What is the On-Grid Solar system?
It's a solar system that is connected and synchronized with the power grid. So, the electrical load will be fed from both sources which share to each other in feeding it.
In cloudy days or at night where the solar system generation is low or even is not exist, the electrical load takes its power requirements from the power grid. And in sunny days where solar generation exceeds load power requirement, the load take all its power requirement form the solar system and surplus solar generated electricity will go to the power grid to be used elsewhere.
Generally, both sources share each other, so at some other times the load will take its power requirement from both.
The Electricity Companies in most of countries like electricity generation that way, and constitute it as distributed generation. To extent that they pay money for this extra solar generation (AC pure sine wave electricity) injected into power grid to the customer / facility owns the on-grid solar system.
How the electricity company pays for solar on grid generated AC electricity?
In order to encourage customers to install on grid solar systems, Electricity Companies put 2 ways to buy electricity from them, the first one called Net metering and the other called Feed in tariff.
In Net metering policy, Electricity Company pays for the net electricity injected into the power grid. For example, suppose that the customer on grid solar system generates 1000kWh in a certain month while its premises consume 700kWh, this means he already returned 300kwh to the power grid, and hence the Electricity Company will pay for 300kwh amount. In other months, the customer on grid solar system may generate 1000kwh but its premises consume 1200kwh, then the customer will pay to the electricity company for 200kWh extra consumption.
In feed in tariff policy, there will be a contact between the Electricity Company and the customer where the customer will be paid for all electricity generated from his solar on grid system and injected into the power grid, referring to the same example, the electricity company will pay for 1000 kwh customer monthly generation according to the contract established between them, and of course the customer will pay for his consumption but individually away from the contract.
Its win-win business relationship between the customer and the Electricity Company, while the customer will save electricity bills and get profits from surplus electricity generated from the solar system, Electricity Company will have reliable power source with high generation capability and be efficiently able to feed other new customers.
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