Net Metering
A utility billing arrangement where excess solar electricity you export to the grid earns credits that offset your electricity bill during low-production periods.
Net metering is the policy mechanism that makes rooftop solar financially viable for most homeowners. When your panels produce more electricity than you are using, the surplus flows onto the grid and your meter runs backward — you earn credits. When your panels under-produce (at night, on cloudy days, in winter), you draw from the grid and consume those credits.
In full net metering, you receive credits at the full retail electricity rate — the most favorable arrangement. Some utilities have moved to "net billing" or "avoided cost" compensation, crediting excess at the lower wholesale rate (often 3–5 cents/kWh vs. 12–18 cents/kWh retail). This significantly reduces payback economics and should be confirmed before system sizing.
Net metering policies are set at the state and utility level, vary widely, and change over time — most notably in California, which replaced traditional NEM with NEM 3.0 in 2023, cutting export rates by roughly 75%. Understanding current and likely future net metering policy in your state is the single most important financial variable in solar ROI.
Real-World Example
Under full net metering at $0.14/kWh retail rate, the family's 9 kW system produced 1,800 surplus kWh in May (worth $252 in credits) that offset their higher December bills when production dropped to 600 kWh.