What is Net Billing and how to start selling electricity under it

At certain times of the day or night, a solar power plant (SPP) can produce more electricity than the consumer needs for their needs. Such periods are typical for summer, when there are long days of light and mostly sunny weather.

Thus, when there is a “surplus” of electricity, the consumer can sell it to the grid and receive money on his or her account. This money can be used to pay for the kilowatts consumed later from the grid (for example, in winter or at other times when the SPP generates less electricity) or to dispose of it at their discretion. This system of selling kWh is called Net Billing, or the self-generation mechanism, which will be described in more detail below.

Let’s take a closer look at what net billing is

Net billing or self-production mechanism (Net Billing) is a system under which the owner of an alternative energy source can sell the excess kW produced to the general grid.
It looks like this: the excess electricity that an active consumer is ready to sell is metered and fed into the general grid. After the energy is sold, the consumer receives a monthly payment for the electricity supplied.

How is the cost of electricity sold calculated?

Scheme of electricity sales under the Net Billing mechanism, source

Surplus electricity is sold to consumers who have concluded a contract with a universal service provider (USP) at the day-ahead market price (DAM), i.e. at the cost of electricity for the next day, at pre-agreed prices.
If a consumer sells electricity while using a storage facility, the sale price may be higher than usual. The reason is that in this case, electricity is sold at the general DAM prices, which are higher than, for example, the prices on the daytime DAM.
If the electricity sales agreement is concluded with a separate electricity supplier and not with the USP, the prices and terms of sale of kW are determined individually for the consumer.
The cost of energy sold, i.e. the funds received on the user’s special account, is determined monthly based on the difference between the supplied and consumed kW from the general grid, as well as electricity transmission and distribution services.

The DAM prices are available here: https://www.oree.com.ua/

Who can use net billing

The self-production mechanism is available for the following types of active consumers
1. Household consumers (in private households) with a capacity of up to 30 kW for roof/ground mounted PV systems or up to 50 kW for facade mounted systems. Energy sources: solar radiation or wind energy.
2. Small non-household consumers: whose installation capacity is no more than the permitted consumption power, maximum 50 kW.
3. Non-household consumers may install generating facilities connected to their networks directly or through their own networks. The capacity of such installations should not exceed the authorized (contractual) capacity of the consumer. Owners of facilities with a feed-in tariff can switch to a self-generation mechanism without any capacity restrictions.
4. Other consumers (including energy cooperatives): capacity of installations – up to 150 kW. Energy sources: sun, wind, biomass, biogas, hydropower, geothermal energy.

Consumers with installations with a capacity of more than 150 kW and up to 5 mW can also be active consumers, but they are subject to restrictions on the volume of electricity supply.

Simultaneous conclusion of contracts under the “green” tariff and self-production for one installation is prohibited.

Who is an “active consumer” and how to acquire this status

Active consumers are those who have a facility for generating or storing electricity and use it for their own consumption and at the same time sell it to the general grid. Simply put, they are those who not only use electricity but also produce it themselves.

Private households, cooperatives, legal entities, and municipal property, such as hospitals, kindergartens, orphanages, schools, and other institutions of socially important or critical infrastructure, etc. can acquire the status of an active consumer.

In other words, the status of an active consumer is available to anyone who:
– produces and sells electricity;
– has an energy storage facility for the purpose of participating in the ancillary services market, providing balancing services and buying and selling electricity;
– sells excess electricity produced or “stored” at the facility;
– participates in energy efficiency and demand management measures, if this is not a professional or business activity.

How to sell electricity under the net billing mechanism

To use net billing, you must first enter into an electricity purchase and sale agreement with a universal service provider (USP). It is also possible for certain categories of consumers to conclude an agreement with a separate electricity supplier. In this case, electricity will be sold under the terms and prices specified in the agreement.

An active consumer does not have to obtain a separate license for electricity generation.

The iSolar team can help you draw up a power purchase agreement for an active consumer. In June 2024, our specialists were the first in the Khmelnytsky region to draw up a relevant document for the sale and purchase of electricity under the self-generation mechanism for a company client.

The iSolar team is ready to share its experience and contribute to the growth of active consumers who sell electricity through the net metering mechanism in Ukraine!