It is no longer an unusual sight to see solar panels on homes.  And with them, the concept of net metering comes into play.  Net metering is the means by which residential electricity customers who generate their own electricity from solar power can sell the electricity they aren't using back to their utility company.

On the surface, this seems like a win-win situation.  After the initial cost of installing the solar panels, electricity is generated at a cost next to nothing.  When demand is greater than what the panels offer, the utility provides the difference.  When the solar panels produce more than what is needed, the extra is put back onto the distribution grid and purchased by the utility.  However, this seemingly straightforward situation raises a few issues. 

You see, the price of electricity includes a number of factors.  One factor is the upfront costs in creating, maintaining, expanding, and upgrading the distribution grid.  And because there is only one distribution grid, there are regulators that determine the price of electricity in order to provide a "fair" return for the money invested in the distribution grid.

The distribution grid was also originally designed to deliver electricity.  Not collect it.  Collecting electricity from solar rooftops is an additional cost for the utilities which is not integrated into the regulated price.  From the utility's point of view, if a consumer is putting electricity back onto the distribution grid, they do so without paying the full cost of service to use the distribution grid.  The consequence is a shift in their share of the cost onto customers who don't have solar panels.  It is like driving your car on a toll road but not paying the toll.  By doing so, you are benefitting in using the road and passing your contribution in maintaining, expanding, and upgrading the road to all the other drivers.

And then there is the issue of how much the utilities should pay consumers for the electricity being put onto the distribution grid.  The payments come in the form of credits which are applied to future purchases.  The value of the credits vary based on number of factors such as where you live, who provides your electricity, and when the electricity is provided to the distribution grid.  Calculating the value of the net metered electricity is not simple and straightforward.

These challenges are not show stoppers.  The benefits to rooftop solar are too high in value.  From the homeowner's point of view, simply put, the electric bill goes down.  Depending on how many panels are installed, it could go way down.  From the utility's point of view, rooftop solar helps reduce peak demand and distribution grid strain.  And anything that dampens the demand swings on the distribution grid is something utilities seek as it allows for more efficient generation and distribution.

However, the challenges are there.  If the benefits of rooftop solar are to be realized on a larger scale, regulators need to come up with a more consumer friendly way for consumers to be paid for their surplus electricity while utilities and investors see a fair return on their investment for maintaining, expanding, and upgrading the distribution grid.