Generating electricity is easy than ever before. Installation cost dropped dramatically from the last decade and also encouragement from government allow consumers install solar on their rooftops.
Given that storing electricity is expensive and quite impossible for large scale like commercial and industrial buildings, the PV system is often connected to the national power grid so that surplus can be exported to the grid and deficit can be imported from the grid. Let’s have an example for a small residential house.
During the day, your system generates 10 units electricity (kwh), you only consume 8 units for powering your appliances. Now here you can choose to waste it or store it in the backup battery system for future use or feed them into the national power grid. When the night comes, our solar system does not work due to lacking of the sun, this time you can use the stored electricity (2 units) from the backup system (if you have) or from the grid or both. Let’s say you do not have the battery to store, you fed 2 excess units to the grid, so your bill will be equal to the amount electricity you consume at night subtract those 2 units.
Net Metering is an arrangement in which electricity exports are adjusted against imports. Basically electricity produced from rooftop solar is deducted from the total electricity consumed over a fixed period of time. This adjustment maybe done either an annual basis or according to the payment terms of the PPA agreement. Typically, a bidirectional “net meter” accounts for both import and export power.
Gross Metering is an arrangement in which a consumers is compensated at a fixed Feed-In-Tariff for the total number of units power generated from the PV system and exported to the grid. Here you will have two types of bills. One bill is the electricity you consume from the grid which you will pay at the normal retail price. The other bill is the gross electricity you pump into the grid which you will be paid at the FIT rate.
So now you wonder which arrangement is better for you in financial aspects. Either which option you choose, you still sign a PPA with national power grid company which is not allowed to change during the contract period. For net metering method, the return will depend on the saving electricity bill which mean you save more when the electricity rate increases. For gross metering since the FIT is fixed in the 20-year-contract, the productivity is likely drop gradually from the year 10 which lead to the reducing cash flow in the future while the electricity rate like goes up annually and your bill increases accordingly.
Understanding those two arrangement is important to have the wise decision. Hope the article gave you some ideas. However, if you still need our consultant, please feel free to give us a call. We are more than happy to talk to you.