Photovoltaics Masters Institute
What is the net-billing system? - principles and an example of settlement
Net billing settlement is a mandatory method of energy management for all photovoltaic installations that began producing electricity after April 1, 2022. According to the Renewable Energy Sources (RES) Act, the new settlement system is voluntary for those who previously opted for net metering (the discount system). Prosumer users who utilize electricity produced by photovoltaics operating before April 1, 2022, can choose the option that they find more convenient or beneficial. What is the net-billing settlement system? What exactly is net billing?
What is net billing?
Net billing is a system for settling electricity that allows owners of photovoltaic installations (or other renewable sources) to sell excess generated energy to the power grid. In this system, owners receive compensation for the energy sent to the grid, which is calculated based on current market rates for electricity.
Net billing differs from net metering, where energy surpluses are settled based on the amount of energy, not its monetary value. In the net billing system, renewable energy prosumers earn from selling surplus energy at wholesale prices while buying energy from the grid at retail prices. This system motivates users who choose to install photovoltaic systems to better manage energy production and consumption. In theory, this should contribute to greater grid stability and more effective use of renewable energy sources.
Net billing – principles
- Energy balancing – net billing allows users of installed renewable energy sources (RES), such as photovoltaic panels, to sell surplus energy to the grid (as an energy seller) and purchase energy when their production does not meet current demand. The excess energy produced by the user is sent to the power grid, while deficits are covered by drawing energy from the grid.
- Financial compensation – unlike net metering, where energy surpluses are settled on a one-to-one basis (the amount of energy produced equals the amount of energy consumed), or according to another ratio (in Poland, a ratio of 0.8 or 0.7 was used depending on installation capacity), net billing principles are based on the financial value of energy, and the price of electricity is calculated according to the RCEm rate.
- Two types of tariffs – the selling tariff is the price at which the user sells surplus energy to the grid, which is usually lower (wholesale energy price). The purchasing tariff is the price at which the user buys energy from the grid, and it is higher.
- Monthly or annual settlements – energy and its value are usually balanced over specific settlement periods (monthly or annual). At the end of the settlement period, the difference between the value of energy sent to the grid and the value of energy drawn from the grid is calculated.
How does net billing work in practice?
Apart from understanding the concept of net billing, it is also important to know how this settlement system works in practice for renewable energy sources.
The most critical element – in addition to the photovoltaic installation – is the installation of a bi-directional energy meter that measures both the amount of energy sent to the grid and the energy drawn from it. This allows for precise calculation of the energy balance. It is also necessary to sign a contract with the local grid operator, which regulates the rules for sending energy surpluses to the grid and drawing it from the grid, as well as specifying the rates for energy sent and received. The grid operator must have a settlement system in place that enables the monitoring and calculation of the value of energy sent to and drawn from the grid, converting energy into monetary value according to current rates. The operator is also responsible for installing the bi-directional energy meter once the contract is signed.
Implementing net billing requires compliance with local regulations concerning energy and renewable sources, which may include matters related to tariffs, safety, and technical standards for installations. The power grid must be adapted to accept energy surpluses from individual producers, which requires adequate infrastructure capable of handling variable energy production and consumption. Users can utilize energy monitoring and management systems that help optimize energy usage and production, by tracking energy production, consumption, and balancing energy needs.
Net billing: photovoltaics – pros and cons
The main advantages of net billing include the motivation for efficient energy management. The system also encourages users of small photovoltaic installations to maximize their use of self-produced energy. As a result, significant savings on electricity bills can be achieved. This system also supports the development of renewable energy sources, contributing to CO2 emissions reduction and sustainable energy development.
Thanks to the bi-directional energy meter and a precise settlement system, users can accurately monitor their energy consumption and production. This increases transparency and financial control. Net billing also supports the stability of the energy grid, allowing better management of energy surpluses and shortages, enhancing the reliability and efficiency of the entire system.
On the other hand, net billing has its downsides. One of the main ones is the difference between the wholesale price at which users sell energy surpluses and the retail price at which they buy energy from the grid. Therefore, to ensure the profitability of the installation, investing in a monitoring system may be necessary. Such a system will continuously inform users about current energy production, consumption, and the amount of energy sent to the grid, as bi-directional meters, while indicating current values, do not provide easy access to this data. This will increase the overall investment cost, but the benefit is greater energy consumption awareness, leading to better optimization and, ultimately, greater savings.
Net billing – invoice
A net billing invoice includes detailed information regarding the user’s energy and financial balance for a given settlement period. It contains information such as:
1. Identification details:
- Name and address of the energy consumer (user),
- Name and address of the energy supplier (grid operator),
2. Settlement period:
- The exact period for which the settlement is made, usually monthly or yearly,
3. Meter information:
- Serial number of the bi-directional meter,
- Meter readings at the beginning and end of the settlement period,
4. Energy balance:
- Amount of energy produced by the renewable installation and sent to the grid (in kWh),
- Amount of energy drawn from the grid (in kWh),
- The difference between produced and consumed energy, expressed in kWh,
5. Prices and financial values:
- Rate for energy sold to the grid (wholesale price, usually lower),
- Rate for energy purchased from the grid (retail price, usually higher),
- Financial value of energy sold to the grid,
- Financial value of energy purchased from the grid,
6. Financial summary:
- Total amount due to the user for energy sold to the grid,
- Total amount to be paid for energy drawn from the grid,
- Final balance, i.e., the difference between receivables and liabilities. This may be an amount payable by the user or a credit for future settlements if the energy sold exceeds the value of energy consumed,
7. Additional fees and taxes:
- Information on any additional fees, such as transmission fees, network maintenance fees, or other operating costs,
- Calculated VAT and other applicable taxes,
8. Contact information:
- Customer service contact details of the grid operator, in case of questions or complaints.
Net billing – example of settlement
1. Energy balance:
- Energy produced and sent to the grid: 500 kWh,
- Energy drawn from the grid: 300 kWh,
2. Prices and financial values:
- Rate for energy sold to the grid: 0.25 PLN/kWh,
- Rate for energy drawn from the grid: 0.60 PLN/kWh,
3. Financial summary:
- Value of energy sold to the grid: 500 kWh * 0.25 PLN/kWh = 125 PLN,
- Value of energy drawn from the grid: 300 kWh * 0.60 PLN/kWh = 180 PLN,
- Final balance: 125 PLN (receivable) – 180 PLN (liability) = -55 PLN (payable),
4. Additional fees and taxes:
- Transmission fee: 20 PLN,
- VAT (23%): 0.23 * (180 PLN + 20 PLN – 125 PLN) = 17.95 PLN.
Amount to pay: 55 PLN (final balance) + 20 PLN (transmission fee) + 17.95 PLN (VAT) = 92.95 PLN.
FAQ:
1. What is net billing?
Net billing is a system for settling electricity, where owners of renewable energy installations (e.g., photovoltaic) can sell excess produced energy to the power grid. Bills are settled based on the financial value of the energy sent and drawn from the grid, not just the number of kWh.
2. What are the advantages of net billing?
Net billing allows the sale of energy surpluses, increasing the profitability of investing in renewable energy sources. It enables precise settlement of the value of energy sent to and drawn from the grid, promoting energy efficiency. This way, users can reduce electricity bills and achieve greater energy independence.