Net billing – what is it and how does it work in practice?
A prosumer who installed a photovoltaic system after April 1, 2022, no longer uses the well-known "net metering" system, but a new method for settling electricity purchase and sales. This is called net billing. Initially considered less transparent than net metering and potentially less beneficial, net billing turns out to be an effective solution. What should you know about it? How does net billing work?
Net billing – what is it and how does it work?
Net billing is a system for valuing the energy produced by the prosumer. It was the central point of the amendment to the Renewable Energy Sources Act1 passed in late 2021. Unlike net metering, net billing accounts for the value, not the amount of electricity fed into the grid. This means that the same number of kilowatt-hours can be converted at a different rate, which is based on the market price from the Day-Ahead Market (DAM).
Energy settlements are made using individual prosumer deposits, instead of the virtual energy storage used previously. Prosumer accounts are managed by all electricity suppliers. The main principle of net billing is that every prosumer remains an active participant in the energy market and seeks ways to optimize their electricity bills through conscious management of self-consumption. By choosing appropriate technological solutions, such as energy storage systems or EV chargers, the participant gains real control over how much they pay for electricity. They can feed electricity into the grid when prices are high and retrieve it when prices are low, thus flexibly adapting to market changes.
The net billing system is fully in line with EU regulations and has already been successfully implemented in many other countries, such as the USA, Portugal, Italy, and Mexico. It is believed to increase the flexibility of the national energy system and improve security in this regard.
Net billing rules – how to settle electricity?
Let’s look at how the net billing system works step by step. The prosumer, using silicon panels, produces electricity, which is first used to power their home or business installation. The electricity generated this way is free from any tax burdens.
Excess electricity that is not consumed is converted based on the market price of energy and is then credited to the prosumer's account. The payment is calculated separately for each kilowatt-hour.
Over the next 12 months, the prosumer can draw electricity from the Distribution System Operator (DSO) if the photovoltaic system's production is insufficient to meet current needs. The cost of electricity purchased this way is first covered by the funds accumulated in the prosumer’s account. Any unused electricity is refunded as a surplus. However, the refund cannot exceed 20% of the value of the electricity fed into the grid in the calendar month of the refund. Therefore, oversizing the installation does not make sense.
Starting from July 1, 2024, net billing will be based on hourly dynamic tariffs, with prices determined by the market information operator, Polskie Sieci Elektroenergetyczne (PSE).
Net billing and prices – how are the charges formed?
The amount of charges under net billing should be calculated annually or at least quarterly because energy prices change too dynamically for a weekly or monthly calculation to make sense. Settling energy based on its value rather than quantity is a fair solution from a social perspective and works well during periods of rising electricity prices. As an example, the average annual price of a megawatt-hour (MWh) was2:
- 174.95 PLN in Q1 2018
- 250.90 PLN in Q1 2020
- 468.35 PLN in Q1 2022
- 511.34 PLN in Q1 2024
The higher the energy prices, the more funds will be accumulated in the prosumer's account in case the energy is not used. This allows for the purchase of more electricity when prices fall. It’s also worth mentioning that prosumers can still benefit from the sixth edition of the "My Electricity" Program (up to 28,000 PLN in subsidies) and the thermomodernization tax relief (up to 53,000 PLN). As a result, it is possible to launch a photovoltaic system at a relatively low cost compared to the savings and profits from the new settlement system.
Net billing electricity sale price – how is it determined?
The fact that electricity prices change every hour does not mean that prosumers have had to follow energy market quotations since 2022. The market electricity price (RCEm) sets the rate at which prosumers selling excess electricity to the grid will be compensated. Polskie Sieci Elektroenergetyczne publishes the price for the previous month on their website. The monthly settlement system has been in place from July 1, 2022, until the end of June 2024. Starting from July 2024, the system will change to an hourly settlement model.
Benefits and drawbacks of net billing – what to know before choosing?
The introduction of net billing has certainly increased prosumers' interest in self-consumption. Energy storage systems, electric vehicles, heat pumps, or company infrastructure powered by electricity help reduce environmental impact and contribute to sustainable business development. Net billing also prevents oversizing installations and allows for more conscious cost management in business operations.
On the other hand, it should be noted that the dynamic changes in energy prices somewhat force photovoltaic users to purchase an energy storage system in order to stabilize their costs. Otherwise, changes in electricity usage habits will be necessary, which – especially for businesses that operate during certain hours – could be a significant challenge.
Regardless of energy price changes, it’s important to mention that excess electricity can only be used within the following 12 months. Managing the prosumer deposit in the case of high production and high demand requires a good understanding of how the energy market works and some ability to predict its behavior.
Net billing is marketed as the future of photovoltaics, and if properly used, it can bring significant benefits from renewable energy sources. However, it requires more involvement than net metering, where a commission of 20% or 30% was simply deducted from the electricity fed into the grid.
If you are planning to install a photovoltaic system for your business but are unsure whether it will be worthwhile, contact us. We will help you develop a personalized green development plan.
1. https://isap.sejm.gov.pl/isap.nsf/DocDetails.xsp?id=WDU20150000478
2.1. https://www.ure.gov.pl/pl/urzad/informacje-ogolne/aktualnosci/10400,W-pierwszym-kwartale-2022-roku-srednia-cena-sprzedazy-energii-elektrycznej-na-ry.html and
2.2. https://www.ure.gov.pl/pl/urzad/informacje-ogolne/aktualnosci/12176,2Q-2024-stabilizacja-sredniej-ceny-energii-elektrycznej-na-rynku-konkurencyjnym.html.