In the 1970s, the most common application of photovoltaic ("PV") technology was off-grid. But today, more than 95% of solar installation are on-grid, or "grid-tied." Certainly falling PV costs have helped accelerate grid-tied solar, but the other driving factor was the adoption of Net Metering.
Net Metering is an electricity policy for utility customers who operate their own on-site "self-generation" power systems such as photovoltaic systems. PV systems are connected to the utility grid via the customers' main service panel and meter and, when generating more power than is needed at the site, return excess electricity to the grid through the power meter, reversing the meter from its usual direction. As a result of the meter working in both directions – one way to measure power purchased (when on-site demand is greater than on-site power production), the other way to measure power returned to the grid – the customer pays the "net" of both transactions.
Retail Price Credit for Power "Sold"
When excess electricity is fed through the meter and returned to the utility grid. To facilitate this, Net Metering customers are on an annual billing cycle as opposed to the usual monthly billing cycle – and the credits received are reconciled with the purchases made annually on the anniversary of the local utility approval of the system installation.
Only Generate What You Need
At the time of this annual reconciliation, there are three possible outcomes. First, if the utility customer has purchased more power than they've returned to the grid, they will be billed for the "net".
Second, the "net" could be zero, although this is unlikely since power use varies somewhat from year to year as does weather which impacts PV system performance, so the odds are pretty low that the bill would be exactly zero.
The third possible outcome, which we do our best to prevent, is that the solar power system generates more power than needed in total over the course of twelve months and there's excess credit. This could happen if the PV system is over-designed or if the customer's usage declines significantly.