Net metering is the primary mechanism for compensating residential and small-scale solar projects. Under net metering, customers with renewable electric generators can reduce their electric bill by generating some or all of their power and receive a credit from their electric provider for any excess generation.

Some states impose several restrictions on qualifying solar projects for net metering. For example, the size of an individual solar project is restricted by the customer’s historical annual electricity usage as opposed to available rooftop space. This could limit customers to putting solar on only a small portion of their rooftop, which will substantially lower the energy generated but cost nearly the same as putting solar on the entire rooftop. Additionally, with few exceptions, moderate-sized solar projects are not eligible for net metering. Moreover, within each utility’s service territory, a system-wide cap is set on the aggregated amount of net-metered projects, which hinders future growth of distributed solar power.

Several other states, including Illinois and Massachusetts, have demonstrated that net metering can succeed when moderate-sized projects are allowed. Illinois recently reformed its initial net metering program launched in 2008. In 2011 and 2012, the state legislature updated several aspects of net metering in Illinois, allowing solar projects up to 2 MW in size to qualify for net metering and raising the system-wide cap to five percent of peak demand. Massachusetts has taken similar steps in recent years to raise the cap on individual project size (from 60 kW to 2 MW) and raise the system-wide limits (to 9 percent of system peak load).

State legislatures could help increase the adoption of solar in the state by removing these barriers to solar freedom. Raising the cap on the size of individual solar projects would encourage larger distributed projects. Raising the system-wide cap will send a positive signal to solar developers that a given state is open to significant expansion in this space. Finally, because a system-wide limit on net metering is sufficient to assist utility resource planners, states could abolish the system-wide caps on net metering for subcategories of projects. Removing these roadblocks will increase the demand for moderate-sized projects and bring good-paying solar jobs to the states.