Net metering explained
Last updated 2026-10-21
With rooftop solar, part of your output powers the house directly and the surplus goes to the grid. How the utility credits that surplus decides most of the value of a solar system.
1. Three ways exports are credited
| Arrangement | Imports | Exports credited at | Value to you |
|---|---|---|---|
| Net metering | Retail rate | Retail rate (1 kWh out offsets 1 kWh in) | Highest |
| Net billing | Retail rate | Lower export rate: avoided cost, wholesale, or a fixed "value of solar" rate | Medium; depends on how much you use on site |
| Buy-all / sell-all | Retail rate for all use | All production sold at a set rate; none offsets your use directly | Depends entirely on the sell rate |
Self-consumption (solar used in the house the moment it is produced) is worth the full retail rate under all three, because you never buy those kWh.
2. How the meter and bill work
- A bidirectional meter records delivered kWh (grid to you) and received kWh (you to grid). Your bill shows both.
- Monthly netting: under net metering, if exports exceed imports in a month, the extra becomes a kWh or dollar credit carried forward.
- Time-of-use netting: on TOU plans, exports and imports are valued at the price of the hour they happen. Midday exports may be worth less than evening imports. See time-of-use rates.
- True-up: once a year (often on the anniversary of your interconnection), credits and charges are settled. Leftover credits may be paid out at a low rate, carried over or forfeited.
- Fixed charges still apply: customer charges, minimum bills, and sometimes grid-access fees per kW of system size.
3. Worked example
A 7 kW system producing 1,350 kWh per kW per year (9,450 kWh/yr) on a home paying the U.S. average 17.99¢/kWh. 40% of output is used on site; the rest is exported.
| Rule | Self-used | Exported | Annual value |
|---|---|---|---|
| Net metering | 3,780 kWh × 17.99¢ | 5,670 kWh × 17.99¢ | $1,700 |
| Net billing (export at 6.30¢) | 3,780 kWh × 17.99¢ | 5,670 kWh × 6.30¢ | $1,037 |
Same panels, 39% less annual value under net billing. That difference can add years to payback. Model your state's sunshine and rate in the solar savings calculator.
4. California NEM 3.0 example
Since April 15, 2023, new rooftop solar customers of PG&E, SCE and SDG&E are on the Net Billing Tariff, widely called NEM 3.0. Exports are credited at hourly values from the state's Avoided Cost Calculator: a few cents per kWh in most hours, much higher on some late-summer evenings. Customers who interconnected under NEM 1.0 or 2.0 keep those terms for 20 years from interconnection.
Example: 6 kW system, 9,600 kWh/yr, California average rate 32.99¢/kWh, 40% self-consumed. Export value assumed at an average 6¢ (illustrative).
| Scenario | Annual bill savings |
|---|---|
| NEM 2.0 (exports at retail minus ~3¢ non-bypassable charges) | $2,994 |
| NEM 3.0, solar only | $1,612 |
| NEM 3.0 with a 13.5 kWh battery shifting surplus to evening | $2,596 |
Simplified: ignores TOU price differences, which raise the value of evening battery discharge further, and the battery's cost.
5. Batteries
- Under net metering, the grid acts as a free battery, so a home battery mainly adds backup power.
- Under net billing or TOU, a battery stores midday surplus and uses it in the evening peak, turning a low export credit into a full retail (or peak) offset.
- Usable capacity, round-trip efficiency (about 85% to 90%) and the number of useful cycles per year decide value. A battery that fills only on sunny days yields less than the spec sheet implies.
- Some utilities pay for battery capacity in virtual power plant programs. Ask.
- Shifting flexible loads (EV charging, water heating, pool pump, dishwasher) to solar hours does the same job for free.
6. What to ask your utility
- Is the current export credit full retail, avoided cost, or a fixed rate? Does it change hourly?
- Is netting monthly, annual, or instantaneous (every 15 minutes or hour)?
- When is the true-up, and what happens to surplus credits?
- Which rate plan is required for solar customers (often TOU)?
- Are there fixed, minimum-bill or per-kW fees for solar customers?
- How long are current terms grandfathered if rules change?
- Is there a cap on system size (often 100% to 120% of past annual use)?
- How long does interconnection approval take, and what does it cost?
Find your utility's rate on utilities and your state's average on electricity rates. More bill-cutting options on save money.
Frequently asked questions
What is the difference between net metering and net billing?
Under net metering, each exported kWh offsets one imported kWh at the full retail price. Under net billing, exports earn a lower credit (often the utility's avoided cost or a wholesale-based rate), while imports still cost full retail. Net billing makes self-consumption and batteries more valuable.
What happens at the true-up?
Once a year (or monthly on some plans) the utility settles your account. Unused credits are typically paid out at a low wholesale rate, rolled over, or forfeited, depending on the state. If you owe, you pay the balance. Sizing a system to produce more than you use rarely pays.
Does net metering still exist?
Yes, in many states, though a growing number have moved new customers to net billing or reduced export credits, often with a grandfathering period for existing systems. Check your state utility commission or your utility's interconnection page for the current tariff.
Do I still pay an electric bill with solar?
Almost always. Fixed customer charges, minimum bills and some per-kWh charges (in California, non-bypassable charges) apply even if you export as much as you import.