What is Solar Net Metering and how does it work for home solar panels?

Net metering is an incentive that allows you to store the extra energy produced by your solar photovoltaic system in the grid system, in exchange for credits. The credits can be used to “take back” energy from the grid in situations when the solar PV system cannot produce sufficient energy due to factors like low sunlight.  It is a quite simple technique that helps bridge the differences between needing more energy at a moment and generating more than required at the other during any particular year. For instance, in India, most areas receive bright sunlight during the summer months, whereas the same areas receive a low income of sunlight during the winters. Net metering allows establishments with solar PV systems to store the extra energy produced during the summer months in the grid, and then “take back” energy from the grid when the cold winter comes along. With solar PV systems rising in popularity and increasing in scale, different state governments in India have come up with their own set of policies regarding net metering.

In this article, we will talk about everything that you need to know about net metering so that you have in-depth knowledge about the topic before making the transition to solar energy for your home or office.

How does net metering work?

To use net metering facilities, the solar PV system needs to be connected to the utility grid via the main service panel of the consumer and the meter. The meter should be a bi-directional meter, as when more power is generated by the solar PV system than required, the excess power can be returned to the grid by reversing the meter from its normal direction. Since the meter works in both directions, one can get readings of both power purchased (when demand on-site is greater than the on-site power production) and power returned to the grid (when demand-on site is less than the generation on-site). The customer pays the “net” of both transactions.

Why is net metering important?

Net metering offers a number of benefits to consumers, and is also good for the environment. By transmitting the excess power to the grid, energy wastage is prevented. The grid, similarly, receives power from a green, renewable energy source, apart from receiving energy from conventional power sources like thermal power plants. Besides, the consumer can save thousands of rupees on energy bills every year. Thus, net metering is a very good money saving choice, and it prompts people to switch to a solar PV system. It can result in an increase in the return on investment on a solar system.

There is another advantage of net metering. Since your solar PV system is generating electricity near the point where it will be used, this process reduces the strain on the transmission and distribution infrastructure of the grid. It also minimizes energy loss which is associated with sending voltage to places far away from the power plant. Some studies, however, have claimed that net metering creates an unfair burden on non-solar customers. However, other studies involving cost-benefit analysis of net metering have found the opposite to be true.

Can you make money net metering?

When you opt for net metering for your home or office, you only pay for the deficit power consumed, i.e. the difference between the power consumed from the grid and the solar power generated by the solar PV system of the home or office. As a result, there is a drastic reduction in the electricity bills, and it provides you with the opportunity to earn an income. Besides, these savings on energy bills from net metering add up with time, increasing your return on investment. Corporates, industrial establishments and educational research institutes can save a lot of money with the help of net metering after making a transition to a solar PV system. The money saved can be used to invest in other businesses in the case of corporate establishments and in the case of educational institutes, this money can be used for the development of educational infrastructure. Thus, net metering offers a great amount of impetus to the growth of an economy and the development of a society.

Apart from the money you directly earn from net metering, switching to solar energy can have a high return on investment in the long run because the Government of India offers solar panel systems, under certain conditions. The up-to-date data on cost and capital subsidy terms for rooftop solar PV systems can be checked on the home improvement loans to those who want to install rooftop solar plants and to include the cost of the system in the home loan proposals. All of these are initiatives that can encourage net metering. Besides, the government also plans to introduce a ‘rent a roof’ policy under which the investors can rent/lease roofs from households and install a solar PV system to feed power to the grid. The responsibility of maintaining the system will be with the investor/developer.

Challenges of net metering in India

The following are some of the challenges of net metering in India:

1. Voltage fluctuation and imbalance in the voltage

Since the energy generated by a solar PV system is dependent on the availability of sunlight, there can be drastic variations in power due to reasons like changes in weather conditions. As a result, there are rapid voltage fluctuations, which can lead to faults in the transmission network. In some cases, such fluctuations can overheat the power lines. Solar PV systems come with inverters, which are designed to regulate the voltage. Voltage fluctuations can arise because of the improper functioning of the inverter. If fluctuations move outside the specified values, the system should be designed to automatically disconnect itself from the grid.

2. Electrical Disturbances

Electrical disturbances, which produce harmonics, are generally caused by the presence of non-linear components in the solar PV system. They can lead to the overloading of equipment and metering errors. As such, the total harmonic disturbances produced by a solar PV system should not exceed 5 percent. Similarly, the individual and current harmonic disturbances should not exceed 3 percent and 8 percent respectively, so that the quality of power in the grid is not affected.

3. Transmission of unwanted current in the grid

The power generated by the solar panels is DC current, whereas the one supplied to your house is AC current. The solar PV inverter converts DC current into AC current. However, there remains a possibility that the inverter passes unwanted DC current into the AC-driven network of the power grid. This can result in overheating of the transformers, damages, and power losses.

4. Unintentional islanding

Unintentional islanding occurs when the solar PV system continues to supply power to the grid even when the grid power is off. This leads to safety issues for technicians, as a power line that is considered off may still be powered.

5. Reverse power flow

PV penetration at high levels leads to reverse power flow. This happens in the case of a weak network, or when the consumption at the consumer’s end is lower than the power fed to the grid. This can lead to an increase in voltage, causing the electricity to change its direction and flow. As a result, there might be overheating in the transformer and transmission lines.

6. Policy problems

Most states in India currently have their own net metering policy. However, net metering is still characterized by slow implementation and arbitrary constraints and limits. For instance, a number of states do not allow net metering for large off-takers of power (i.e. HT power consumers). Besides, in most states, there is a cap on the size of the solar plant that can be availed under net metering.

Due to the poor implementation of net metering policy and business-unfriendly net metering rules, the rooftop solar sector in India is still underdeveloped. This is despite the fact that a number of industries in India have lots of idle spaces on roofs, which can be used for solar plants.

Net metering policies in India

At present, 18 out of the 29 Indian states have net metering policies. West Bengal was one of the first Indian states to have formulated a net metering policy, back in 2013. Most of the other states have come up with their own net metering policies in recent years. Some of these states, such as Karnataka, Uttar Pradesh, Haryana, Telangana, Gujarat, Andhra Pradesh, Assam and Jharkhand allow for both net and gross metering. Besides, most of the 18 states now allow for a 100 percent capacity with respect to sanctioned load for net metering. However, the limitations on transformer capacity vary, with the limitation being as high as 90 percent in the case of Tamil Nadu, and 20 percent in the case of Assam and Jammu and Kashmir.

Most of the states which allow net metering follow a yearly cycle of compensation, with Telangana, Andhra Pradesh and Karnataka being the only exceptions. The billing period for settlement in most states is monthly.


Net metering is an ingenious way of reducing the burden of energy bills. It is also an environmentally friendly solution, as it prevents the wastage of electricity by sending the excess electricity produced by the solar PV system to the grid. Besides, it encourages entrepreneurship in the rooftop solar energy sector.

In this article, we covered each and every aspect of net metering. We answered many relevant questions, such as why net metering is important, can net metering enables us to make money, how net metering works, etc. Besides, we covered the challenges of net metering in India, and also discussed in detail the policies that different Indian states have with regards to net metering. We would advise you to go through this article thoroughly to understand what is solar Net Metering and how it works for home solar panels.

Samarth Gara
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