Net metering versus feed-in tariffs: key differences
Net metering and feed-in tariffs (FITs) are two policies that compensate solar owners for electricity fed back to the grid. While both support distributed generation, they operate differently and have distinct impacts on solar economics.
Net metering basics
- Homeowners receive credits on their electric bill for surplus solar energy exported to the grid.
- Credits typically offset future consumption, and in many programs are honored at or near the retail rate.
- Net metering generally simplifies billing by netting generation and consumption over a billing period.
Feed-in tariff basics
- A FIT pays a fixed rate for each kilowatt-hour delivered to the grid, often under a long-term contract.
- FIT rates are typically set based on generation cost and policy goals and may differ from retail rates.
- FITs encourage dedicated production and investment by guaranteeing purchase prices for generated electricity.
Comparing impacts
- Value to owner: Net metering often provides greater direct retail value to homeowners who use their credits to offset consumption. FITs can offer guaranteed income streams, especially attractive for commercial or utility-scale projects.
- Policy goals: FITs are designed to rapidly scale generation with predictable returns; net metering incentivizes self-consumption and simplifies distributed adoption.
- Complexity: FIT programs require administrative processes and rate-setting; net metering is a simpler bill crediting mechanism.
Which is better depends on local prices and policy objectives. Homeowners should compare current net metering rules, FIT availability and alternative compensation methods in their area to understand the financial outcomes of each approach.