The Net Loss of Net Metering

Because of the way the electric grid works, net metering is wrong

For every complex problem there is an answer that is clear, simple, and wrong.

H. L. Mencken

Let's assume for purposes of discussion that rooftop solar power generation is such a Good Thing that it should be encouraged with subsidies.  Solar subsidies can be overdone as the Germans found when businesses started opening factories and creating jobs in other countries because they couldn't afford German electricity prices.  It's important to get subsidy programs right.

Rooftop solar systems receive two subsidies in the United States.  The federal government offers tax credits when solar systems are installed, and many states force electric companies to buy surplus electricity from homeowners and other solar sources at full retail price.  This is called "net metering."

If a homeowner pays, say, 10 cents per kilowatt-hour, and his solar cells push a kilowatt-hour of power back through the meter into the grid, why shouldn't the power company pay what they'd charge the homeowner for it?

This is clear and simple.  Because of the way the electric grid works, however, net metering is wrong.

Electric Grid Made Simple

A few formulas will show why net metering is wrong.  The formula for electric power is P = V · I where P is the electric power in watts (W), V is the voltage in volts (V), and I is the current in amps (A).

Your laptop power brick, rated 5 volts at 5 amps, supplies 25 watts, 5 volts times 5 amps.  Your electric meter tells the electric company how many watts you've used and for how long.  If you run a one kilowatt load for one hour, you've used one kilowatt-hour of power and pay accordingly.

The electric company worries a lot about power because that's what you pay for, but they worry nearly as much about power loss in their wires.  They can't bill for lost electricity, which is distasteful.  Power loss through a transmission cable is (I2R) where I is current in amps and R is electrical resistance in ohms.  Loss is the current squared times the resistance of the wire.

If you cut resistance in half by using a better conductor, you cut power loss in half.  Most electric wires are made of copper because copper offers the least resistance of any wire power companies can afford.  Gold and silver wires have less resistance, but they're a bit pricey when bought by the mile.

Electric companies work hard to find just the right alloy to minimize resistance while being strong enough not to break, but the real payback comes from cutting current.  Power loss is proportional to the square of current.  If you cut current in half, you reduce loss by 75%.

That's why power companies transmit power at much higher voltages than you find in your house.  Suppose your subdivision needs a certain amount of power P.  The formula is P = V · I.  If you need 100 watts of power and you transmit it at 10 volts, you'll need to send 10 amps; 10 volts times 10 amps is 100 watts.  That will lose power at 100 (10 squared) times the resistance of your wire.

If you transmit at 100 volts, you'll need only one amp to transmit 100 watts; 100 volts times 1 amp is 100 watts.  Loss will be 1 (1 amp squared) times the resistance.  Raising the voltage cut your losses by a factor of 100, and you can use a thinner wire because there's less current flowing.  All you need is better insulation to protect people against the higher voltage.

Long distance transmission lines run at millions of volts.  Once power gets near a neighborhood, it's stepped down to 20,000 volts.  The company puts transformers on poles to step 20,000 volts down to the 110 volts your house needs.  One transformer serves 3-5 houses depending on their load.

Net Metering's Achilles Heel

Suppose your solar panels feed one kilowatt-hour back through your meter and the other houses which are fed by your transformer have no solar power.  Your power flows through the wires to their houses, but there are losses along the way so the power company loses money on the deal.  Although they can charge your neighbor retail prices for the delivered part of kilowatt-hour they bought from you, they have to make up the losses in the power line to sell an entire kilowatt-hour to your neighbor.

It's worse if your neighbors also have solar cells.  Suppose you and they together have a 10 kilowatt-hour surplus.  The power company can't sell it to other users on your transformer, so the power has to go backward through their transformer onto the 20,000 volt line.

Utility pole transformers have been lovingly redesigned over the last century or so to step 20,000 volts down to 110 as efficiently as possible.  The Energy Information Administration estimates that about 5% of all American electric power is lost in transmission, so pole transformers are pretty efficient when stepping down.

When stepping up, however, they aren't nearly as efficient because they weren't designed to do that.  The power company takes a much worse hit due to power loss when you and your green neighbors run their transformer backward to step up your 110 volt power for the 20,000 volt line.

What's worse, power loss translates into heat.  The power losses the company suffers when you run their transformers backward make the transformers hotter than expected.

When does this happen the most?  At the height of summer, when your solar system is cranking and the transformers are being warmed by sun shining on them.  Like any electrical appliance, if it fries, it dies.

Power companies are correct in saying that net metering requires that people who are rich enough to afford solar cells get a free ride at the expense of everybody else.  Utilities are happy to buy the power, but argue that they should pay no more than the wholesale price they pay other generating companies.

Battle of the Billionaires

Solar City was started by Elon Musk to install rooftop solar energy systems.  It's grown to about $350 million in annual revenue.  Between the federal tax credit and selling surplus power at retail prices based on net metering, Solar City can install systems without charging homeowners anything.  Solar gets the tax credits and customers buy less electricity.

This was working so well that the Nevada power company, which is owned by Warren Buffett, fought back.  After much lobbying, the power company won price changes that made it uneconomical to install new solar systems and made existing installations liable for as much as $11,000 in additional payments over the next two decades.  Solar City stock took a big hit.

Greens and Elon Musk are outraged, the power company is happy, and the bulk of customers who haven't gone solar and didn't understand what was going to happen to their electric rates as more rooftop solar went in don't much care.  Both Warren Buffet and Elon Musk have much wampum; the lawyers are licking their chops in anticipation of long-running lawsuits.

Rides for the Rich

Like net metering, all green subsidies are designed to transfer wealth from low-income taxpayers to high income political donors.  Consider Mr. Musk's Tesla, an all-electric automobile that sells for north of $100,000.  Rich people who drive Teslas bask in feeling good about saving the planet while collecting tax rebates, discount parking, HOV use, and free battery charging, but the British have shown that this is an illusion.  Although the car itself doesn't pollute, the electricity comes from somewhere, and most electrical generators pollute.

In China, because their coal power plants are so dirty, electric cars make local air much worse: in Shanghai, pollution from more electric-powered cars would be nearly three-times as deadly as more petrol-powered ones.

It gets worse when you take manufacturing into account.

Over a 150,000 km lifetime, the top-line Tesla S [in Britain] will emit about 13 tonnes of CO2. But the production of its batteries alone will emit 14 tonnes, along with seven more from the rest of its production and eventual decommissioning.

Compare this with the diesel-powered, but similarly performing, Audi A7 Sportback, which uses about seven litres per 100km, so about 10,500 litres over its lifetime. This makes 26 tonnes of CO2. The Audi will also emit slightly more than 7 tons in production and end-of-life. In total, the Tesla will emit 34 tonnes and the Audi 35. So over a decade, the Tesla will save the world 1.2 tonnes of CO2.

Reducing 1.2 tonnes of CO2 on the EU emissions trading system costs £5; but instead, the UK Government subsidises each car with £4,500.

Sure enough: green regulations are nothing more than schemes for transferring money from middle-class taxpayers to rich greens who want to feel good about themselves regardless of the facts.  Mr. Musk isn't saving the planet with either Tesla or Solar City, he's exploiting an artificial market which was created solely by government fiat.  His business is just another boondoggle, it's not a moral imperative.

At least his exploits haven't cost citizens anything besides money.  We're fortunate that we haven't been forced to install complex home heating systems which leave people freezing in the dark as happened in England.

Kermit Frosch is a guest writer for  Read other articles by Kermit Frosch or other articles on Environment.
Reader Comments

So what if it is a push? Lose 1.2 tonnes of CO2 is no big deal over the life of the car. The real crux of the matter is the cash subsidies by the government. This is the big problem. The CO2 thing is a bunch of hogwash, more jobs have been thrown on the trash heap of history because of the greenies than you can count. They are the ones that owe an apology, not the folks who buy the cars. Ditto the solar panels. They will become practical one day, you can't force it.

April 15, 2016 10:40 PM

PHew! Good one!

April 16, 2016 2:48 AM

3 problems that cause this to understate the problem:

1) The power delivered is AC, which means that the phase between V and I is important (normally 90 degrees). There are many things that can cause a phase error, and when that happens there is a net power loss. So if someone sells power that is out of phase, not only does the utility have to pay for it, but it actually can reduce the power available on the line, not increase it. Typically cheap inverters produce very dirty AC, and that too can cause problems, both for the utility and for other customers.

2)The cost of the wires is a significant part of the total cost, yet that cost is reversed too, giving them a free ride that others must make up.

3) Once there is a solar (or any other non-utility) source feeding the line, the utility cannot turn the line off to work on it. This means that every line, even if the workers have cut the utility power, must be treated as if it is hot, which makes it far slower to fix. To do otherwise is very dangerous. It also means that emergences situations like down wires can never be assumed to be off or rendered safe; if a customer has their own source on that line, then it can go hot at any time.

April 16, 2016 11:21 PM

"Net metering" is a bad idea for many reasons, most of which have to do with shifting utility costs from those with residential solar systems to those without.

BUT a transformer will work just fine when "run backwards," as a transformer is inherently a linear, bidirectional device.

In everyday usage people call all sorts of things "transformers" (such as small AC-to-DC power supplies) which really aren't, but, those big cans on the utility pole outside your residence really are transformers. And they'll have the same (high) efficiency in either direction.

April 19, 2016 11:42 AM

The fundamental premise to this article is fatally flawed - despite the great mathematical discourse losses are actually charged to the customers, and paid to the utility, through Ancillary Services charges. Voltage support, losses, other system stability/delivery components are billed as incurred by the utility.

April 21, 2016 12:54 PM

The fundamental premise to this article is fatally flawed indeed.

And Albigensian is correct. A transformer is a bidirectional device, and the load losses depend on the transformer nameplate % impedance, regardless of the flow direction.

Libbard is also correct in that these losses are already billed to the customers.

Ed's 3rd bullet point is moot - NFPA 70 (National Electric Code) article 705 describes the requirements for disconnecting means for utility interactive inverters, transformers and other power production source. NFPA 70E does not allow work on energized lines, and to treat any line as energized until proven otherwise anyway (disconnect, lockout tagout). NEC also requires utility interconnected power supply to bear markings for multiple sources of power. Downed lines are ALWAYS treated as hot, regardless of whether there is solar/net metering or not. ALWAYS. Jesus christ if you don't read the rest of this comment, just remember that one.

The future of energy is moving way beyond photovoltaics and electric vehicles. Energy storage technology has come a long way, and utilities are also modernizing the grid with distributed energy storage.

The DOE isn't just giving subsidies to "rich greens" but also to utility companies to modernize the power grid.

Tesla isn't just about "ride for the rich". Rich people who drive Teslas bask in feeling good about saving the planet while collecting tax rebates, discount parking, HOV use, and free battery charging.

Wait a minute - there is no such thing as "free" battery charging. Tesla pays for the charging infrastructure and passes the cost along to the Tesla owner when he/she pays for that "north of $100k" vehicle. The author of this article does not understand that Tesla isn't an automobile, but a built-in, long-distance, electric-based transportation service. It isn't free energy to the user (they paid for this service to Tesla), and not free to Tesla (they paid for the real estate, infrastructure, and maintenance of these charging stations).

The "tax rebates" on these vehicles don't last forever and yet demand keeps rising, indicating that people want EV regardless of rebates. Within days of Model 3 reveal, Tesla has maxed out the tax credit cap (200,000), their total reservations now have broke the 400,000 ceiling.

The most revolutionary idea that came from Elon Musk isn't the idea of EV (that was first invented in 1834!) or solar panels (also devised in 1800s). Instead he came up with the "ecosystem" of products that work with each other (much like what Steve Jobs did for personal computing). The car, the rooftop solar panels, the "free" charging stations, the distributed battery wall packs. It's still a clunky idea for consumers, but distributed energy storage is gaining momentum with utilities.

Soon, grids will be modernized to become smarter, optimize power flow, reduce losses, accommodate distributed supply and storage.

May 4, 2016 12:56 PM

Ethanol, anyone?

July 4, 2016 5:55 PM

Ethanol is not sustainable.

July 4, 2016 7:41 PM

I can see five coal-fired power plants from my house - perhaps this is one reason that this area leads the U.S. in cancer deaths?
Coal is a DIRTY NASTY energy source. Always has been nasty and politically corrupt ($$$).

Solar panels are not perfect but we do need to work toward a cleaner energy future.
This is why I have installed my own solar panels and use the power to charge my (used) Tesla.
Knuckle-dragging Luddites always seem intimidated by change - or maybe they have never installed their own solar and seen what 100% clean energy can do.
No, solar is not for the rich. I am an hourly factory worker (electrician) and I can run my own solar for FAR LESS than it costs to make electricity from Stinky Dirty Nasty Coal - COUGH!

March 18, 2017 10:00 PM

I can see five coal-fired power plants from my house - perhaps this is one reason that this area leads the U.S. in cancer deaths?
Coal is a DIRTY NASTY energy source. Always has been nasty and politically corrupt ($$$).

Solar panels are not perfect but we do need to work toward a cleaner energy future.
This is why I have installed my own solar panels and use the power to charge my (used) Tesla.
Knuckle-dragging Luddites always seem intimidated by change - or maybe they have never installed their own solar and seen what 100% clean energy can do.
No, solar is not for the rich. I am an hourly factory worker (electrician) and I can run my own solar for FAR LESS than it costs to make electricity from Stinky Dirty Nasty Coal - COUGH!

March 18, 2017 10:02 PM

@Robert Wilson

You are correct in that using solar to charge your Tesla is a good deal provided that you were able to install the panels yourself assuming that your car is at your house during enough sunny days to meet your driving needs. There are some dirty little secrets about renewables, however:

1) Once installed, the energy is free, so the electricity they generate will always be cheaper on the spot market than any other generator AT THAT TIME. That means electricity prices can go negative so that old power plants have to pay to have the electricity taken away. Some of the older nuke plants have asked for, and received subsidies because renewable subsidies upset the market.

2) Solar is not working at least half the time. If you measure output at high noon on a clear day, on the average over a year, you will get between 10% and 25% of that amount. You lose 50% off the top because of night. So to provide a guaranteed watt, you need between 4 and 10 watts of installed capacity.

3) Suppose an entire neighborhood is doing solar and a cloud goes over the sun. Where is the grid going to get enough INSTANTANEOUS power to keep all those A/C units running? Conventional plants take hours to start and stop. Gas-fired is faster, but it's not instantaneous. Our grid is not meant to handle such major fluctuations. Fixing the grid up to handle that is going to cost beaucoup balloons as Kojak would say.

4) Suppose we have a week of cloudy days. Who is going to pay for enough conventional generating capacity to handle the load when Solar is producing nothing at all? That happened in Britain at a very cold time - their vaunted windmills produced nothing because the air was still just when they needed it the most.

March 18, 2017 10:32 PM

First electric wires used by the power companies are not copper but stranded aluminum with a steel strand for strength. It makes no difference which way power flows through a transformer. The distribution and transmission costs are determined by the peak power needed (kilowatts) throughout the system not how much energy is bought (kilowatt-hours). Electricity from the generation plants to customers enters on transmission lines and then goes to distribution lines and from there to the customer. Starting at the generation plant their will be a number of transformers on the way to the customer. However when customers at the end of the transformer nodes send power back into the system less power from the generation plant is used and this reduce losses in the system because the power is being used locally instead of having to undergo a long trip from the generation plant. As long as the peak power leaving the power generating customers does not exceeded the peak power that the system was sized for ordinarily flowing in the opposite direction than their will be no need to change the wire size or transformers size in the transmission or distribution system. Power factor has nothing to do with using inverters. The system should already be setup to deal with power factor problems and 'dirty' power is already a problem because of switching power supplies used in most electronics manufactured today.

July 10, 2017 4:00 PM

The WSJ calls subsidies for electric cars a scam.

Federal subsidies for electric vehicles are an income transfer to the affluent, and now comes news that significant numbers don’t qualify. The Treasury Inspector General for Tax Administration (Tigta) in late September reported that the feds handed out nearly $74 million to undeserving EV owners from 2014 through 2018.

“The [Internal Revenue Service] does not have effective processes to identify and prevent erroneous claims,” said Tigta, meaning filers are applying for credits largely on an honor system. Between confusion over how the credits work and outright fraud, the government is getting fleeced.

Tigta says that of the 239,422 EV credits claimed and received during 2014-2018, it identified 16,510 as potentially erroneous. The numbers could be higher since Tigta used samples of filers who claimed the credit. A significant portion of the Tigta report is redacted for what it calls “law enforcement” reasons, suggesting the feds are either investigating some of this for fraud, or trying to discourage other EV owners from exploiting the system.

But it appears many credits are going to owners of vehicle models that don’t meet requirements under the law; to secondary owners (only “original” owners may claim the credit); and to drivers who are leasing vehicles (only the leasing entity may claim). The Tigta evidence also suggests many owners may not understand—or are ignoring—the phaseout of credits under the law, and claiming the credit above the allowed threshold per company.

Tigta’s audit comes as auto makers lobby Congress to expand the EV tax credit. The feds currently provide a $7,500 consumer tax break for an auto maker’s first 200,000 cars. The tax credit then drops by half for EVs sold over the next six months, and by half again for another six months. Then it goes away.

Tesla and General Motors have hit the 200,000 mark, while others are drawing close. Despite promising that this subsidy would be temporary, auto special pleaders want Congress to double to 400,000 the number of vehicles eligible for credits. They are eyeing a new House energy tax subsidy package as their ride to expansion.

Government data show the EV subsidy mostly benefits the well-to-do. Electric cars are substantially more expensive than average vehicles. A Congressional Research Service study found that almost 80% of the credits were claimed by households with adjusted gross income of more than $100,000. About half of all sales are in California.

Tigta recommends, among other things, that the IRS use Vehicle Identification Number (VIN) data to find errors—which, incredibly, the agency isn’t already doing. A better plan is to let the program expire. Washington has been subsidizing EVs for nearly 30 years, and it’s no longer an infant industry. If all good things must come to an end, the fraud can too.

October 12, 2019 2:50 PM

I’m a PG&E customer in California on a “Time-of-Use” billing schedule where my peak time is 4-9 pm, M-F. We do Net-Energy Metering here, and at the end of 2018, I installed a 7.5kWh system of panels on my roof. Since then, I have been keeping a spreadsheet of how much grid power I use and how much solar power my inverter says I produce. In this spreadsheet, I have the following values for each billing period.

Grid kWh Consumed “Consumption” total reported by PG&E.
Grid kWh Returned “Net Generation” total reported by PG&E.
Solar kWh Generated Solar power generated according to inverter.
Solar kWh Consumed “Solar kWh Generated” less “Grid kWh Returned”.
Total kWh Consumed “Grid kWh Consumed” plus “Solar kWh Consumed”.

My spreadsheet is telling me I consumed 10% more power last year (19,144.23) than I did the year before (17,898.16).

Can anyone explain either where I’m losing the power or how my calculations are inadequate?

March 10, 2020 4:39 PM

sthames42 - doing something similar. I use what the utility meter provides. I add the grid kWh's for a total - I subtract the delivered from received for any rollover and then subtract the rollover from the total for what I believe is total used. I don't use what the inverter says it produced as I don't believe you can expect all of it to end up on the utility meter. My question is why is there such a big loss between the inverter and the utility meter? Maybe because the inverter is producing but at times not enough to push back to the utility? Don't know. Interested to know what anyone thinks.

May 27, 2021 11:32 PM
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