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Net Energy Metering (NEM) explained

NEM explained with illustrations

One of the most asked questions about solar is “Solar power systems produce electricity during the daytime, then how will one use the generated electricity at night? (When the consumption is the highest)”?

The answer is simple: you need to store it. Now the traditional way of storing energy is by using batteries. But batteries come with a deck of problems with it. Like:

1) Power discharge from a battery: If you store 100 units of electricity in a battery, it will only give you back 60-80 units of energy.

2) Most batteries start dying out after the 3-year mark is reached. While they are one of the expensive components of the system, replacing them often will make your wallet shallow.

3) The number of batteries you will need: To power a simple 2 bhk flat you’ll need 3-4 battery sets. For a housing society, the number will go higher and still provide a backup for only a few hours. With all these drawbacks, surely there must be a better way for storing energy?!? and enters "Net metering".

What's Net-metering?

You can put up a Rooftop solar power system and connect it with your DISCOM (Electricity provider like MSEDCL, Tata Power, Adani Power or any).  This makes your system an On-Grid system. (Also called as Grid-tie System).

Your existing connection uses a uni-directional electricity meter i.e., you can only import electricity from the grid. But when you apply for an On-grid connection, DISCOM replaces your uni-directional meter with a bi-directional meter. With this, you can import as well as export electricity to the Grid, from the same meter.

How Net-metering works and why is the import-export required?

A solar power system produces electricity only during the day-time, whereas your electricity consumption happens for 24 hours, in fact majority during the night-time. Whenever solar power is available, the electrical system prefers solar power over the grid power. This is because solar power runs at a slightly higher voltage than Grid.

Let’s understand this with an example:

Suppose Rohan’s home needs 100 units of electricity in a day (24hours). Out of which 30 units are used during the day and 70 units at night.

His solar power system will produce 100 units of electricity in the day-time, of which, 30 units will be consumed directly and the un-utilized 70 units will be exported to the grid. These exported units will be recorded by the meter as “ EXPORT “.

At times when solar power is down, Rohan can "IMPORT" electricity from the DISCOM.

Now, at the end of the month, your DISCOM (electricity provider ) checks the imported and exported units reading. And your bill is generated only for the net units. Net units are the difference between imported and exported units.

Case 1: Import is 100 units; Export is 90 units
Then billing is done only for the 10 units.

Case 2:Import is 100 units; Export is 100 units
Then billing is done only for the 0 units.

Case 3: Import is 100 units; Export is 120 units, then billing is for 0 units, and the extra 20 units are banked, i.e., stored with the DISCOM. (Note: You do not get financial credits for the stored units in the monthly cycle.)

During the day time, excess units are exported as depicted above

You can use solar as well as DISCOM simultaneously

At night, when solar is down, Rohan will continue to use the grid power supply,all units used will be recorded by the meter as “Import”

This Import and Export of units happens instantly, i.e. every second the system checks, if solar generation is excess, adequate or running short.

Use DISCOM at night

Seasonal changes in solar generation:

Net-metering also helps us adapt to the fluctuating nature of solar generation. Apparently, solar generation is higher during the summer season, and dips during the rainy seasons. Excess units generated during the months of April, May and June can be banked with the DISCOM. And in July, August these units can be used up.

Banking of units:

At the end of a month, if your export of electricity is more than your import, the excess units get banked with the DISCOM. You can use these units in the next billing cycles. Important Note: The banking of units is reset at the end of the financial year, i.e., 31st march of every year. If any units are banked at this stage, will be converted into credits against your DISCOM account. The Conversion rate is Rs 3.00 to Rs 3.50 per unit.

Net-metering is not meant for earning money:

There are a lot of people, who in the quest of having an extra source of income, consider putting up an over sized solar power system and earn the credits from DISCOM. We would advise you not to do so. Net-metering as a principle is meant only for importing and exporting of electricity from the grid. DISCOMs hold the right to disqualify you from getting the financial credits if your banked units go above permissible limits. Hence, it’s a best practise to put up a solar plan that only suffices your energy requirements.

Net-metering Agreement tenure:

With most of the DISCOMs, net-metering agreement is for a 20-year tenure. Which can be renewed at the end of 20 years.

And folks, that's Net-metering.

Hope you understood what net-metering is, how it works and other details which were important to know about it.

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