Solar power is a renewable energy source that is extremely popular, but has a cost problem. Net metering is a concept the government is currently using to offset this problem.
Solar power works by converting sunlight into electricity. With the abundant amount of sunlight hitting the planet each and every day, the potential of converting to solar power is massive. Ah, but there is one problem. Solar energy platforms are not very efficient. Solar cells currently only convert sunlight to energy at roughly 8 to 13 percent depending on the system. This lack of efficiency means you must buy large, bulky, expensive solar panel systems to meet your energy needs. Much research is being done in the field of nanotechnology solar cells to improve this problem, but the answer is a few years off. So, what can you do to deal with the cost issue today?
The government tries to promote certain conduct in two ways. First it makes things illegal such as drug use. Second, it creates financial incentives and penalties to try to guide our conduct. Taxes on cigarettes, for instance, are high and try to motivate us not to smoke. Tax credits offered for the purchase of hybrid cars is an example of using incentives to promote an activity.
When it comes to solar energy, the government realizes that there is a cost problem. It tries to resolve this in a number of ways. The first is to offer tax credits for buying solar panel systems. Tax credits are a tremendous financial benefit. They work by reducing the tax you owe dollar for dollar. For instance, you might figure out your taxes for this year and find out you owe the IRS $5,000. If you can claim a tax credit for $2,000, you would end up owing the government $3,000. In short, the credit is much more powerful than a mere tax deduction.
Another area where financial incentives are offered on solar is net metering. Net metering is simply the concept of selling energy back to a utility company at the same rate it sells it to you. This concept goes a long way to making solar energy competitive. Here’s how it works.
Assume you buy a solar panel system for your home. Your high energy needs tend to happen early in the morning and later in the afternoon. During the week, you have nominal energy needs during the day when you are at work. So, what happens to the energy being produced by the solar panels during the day? Well, you can sell it back to the utility company. This is called being “on grid”, with the grid being the platform the utility uses to deliver energy to communities. With net metering, the energy produced by your panels is fed back into the grid. Your utility meter literally spins backwards. You are selling electricity to the utility during the day. At night, you draw energy off the grid. The end result is you owe little or nothing to the utility company at the end of the month. This will save you a thousand dollars or so each year.
Net metering is currently a state concept. While over 40 states have laws on the books requiring utilities to allow net metering, there is no federal standard. That may be about to change. Federal law now requires all states to consider whether they wish to enact net metering legislation by 2008. Most are expected to pass such laws. When this occurs, net metering will be a cost cutting solution to the solar power energy problem, making it a more viable energy source for you and me.