Virtual net metering: What is it? How does it work?

Virtual net metering is net metering for electricity generated by a solar system located in a different place than where the energy is consumed. If you're a community solar customer, you'll want to familiarize yourself with virtual net metering. Lucky for you, we've got you covered!

Virtual net metering (VNM) is a bill-crediting system for community solar. When community solar projects create power that's not used on site, it's fed back into the grid, generating net metering credits that are shared among subscribers. The energy generated by your share is sold to you at a discount, reducing the cost of your electric bill.

To dive further into this highly appealing solar incentive, we should define two relevant concepts: community solar and net metering.

Community solar

Community solar is an alternative to rooftop solar for households and businesses that either can't install solar panels on their roof or would prefer not to have solar panels on their property. Community solar is also sometimes called "shared solar," because households will collectively pay for a shared solar system that provides power to multiple homes.

You can think of community solar as something households "subscribe" to. A large-scale, off-site solar panel installation will typically offer energy to hundreds of households. In many cases, a community solar array can be built to power an entire neighborhood or town. A resident--maybe a renter or someone with a home that can't support panels--can own or rent a few of the community array's solar panels to get discounted rates on clean energy without making any upfront purchase. Issues like maintenance, warranties, and equipment are also not a factor with community solar because the owner handles those elements. Learn more about how much you could save with community solar.

Net metering

Net energy metering, usually called "net metering," is a solar incentive where households receive credits for the excess power generated by their solar panels. This type of net metering only applies to power produced and used in the same location. Net metering rules and the type of credits earned can vary depending on state regulations and utility programs.

The "virtual" part of virtual net metering allows community solar customers to reap the benefits of net metering even though they do not own a solar system. Virtual net metering (VNM) offers weighted credits determined by your portion of the solar array. VNM is also called aggregated or community net metering – an incentive shared among multiple people who own a share of a community solar array.

The amount of virtual net metering credits you receive depends on the size of your share in the community solar system. For example, if you own 25 percent of a community solar array, you'll be credited for 25 percent of the production of that system. The credits will appear on your electric bill, offering a significant cost reduction on your energy spending without the hassle of having panels installed and maintained on your roof. In a sense, the massive solar array in which you hold stock will provide virtual energy to your home, and VNM credits are how you account for that energy.

With community solar and VNM, you'll receive two bills: one from your community solar provider, charging you for the energy credits generated by your share of the community solar project, and your regular electricity bill, which will reflect the credits you received based on your share of the community solar project. You can think of the solar credits generated by your share of the community solar project as a gift card for electricity that you can purchase for 90-95 cents on the dollar. To learn more about community solar billing, check out this article covering the key things to know or get a preview of what your electricity bill will look like with community solar.

Before anybody can construct a community solar array in your state, your state's government must approve legislation enabling and regulating virtual net metering. Not every state has VNM, but a growing number are developing rules to make way for community solar options. 

The top-performing states for community solar are where most activity in this industry segment occurs. However, there are other emerging markets – according to SEIA, there are active community solar programs in 41 states and the nation's capital.

Community solar and virtual net metering are currently more popular in the Northeast. However, it's forecasted that community solar programs will be established nationwide as awareness grows. As the "sharing economy" expands in the U.S. (which includes companies like Airbnb, Uber, and TaskRabbit), more households are exploring opportunities within their communities that help them make the most of their resources.

These are some of the top states that offer virtual net metering: 

• California: Passed its first shared renewables law in 2013, and in September 2022, it passed a law expanding virtual net metering. The market is primed for a boom considering California's ambitious goal of becoming 100 percent carbon-free by 2045. With the newer law, we can expect to see market growth and increased availability of community solar by 2024.

• Colorado: First adopted community solar in 2010 with the passing of the Community Solar Gardens Act. Ten years later, they remain a leader in community solar. Xcel Energy, the largest utility in the state, boasts of the nation's most extensive community solar program: Solar* Rewards.

• Illinois: Is one of the most recent states to adopt community solar, having done so with the passing of the Future Energy Jobs Act in late 2016. Since then, the market has grown substantially thanks to the Illinois Shines program, which provides financial incentives for community solar projects.

• Maine: Initially passed community solar legislation back in 2009. However, due to net metering caps and other policy factors, the state has struggled to grow its community solar market to its full potential. In 2019, legislators passed An Act to Promote Solar Energy Projects and Distributed Generation Resources in Maine, eliminating past barriers and promoting community solar development.

• Maryland: Began offering community solar in 2017 by introducing its seven-year community solar pilot program. With the passing of the Clean Energy Jobs Act (CEJA) in 2019, the state set a goal to generate 50 percent of its electricity from renewables by 2030, which includes community solar.

• Massachusetts: Was one of the first states in the country to offer community solar options. Much of this is due to the passage of the Green Communities Act in 2008, which established the state's first solar carve-out. This legislation also helped form the Bay State's virtual net metering policy that allows electricity customers to receive bill credits for energy generated at community solar farms. According to the Institute for Local Self-Reliance (ILSR), Massachusetts had roughly 208 community solar projects as of late 2020.

• Minnesota: Has long been the national leader for community solar, having more projects and capacity than any other state in the country. The state's largest utility company, Xcel Energy, is home to the nation's most extensive community solar program (Solar* Rewards). M.N. first passed community solar legislation in 2013, and community solar development has increased.

• New Jersey: Passed AB-3723 / SB-2314 in 2018, establishing the state's first community solar program. The state's renewable portfolio standard (RPS) targets 100 percent clean energy by 2050, which will help to incentivize community solar growth.

• New York (solar only): The Empire State is home to one of the best community solar markets in the country. New York first launched community solar in 2015 as part of the Shared Renewables Program, an initiative to help make clean, affordable energy accessible for all types of New Yorkers. As of 2020, thanks in part to Governor Cuomo's NY-Sun initiative and Reforming the Energy Vision (REV) plan, New York is one of the top five states with the most community solar installations in the country.

• Rhode Island: Established a community virtual net metering policy in 2016, which allows electricity customers to receive bill credits for energy produced at large, off-site solar projects. The state's first community solar farm, Broncos Highway Solar, went live in late 2019. Fortunately, there's more to come: as of late 2020, 16 more community solar projects are planned for the Ocean State.

• Washington, D.C.: The first community solar project was built in Washington, D.C., in 2017, and community solar has been expanding in the District since. Solar for All and the District Department of Energy and the Environment are helping residents go solar in the city's effort to go 100 percent carbon-neutral by 2050.

With community solar, you can take advantage of virtual net metering and save money on electricity costs! EnergySage is the nation's leading online solar marketplace: using our Community Solar Marketplace, you can compare local options, get a quick community solar savings estimate, and seamlessly subscribe to an open project in your area. Over 10 million people visit EnergySage annually to learn about, shop for and invest in solar. Compare your community solar options today to see how much you can save.