As renewable energy becomes more efficient, its popularity is increasing.
But sometimes your renewable resource is more efficient than expected, as, for instance, on sunny summer days or on particularly blustery, autumnal ones.
When this happens, your home may produce more energy than it can use all at once. It’s tempting to want to sell that electricity back to the grid, but depending on where you live, the process may be more complicated than that.
To start, let’s look at the different ways utilities pay their customers for solar-generated power and other benefits of selling electricity back to the grid.
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How Utility Companies Pay You for Solar-Generated Power
Depending on your state, there are various ways utilities pay you for solar-generated power. Often this is a combination of SRECs and net metering.
But not all states have the infrastructure in place to support these things, and when that happens, it may be possible to sell electricity back to the grid.
Solar Renewable Energy Credits (SREC)
Solar Renewable Energy Credits or SRECs are incentive-based programs that allow homeowners and renewable energy producers to earn money in return for solar-powered energy generation.
You receive an SREC for each megawatt-hour or 1,000-kilowatt-hours generated by every solar panel system you have installed.
Confusingly, while all SRECS are a type of Renewable Energy Credit (REC) not all RECs are SRECs. That’s because SRECs specifically incentivize solar-generated power.
However, the rate of incentivization – the number of megawatt or kilowatt-hours – is the same for SRECs and RECs.
The other key difference between an SREC and an REC is that your state can only issue SRECs if it has a solar carve-out. Carve-outs are state-specific requirements that stipulate a portion of their local energy come from a specific renewable source, such as:
Not all states have solar carve-outs, and that means you’ll need to check with your local representatives to confirm you are eligible for SRECs if you decide to add solar power to your home or business.
Another way to sell electricity back to the grid is by net metering. One reason for net metering is that, especially on sunny days, solar panels produce an excess amount of energy. When that happens, the excess gets sent back into the grid and redistributed throughout your community to houses and businesses that need more energy.
The net-metered house then receives a credit, and the meter effectively runs backward. So, when your house uses more energy than it produces, the net-metered credit takes effect.
You can then enjoy the credit you’ve earned when it suits your home. This is especially helpful on cloudy or wintry days when you may not receive as much electricity as you need from solar panels.
Moreover, homeowners with net-metered houses only pay the ‘net’ energy; That’s the difference between the energy your renewable resource produces and the amount of energy required to produce it in the first place.
Net metering is popular with customers, especially if they rely on solar energy since it’s common for solar panels to produce more energy during the day than homeowners can use.
Selling the excess electricity back to the grid gives them control over their electricity bills, and reduces how much they pay monthly.
Many states have net metering rules in place to benefit solar panel users, and these states include:
- New Jersey
- West Virginia
However, other states, like New York, offer a different system. The values it uses to determine credits are different from those used in net metering. But, the engineering behind it works similarly to net metering.
Selling Solar Power
Since not all states have net metering practices, there are instances where you can sell electricity back into the grid. Doing this makes you eligible for reimbursement from your electric company. Depending on the values the company uses, you may receive less than if you lived somewhere that used net metering, but this is not always the case.
However, it’s completely normal to produce surplus solar energy. 20-40% of solar energy panels produced goes back into the grid.
To determine how much you can earn for selling energy back into the grid, you first need to know how much you’re producing. This requires an understanding of electrical equipment.
You’ve probably had a look at your electrical meter before. If so, you’ll be familiar with how to read it. But to determine how much electricity you can sell back to the grid, you need to open the meter and look at something called the inverter.
This is what electricity companies use to measure your energy consumption. Provided you can establish your solar panels are producing more energy than you are using, you can sell the excess energy back to the grid.
Here’s how to do that.
Process For Selling Electricity Back To The Grid
It’s possible to sell electricity back to the grid in states that don’t rely on net metering.
1. Check with your utility company
The first thing you need to do if you want to sell electricity back to the grid, is to consult your utility company.
Different companies will have different ways to apply to sell your electricity back to the grid. Typically, you would do this through a customer portal, but it can vary.
Alternatively, they may be part of a state that uses net metering instead and will be able to explain the process and any credits you are eligible for.
2. Verify with your state
Because the way states handle excess energy production varies from state to state, the next step is to verify with your state that you can sell electricity back into the grid.
3. Review tax benefits
Once you establish you can sell electricity back to the grid and have begun the process, review any tax benefits you may incur.
There are some tax credits that you can claim against the cost of your solar energy.
There are also federal tax benefits for installing a solar system that could significantly reduce how much you pay in taxes.
Systems installed in 2021-22 receive a 26% tax credit, while those installed in 2023 receive a 22% credit.
4. Install and sell power back
However, to qualify for these benefits, you need to install a renewable energy source, either in your home or as part of a community solar project.
With your new solar system installed, you can start using the meter inverter to keep track of your solar energy production and start selling surplus electricity back to the grid.
The thing to understand about selling electricity back to the grid is that while it’s possible, it’s not usual. You’re more likely to save money on energy bills through systems like net metering and SRECs.
Instead of selling the energy back directly, the grid reallocates the electricity to places that need it. The credits you receive leave you with a bit of spare change to spend on something more interesting, if less crucial to home-running than the electricity bill.
Although certain tax benefits exist at a federal level, many of the systems in place to help you sell energy back to the grid are state-specific. So, if you want to try and turn a profit on your excess electricity, researching your state’s policies is the place to start.
Once you’ve done that, you can start selling electricity back to the grid and enjoying your savings.