How much people save on their electric bill after installing a solar array depends largely on local policies, a Nebraska extension educator told NRT students in a talk on March 1, 2023.
John Hay, who specializes in renewable energy and biofuels and installed a solar array at his home in 2017, explained three ways of financially compensating consumers who produce some of their own electricity with solar panels.
Net metering is the best deal for consumers, he said, with the electricity produced by the consumers’ panels subtracted from the electricity they need to pay the utility company for. Consumers with solar panels then pay the leftover amount at the standard retail rate. In this way, they get credit at retail price for whatever electricity they produced. However, if they produce more electricity than they use from the utility, that surplus gets paid at a rate lower than retail, perhaps between a third and half of retail.
Hay said an average sized solar system may cost $15,000 to install and, with net metering, a Nebraska consumer might expect to pay that back in about 14.5 years. A solar array with a standard 25- to 30-year life expectancy should last long enough to pay back the initial investment and then benefit the consumer financially several more years.
“There is a lot of utilities in the state of Nebraska, seven now, that have reached the threshold where they’ve got enough systems installed, that they don't have to net meter anymore,” Hay said. “Then they get to choose the policy put in place for the next set of customers, and that's pretty important.”
Meters are now sophisticated enough to measure the electricity that goes from the grid into a house, solar energy produced at a house and sent to the grid, and solar energy produced and used at a house without going to the grid.
Utilities may reason that consumers need to pay not just for the electricity they used from the grid but for the system maintained to generate, transmit and distribute that electricity. This includes the power plants and wind turbines that generate it; the substations that transmit it and maintain the electric grid and lines of transmission; and the utilities that distribute the electricity, issue bills and collect payments.
Instead of net metering, a utility may use net billing to compensate consumers using solar energy. In this method, consumers pay for all of the electricity from the utility at full retail and then get credited at a lower rate, perhaps between a third and half of retail, for the electricity their solar panels produce and send to the grid. The solar energy they use at home, which never goes to the grid, offsets full retail value to the solar consumers, as it does in net metering, since it lowers the amount of electricity the house uses from the grid.
“With net billing, you can see that I'm not getting as much value from what's sent to the grid,” Hay said. “So, that's really important from an economic analysis standpoint to understand ‘Is this going to be a good economic investment to put this solar on my house if what I send to the grid has less value?’”
The third way of compensating solar consumers, buy all/sell all, involves use of a solar meter that measures both the solar energy sent to the grid and the solar energy used in the home. The consumer is credited at the lower rate (between a third and half of retail) for the energy sent to the grid. The utility buys the solar energy used in the home at that lower rate also, but then turns around and sells it to the consumer at the full retail price, along with charging full retail for the electricity coming from the utility into the house.
Net billing can have an 18.5 year pay back, but when it comes to buy all/sell all, “the economics fall apart pretty rapidly,” Hay said.
Utilities in Nebraska are nonprofits, not seeking profit, but they need to make enough money to maintain their business, he said.
“They're trying to make themselves whole, but the question is, is net billing making them whole or do they think that they need to buy all/sell all to make them whole?”
In the future, as meters grow increasingly sophisticated and can show utility companies what times of day electricity was used and in what amount, thus allowing utilities to charge different rates for the time of day, Hay told the NRT students they can expect to see more promotion and advertisements of behind-the-meter solar.
“You need to look at those very skeptically, not because they may not be correct in that they could be a decent investment or something like that, but the reality is that the policy is different in different places,” he said.
Consumers who want to lower their electric bill without installing a solar array should lower their thermostat in the winter, reduce the temperature on their water heater and raise the temperature on their air conditioner.
“Beyond those three, everything else is small,” Hay said. “Let's say I have my lights off more or reduce how much time I'm cooking. Don't worry about those things. What you need to worry about is, what setting do you have your thermostat on and can you change that and still be comfortable? Those are the big savings.”
— Ronica Stromberg, NRT Program Coordinator