How Net Metering Works in Texas
January 29, 2024
Thinking about joining the over 200,000 Texas homes powered by solar? Over the past decade, Texas has seen a renewable rush of sorts alongside the booming energy needs of a growing economy. With environmental regulations and market pressures forcing an older generation of energy sources to be retired, solar energy has stepped in to make Texas one of the most solar-powered states in the nation, second only to California.
According to the Solar Energy Industries Association (SEIA), the installed solar capacity in the state is enough to power over 2 million homes in 2023.1 That’s a lot of excess energy. Solar buyback programs, like net metering, allow retail electric providers (REPs) to take this surplus off the hands of homeowners to buoy the decarbonization goals of the state while helping homeowners save money on utility bills – a win-win for pockets and the planet!
These are the state of Texas solar incentives making a transition to renewable energy easier than ever.
What is Net Metering?
The concept of net metering originated in the 1980s as a method to capitalize on a homeowner’s excess solar energy. This surplus energy would be returned to the public utility grid, enabling residential solar systems to contribute to the grid and simultaneously reduce the cost for homeowners when they draw power from the utility.
When customers feed the unused electricity back into the grid, they receive a credit from their utility company. These customers are only charged for the “net” amount of energy consumed each month.
Types of Net Metering
Today, 38 states are mandated to offer net metering credits in some form, according to the Solar Energy Industries Association (SEIA). Although Texas is not a mandated state, it does have many REPs that offer programs. The most common are:
- One-to-one exchange: Where a kilowatt-hour produced by your solar panels is worth the same amount as a kilowatt-hour drawn from the grid.
- Virtual Net Metering (VNM): One that Austin Energy uses, which is connected to community solar projects.
- Annual Net Metering: A program that allows for a rollover of a net kilowatt-hour (kWh) credit to the subsequent month.
Net Metering vs. Solar Buyback
Texas is exceptional in that the state allows homeowners in most cities (those that are “deregulated”, like DFW and Houston) to choose their electricity provider– which means more options! Unlike net metering programs, where utilities provide credits to customers for their excess electricity, in a buyback program model, various utilities compete to purchase your surplus power.
Some buyback programs in Texas serve as a mechanism for utilities to reward solar customers for their overproduction through credit-based compensation similar to net metering, while others provide actual monetary reimbursements on a month-to-month basis.
In 2023, over a dozen utility companies offered Solar Energy Buyback Plans in Texas, including Chariot Energy, Just Energy, Shell Energy, and TXU Energy.
What if My Solar Panels Don’t Produce Enough Energy
The benefits of net metering can go both ways! During times when your panels don’t produce sufficient electricity to meet your residential needs (during night hours or on cloudy days), you can utilize these Texas net metering credits instead of purchasing additional electricity from the utility.
Texas Net Metering for Home Solar
Despite the absence of a universal net metering policy in Texas, plenty of utilities within the state, such as El Paso Electric, the City of Brenham, CPS Energy, and retail electricity providers, such as Green Mountain Energy, have implemented policies that reward solar energy system owners for their surplus energy.2
If your electricity provider has a net metering program, you are granted credits on your electricity bill for any surplus electricity produced by your solar panels.
Performance Based Incentives in Texas Net Metering
Some programs focus on your solar system’s overall production, not just the excess energy you generate. Performance-based incentives mean that you receive the incentive irrespective of how the solar energy is utilized – whether it’s consumed on-site or sent back to the grid.
For example, the Value of Solar (VOS) Tariff provided by Austin Energy credits your electricity bill at a rate of 9.7 cents/kWh, calculated on the entirety of your solar energy generation, not only on your surplus production.3
How are Net Metering Credits Calculated in Texas?
Although Texas has both regulated and unregulated electricity markets that offer slightly differing net metering programs, the credit or payout value is always set according to the system’s net generation. This refers to the amount of electricity produced by the system that the homeowner did not directly consume.
This unused electricity is then compensated at the retail electricity rate. Under net metering, this retail rate is computed monthly.
Texas Solar Rights Law: What if My Residence is Governed By an HOA?
Thanks to the Texas Solar Rights Law, if you reside in a community overseen by a homeowners’ association (HOA), Texas law places significant restrictions on the ability of HOAs to prevent the installation of solar energy systems on the properties they manage. This virtually ensures your ability to join a net metering program.4
Can You Make Money from Net Metering in Texas?
Of course, the bottom line is your bottom line. The savings you can earn from Texas solar power incentives vary depending on key factors such as the size of your solar system and the specific terms of your electricity provider’s buyback program.
Because of the largely open market (with the exception of a few regions with a sole power company) in Texas, net metering offers an excellent way to reap these rewards. Look for a utility company that offers full credit for surplus energy generation and a plan where you can roll over credits to the next month’s bill.
Is Going Solar Worth It in Texas?
Given that Texas enjoys more than 200 days of sunshine per year and has one of the nation’s highest energy consumption rates, going solar presents a prime opportunity for residents to embrace savings, sustainability, and energy independence. Texas’s net metering and solar buyback programs offer an easy pathway to achieve all of these.
Be most powerful with Freedom Solar. Let our full service solutions guide you to energy independence today!