Net metering, explained

When your solar panels make more electricity than your home is using, the extra flows out to the grid. What your utility gives you for that power is one of the biggest factors in whether solar pays off. It also affects how big a system to build and whether a battery is worth it.

The rules have different names in different places: net metering, net billing, export credits, feed-in rates. This guide explains how they work, why the details matter, and what to look up for your own utility.

Where your solar power goes

At any moment, your solar power goes one of two places:

1. Into your home. Whatever is running uses solar first. Every kWh used this way is a kWh you don’t buy from the utility, so it’s worth your full electricity rate.
2. Out to the grid. Anything your home isn’t using at that moment is exported.

At night, or when your home needs more than the panels make, you buy power from the grid as usual.

The question net metering answers is: what is an exported kWh worth?

Classic net metering: one for one

Under classic net metering, your meter tracks power in both directions, and each kWh you export offsets a kWh you buy, at the same rate. Export 10 kWh at noon, import 10 kWh at night, and they cancel out on your bill.

In effect, the grid works like a free battery. It doesn’t matter much when you use your power, only how much your panels make over the billing period compared to what you use.

Other common arrangements

Many utilities now use rules that value exported power differently. The details vary a lot, but common versions include:

• Exports credited at a lower rate. You buy power at the retail price but are credited less for what you export, sometimes much less. This is often called net billing.
• Export values that change by time of day. Exports may be worth more at some hours than others.
• Monthly or yearly settlement. Extra credits may roll over from month to month, then get settled once a year. Some utilities pay out leftover credits at a lower rate, and some let them expire.
• Charges solar can’t offset. Fixed monthly connection charges, minimum bills, and some other fees usually stay on your bill no matter how much solar you produce.
• Grandfathering. When rules change, existing solar customers are sometimes allowed to stay on the old rules for a period of time. New customers get the new rules.

Why it matters: a worked example

Here is the same solar system under two different export policies. The numbers are made up to show the effect, so use your own rates.

• The system produces 10,000 kWh a year.
• The home uses 40% of that directly (4,000 kWh) and exports the other 60% (6,000 kWh).
• The utility charges $0.16 per kWh.

Policy A: exports credited at the full retail rate ($0.16)

• Solar used at home: 4,000 × $0.16 = $640
• Exports: 6,000 × $0.16 = $960
• Yearly value: $1,600

Policy B: exports credited at $0.05

• Solar used at home: 4,000 × $0.16 = $640
• Exports: 6,000 × $0.05 = $300
• Yearly value: $940

Same panels and same sunshine, but about 40% less value under Policy B. That can turn a good payback into a mediocre one.

Using more of your own solar

Under a policy like B, every kWh you use yourself is worth more than one you export. If the same home moved more of its usage into sunny hours (running the dishwasher, laundry, or EV charging midday) and used 60% of its solar directly:

• Solar used at home: 6,000 × $0.16 = $960
• Exports: 4,000 × $0.05 = $200
• Yearly value: $1,160, up $220 from simply changing when it used power

What it means for your decisions

System size. Under one-for-one net metering, sizing to cover all your usage usually makes sense. When exports are worth much less, a smaller system that mostly feeds your own home can give a better return, because the last panels you add mostly produce low-value exports. Our guide to how many solar panels you need shows how to size for any share of your bill, and the calculator lets you try different amounts.

Batteries. Low export credits are the main reason batteries save money: store the solar you’d otherwise export cheaply, and use it in the evening instead of buying power. Under one-for-one net metering, a battery saves little. See how much battery storage is enough.

Timing. Under time-based rates or low export credits, when you use power matters. Shifting flexible loads into sunny hours is free and can noticeably increase your savings.

How to find your utility’s rules

1. Search your utility’s website for “net metering”, “net billing”, “solar”, “interconnection”, or “distributed generation”. The official rules are usually in a document called a tariff or rate schedule.
2. Check your state’s utility regulator, often called the public utility commission or public service commission, which approves these rules.
3. Look up your state in the DSIRE database, which lists incentives and solar policies across the United States.

Questions to answer:

• What is an exported kWh credited at, and does it change by time of day?
• Do extra credits roll over? What happens to leftover credits at the end of the year?
• Which charges on your bill can solar not offset?
• Is there a cap on system size, or on how many customers can join the program?
• If the rules change, would you be grandfathered, and for how long?
• What approval do you need before turning your system on?

That last one matters. Utilities generally require you to apply and get approval, often called interconnection, before you switch on a grid-tied system, and they may need to install a new meter. Installers usually handle the paperwork, but don’t turn a system on before you have permission.

Next steps

1. Find your utility’s export rules using the steps above.
2. Run your numbers in the calculator, then think about how exports change the result for you.
3. When you get quotes, ask installers what export rate they assumed, and check it against your utility’s actual rules.