Net Energy Metering Vs Feed In Tariff Grid Connections


Net Energy Metering (NEM)

Net energy meter system connects our system to the power grid through bi-directional meter. We can draw the power from the grid as well as we can export the extra generated power by this it offsets our electric bill. If we don’t produce as much electricity as we use then the grid just supplies the difference and we get billed for that difference, if we produce more than we use, the excess just goes to the grid. For the excess exported power weather we get paid for that difference depends on the net metering rules or we may not get paid for that difference, but we may able to draw that excess electricity within the specified period of time. Thus we can “draw down” that power in the given period of time when we are producing less electricity than required.

Feed In Tariff Grid (FIT)

In Feed in Tariff (FIT) system our system is connected to the power lines and selling electricity to the power company. The FIT program allows us to supply power to the grid and get paid specified amounts of money per kWh. The electricity produced by our system is metered same as a house and we get 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 our investment. The disadvantage is that if we use electricity also, we have to pay for that 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. 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 Energy Metering (NEM)

Feed In Tariff (FIT)

Pros

  • NEM can offset your bill and only pay for electricity used in excess.
  • no contract needed, easy and simple to implement
  • acts like a perfect hedge against rising electricity prices
  • FIT is guaranteed contract to sell electricity usually for a long period.
  • FIT 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 vary significantly as to how long you can bank your credits and how much you banked.
  • If you produce more than you use, you generally don’t get paid as much for those kWh’s.
  • More complex to implement because you need to get a contract and it may be a competitive process
  • No hedge against rapidly rising electricity prices
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