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Net Metering Versus Feed In Tariff Grid Connections

Net Metering

Grid Tied Net Metered systems involve connecting your system to the power grid but you use the power, and it offsets your electric bill. If you don’t produce as much electricity as you use then the grid just supplies the difference and you get billed for that difference, if you produce more than you use, the excess just goes to the grid. Whether you get paid for that difference that you supply to the grid depends on the net metering rules in your jurisdiction. You may not get paid for that difference, but you may be able to carry forward that excess of electricity you produced over what you used for a period of time so that you can use it or “draw down” on it in periods of time when you are producing less electricity than you are using. For instance in Ontario currently, you don’t get paid for excess electricity that goes to the grid in a net metering arrangement, however you can carry forward the excess electricity generated for up to one year, after that it expires.

Feed In Tariff Grid

Grid Tied Feed in Tariff (FIT) systems involve connecting your hydro system to the power lines and selling electricity to the power company. In certain jurisdictions there are Feed in Tariff (FIT) programs that allow individuals and companies to supply power to the grid and get paid specified amounts of money per Kwh usually for a defined contract period. These contract periods are for extended periods of time and usually indexed to inflation in some way and are designed to encourage investment in renewable energy by providing a reliable and known revenue source. The electricity produced by your system is metered the same as a house and you are paid for the electricity produced. The advantages of selling under a FIT program once approved is the reliable guaranteed revenue stream and contract period to pay for your investment. The disadvantage is that if you use electricity also, you will likely be paying for electricity at the normal rate the same as everyone else, and this rate is likely higher than what you will be paid under the FIT program. So for example, you may be selling electricity to the grid for one price, and then buying it back to use at a higher price. However, if you are able to generate a lot more electricity than you can use, a FIT contract is the only way to sell your electricity. Ensure that you have a FIT contract before installing a system if you are interested in selling electricity to the grid.

Summary

The Pros and Cons of Each Type of Connection

Net Metering

Feed In Tariff (FIT)

Pros

  • can offset your hydro bill and only pay for electricity used in excess of what you generate
  • where it exists, there are laws that guarantee your right to net meter and offset your bill
  • no contract needed, easy and simple to implement
  • acts like a perfect hedge against rising electricity prices
  • guaranteed contract to sell electricity usually for a long period of 20-40 years. In Ontario, Canada it is 40 years for hydro power.
  • allows you to sell all your power if you’re able to generate more than you use
  • price is usually partly indexed to inflation

Cons

  • rules can very significantly as to how long you can bank your credits (i.e. only a month or up to a year) and how much your kwh’s that you banked are worth (retail or wholesale value)
  • if you produce more than you use, you generally don’t get paid for these kwh’s, they expire
  • more complex to implement because you need to get a contract and it may be a competitive process
  • usually rates paid by owners for electricity are higher than FIT contract prices therefore you may end up selling your electricity at one price and buying back the electricity you use at a higher price
  • no hedge against rapidly rising electricity prices