNM exists in some form in 18 states, as well as Washington DC. However, consumer compensation varies widely by program: some state programs offer the retail energy rate; others the wholesale rate; and still others create their own billing mechanisms.


AC Power's Role in Leveraging NEM and VNM


As a solar developer specializing in transforming undervalued lands such as landfills and brownfields into productive renewable energy sites, AC Power always assesses VNM policies when considering the siting of solar projects. By developing solar projects that leverage these billing mechanisms, AC Power facilitates the expansion of solar energy access to a broader range of consumers, including those who cannot install solar panels on their premises.


Since landfills and brownfields are not always located near a direct off-taker, or someone who can use the energy generated by the solar array, the existence of VNM policy enables that clean energy to be transferred to the local public grid, and the benefits of it be distributed to the project’s subscribers. For example, VNM acts as the financial backbone to community solar programs, which allow consumers to take a partial stake in offsite solar projects. AC Power leverages these incentives to ensure that its projects benefit the maximum number of stakeholders.


In summary, NEM and VNM serve as essential tools in the transition towards a more resilient and decentralized energy system. They represent key off-take solutions that solar developers like AC Power utilize to promote solar energy adoption, making renewable energy more accessible and financially viable for a diverse range of customers. By understanding and effectively implementing these mechanisms, solar developers can significantly contribute to the growth of the solar industry and the broader goal of achieving energy independence and sustainability.


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