What is net-metering & why is it required?
Net metering is a billing mechanism that allows homes & businesses that generate solar energy to deliver unused energy back to the grid & receive a credit for the same. If the credit received is higher than the grid-power tariff, it is called “feed-in-tariff” & if the credit is the same as grid tariff, it is more commonly known as net metering.
Net metering was devised as a policy to promote wide-spread adoption of solar because in certain cases such as residential homes, during daytime the solar panels might be generating more energy than the home is consuming, so, under the policy the homeowner is able to export the excess solar power & receive a credit for the same.
A net metering implementation is typically accompanied by the installation of a utility approved bi-directional meter in place of the existing meter. The bi-directional meter records the energy flow happening in both directions, i.e. energy being drawn from the grid into the building & solar energy being exported from the building to the grid and is used to calculate the net billing at the end of the month. Secondly, a long-term Power Purchase Agreement (PPA), typically for a period of 25yrs is signed between the homeowner & the utility company so that the homeowner receives credit for the exported solar power.
Further details regarding the comparison of different types of solar power systems & the challenges around net metering are available here