What is net metering?

If you have access to net metering, you'll save a lot on electric bills with solar.

Your solar panels often produce more energy than what’s needed to power your home. That energy has to go somewhere, so in most cases, it goes back to your electric grid. If you live in an area with net metering, you’ll be compensated for your contribution.

Net metering is an electric billing tool that makes solar even more affordable. Think of it as a virtual piggy bank for your electricity; when your panels overproduce, the extra energy flows into the grid, earning you credits through your utility. On a cloudy or rainy day when your panels aren't producing enough energy, you’ll pull energy from the grid and count that against the credits you've banked over time. As a solar customer, you’ll only be billed for your "net" energy usage.

Also known as net energy metering (NEM), this foundational policy is one of the biggest incentives to go solar. Here's everything you should know about it.

How does net metering work?

A correctly sized solar energy system can produce enough power to meet your annual electricity demands, but it won’t always match up with your daily demand. Solar panels produce more energy in the summer when the days are longer and sunnier and less in the winter when the sun is lower and the days are shorter.

Net metering helps balance this by giving you credits when excess energy is produced (summer), which you can use later (winter). Here’s how it works:

• When your solar panels produce more electricity than you're using at any point during the day, the electricity is sent back to the grid, running your electric meter in reverse.
• When your energy use is higher than your solar panel production (either at night or on cloudy days), you'll pull electricity back from the grid, running your meter forward.
• At the end of the month or year, you'll be billed the net amount of what you send to the grid and what you pull from the grid: hence "net metering".

Fact or fiction

Is net metering like a monthly paycheck?

No—in most cases, you won’t receive a cash payment from your utility with net metering. Instead, you get utility credits for your excess solar electricity that you can apply to future bills.

Why does net metering exist?

Net metering policies were designed for two primary purposes: First, to encourage the greater adoption of renewable energy throughout the country, and second, because utilities—and the electricity grid as a whole—can benefit from the influx of low- to no-cost solar energy.

Solar energy can help balance the cost of purchasing electricity from other resources, especially during summer months when electricity is often the most expensive on the hottest—and sunniest—days of the year.

Net metering doesn't just apply to solar, either. Solar net metering is by far the most common type, but depending on the rules in your state, you may be able to net meter with other types of distributed generation systems, like wind turbines.

fact or fiction

Do net metering credits expire?

In some states, your net metering credits will roll over from month to month and sometimes year to year, meaning you won't have to use all of your credits in one billing period. So, since your solar energy system produces high amounts of energy in the summer, you can build up credits to use in winter billing cycles when your generation is lower.

But this isn't always the case. The rollover policy depends on your state and utility company, so it’s important to size your system large enough to offset as close to 100% of your electricity needs as possible, but not to produce significantly more than you use.

How do electricity bills work with net metering?

Most homes produce excess electricity in the summer months and use more electricity from the grid in the winter. Because these variations in production are fairly predictable, your utility usually won't send you a monthly check when you produce more than you need.

Instead, you'll build up extra credits during the summer months so that you can draw from them at night and during the winter months when you need them. With the right design, your system can generate enough power to match your total electricity use for a year, even if you produce much more than you need in some months and much less in others.

When your solar power system generates more electricity than you use over the course of a month, you'll receive a credit based on the net number of kilowatt-hours you gave back to the grid. If you produce less electricity than you use in a given month, you must buy electricity from your utility to make up the difference. In these instances, you would pay for the electricity you use, minus any excess electricity your solar panels generate.

fact or fiction

Can you go off-grid and still net meter?

Net metering is like having the grid serve as a giant solar battery. But, if you install an "off-grid" solar panel system, you won't benefit from net metering.

An off-grid solar system requires you to have your own batteries to keep the lights on once the sun goes down. For nearly all residential (and commercial) applications, staying connected to the grid is your best bet.

Where can I learn about net metering in my state?

We track all solar incentives in the states where the EnergySage Marketplace is open. Click on your state to learn if net metering is available to you and what other incentives may help you save with solar:

• Arizona
• Arkansas
• California
• Colorado
• Connecticut
• Delaware
• Florida
• Georgia
• Idaho
• Illinois
• Indiana
• Iowa
• Kansas
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Minnesota
• Missouri
• Nevada
• New Hampshire
• New Jersey
• New Mexico
• New York
• North Carolina
• Ohio
• Oklahoma
• Oregon
• Pennsylvania
• Rhode Island
• South Carolina
• Tennessee
• Texas
• Utah
• Vermont
• Virginia
• Washington
• Washington D.C.
• West Virginia
• Wisconsin

For california homeowners

What's Nem 3?

In December 2022, the California Public Utilities Commission (CPUC), the regulatory agency in charge of private utility companies in California, approved California's new net metering policy, NEM 3.

It went into effect on April 14, 2023, and significantly reduced the rate at which utility customers with solar energy systems are compensated for the excess electricity they send to the grid. But with California's exorbitant electricity costs, installing solar is still worth it for most Californians if you add a battery.

Other types of solar buyback programs

Buy all/sell all

The buy all/sell all model works by allowing users to sell 100% of the energy generated by their panels to the utility company. In return, they get 100% of their home's energy from their utility at the retail rate.

Two separate meters are required for this type of net metering. The user will pay the difference between the amount generated and the amount consumed. With buy all/sell all net metering, you don't directly consume any of the energy generated by your solar panels.

Net billing

In the past, net billing has been most common in large commercial solar installations, but it's becoming increasingly popular for home solar panel systems. Net billing is similar to net metering in that it allows you to essentially use the grid as storage for the excess electricity generated by your solar system, but it’s not as consumer-friendly as traditional net metering.

Under net metering, your credits are typically a one-to-one exchange: A kilowatt-hour produced by your solar panels is worth the same amount as a kilowatt-hour produced by the grid. However, with net billing, your compensation rate is typically lower than what you pay for electricity. Instead of "banking" the credits earned from the excess energy generated by your solar panels, you'll "sell" that energy back to your utility, typically at the wholesale rate instead of the retail rate.

Virtual net metering

Many states have virtual net metering (VNEM) policies, which allow you to benefit from net metering even if you don't have solar installed onsite at your home. Virtual net metering is often offered alongside traditional net metering or another type of solar buyback program for rooftop systems.

In most cases, you participate in virtual net metering by subscribing to a local community solar farm. Under virtual net metering, the electricity generated by the solar farm is fed into the grid, and the net metering credits are shared among all subscribers. The energy produced by your share of the farm is sold to you at a discount, reducing your annual electricity costs by 5-20%.

Community solar is a great option if you can't install a rooftop solar system: Check out the EnergySage Community Solar Marketplace to explore projects near you.

Why net metering is the best solar incentive

Net metering allows you to store every unit of energy you produce with solar to be used at a later date from the grid. It can help you save thousands of dollars over the lifetime of your solar panel system.

While net metering isn't the only way utilities compensate homeowners for going solar, it's by far the most common and effective solar policy at the moment. If you're interested in learning more, visit the DSIRE, which tracks net metering and other solar incentives and rebates.