Many people wonder whether or not they are able to sell energy back to the grid, especially with the prominence of solar systems, distributed energy resources, and other forms of on-site power generation. This article aims to outline the different ways you can sell power back to the grid, how it actually works, and the benefits of doing so.
Can You Sell Energy Back To The Grid?
Although many people with solar systems on their homes or businesses think that they can sell excess electricity to the power grid, the reality is that you can only sell power to the grid if you have an electricity generator’s license and qualified power-generating assets.
Unless you are planning to raise tens of millions of dollars to build a power plant and register with the electric grid, you cannot sell energy. You can, however, receive credits for excess power generated by your solar system. Let’s explore more on how that works below.
How Does Selling Electric Back To The Grid Work?
As we stated previously, you cannot sell power to the grid without being a registered generator. You can, however, receive billing credits for excess power from a solar system or wind turbine. Read on to learn about the different ways to sell back power.
Excess Power From Solar Systems
This is the most common way consumers believe they can sell electricity to the grid. However, the way that you can earn income from excess solar power is through net metering. Currently, there are over 35 states that offer a net metering program for solar system owners.
Net meters are smart meters that track the total kilowatt hours generated by a solar system against the total amount of kilowatt hours consumed in a building. If there is excess power generated from the solar system, the consumer receives a billing credit in the amount of the excess electricity.
Most states, however, place restrictions on the total solar system size as it compares to the building’s energy usage. The system cannot far exceed the consumer’s electricity demand in order to prevent too much electricity being fed onto the power grid from overproducing solar systems.
Electricity Generation Plants
One way to legally sell electricity to the grid is to register as a generator, obtain an electricity-generating license, and begin producing power. There are several ways that license generators can make power and earn income:
- nuclear power plants
- natural gas power plants
- hydroelectric generation stations
- utility grade solar farms
- wind turbines and more
These projects take many years of local, state, and federal approval and can cost upwards of billions of dollars.
Energy Storage
Another way to sell electricity to the grid is through energy storage systems or batteries. Recently, the Federal Energy Regulatory Commission (FERC) passed Order 841 which requires the nation’s electric grid operators to allow energy storage owners access to their wholesale electricity markets and electric transmission networks. When this order is finally implemented battery storage owners will be able to produce energy, store it on a battery, and sell it back to the electricity grid for income.
Why Sell Power To The Grid?
Electricity generators earn profits by producing power at wholesale prices and selling them to the grid for a markup. Consumers, on the other hand, can also benefit financially from sending electricity back to the grid from solar systems or other distributed energy resources.
As we discussed above, retail consumers cannot get paid for electricity in the same way that generators do; however, net metering credits can add up and help to offset energy costs. In fact, if you have a solar system that is consistently generating more electricity than you need, you can rest assured knowing that you have enough energy credits stored up to survive long periods when your solar system might not be working as well (e.g. rainy days).
All in all, whether you are participating in the wholesale markets as a power generator, or a consumer simply earning net metering credits, selling electricity can be quite profitable. Let’s explore the numbers below.
How Much Money Can You Make Selling Electricity Back To The Grid?
The amount of money you can earn from selling electricity depends on your place in the market. Registered electricity generation plants earn wholesale electricity prices for their power, while consumers can earn retail credits. Let’s look at each in more detail.
Electricity Generators
The power generation business model is quite simple: make electricity for less than the going wholesale price and sell your power for profits. After registering with the grid operator, getting licensed, and building a power plant, electricity generators earn money from grid operators for all units of electricity fed onto the grid.
Electricity prices in the model, however, are set by the grid operator each hour based on auction results among power generators. Whatever the price of power for the hour ends up being, all electricity generators are paid the same for their contributions. During hours of high demand, prices can rise substantially, allowing generators to earn healthy profits. These companies are also compensated for electric capacity fees for their participation in the market.
Retail Consumers
Retail consumers earn net metering credits for any excess electricity generated by their solar systems. In most utilities that allow net metering, the consumer is credited for the retail price of electricity for each unit that is fed onto the grid. Because excess solar generation is regulated, these credits do not become overwhelmingly substantial, but they can still help to offset future energy costs.
Want To Learn More About The Electric Grid And Selling Power?
In summary, selling energy back to the grid can be complicated and expensive. However, there are other options available to commercial and residential consumers that are looking to reduce energy costs. Our team understands the electricity grids in the U.S. and can help you navigate selling energy back to the grid. Contact us today to learn more.
