Net metering explained: how solar credits work on your electric bill
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Author
Andrew Blok
Electrification and Solar Writer and Editor
Editor
Andrew Giermak
Solar and Electrification Writer and Editor
If you’re looking at solar panels to lower your electric bill, you’ll hear “net metering” almost immediately. It strongly shapes how your solar panels affect your energy bill, but the rules depend on where you live. Here are the basics, and how you can check rules in your own area.
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What is net metering?
Solar panels produce the most power when the sun is high, often when you’re not home using much electricity. The extra flows out to the power grid, the network of lines and equipment that delivers electricity to homes. At night, you pull power back from it.
Net metering is a billing arrangement that tracks that two-way flow. Your meter records the electricity you take from the grid and the extra solar electricity you send back. For each kilowatt-hour (kWh) you send out, you earn a credit. (A kilowatt-hour is the unit electricity is billed in; it’s enough power to charge a smart phone about 60 to 80 times.)
With true net metering, that credit is one-to-one. One kWh sent to the grid cancels out one kWh you take later, valued at the same retail rate you normally pay.
Net metering examples
| From the grid to you | From you to the grid | Result |
|---|---|---|
| 100 kWhs | 50 kWhs | You pay for 50 kWhs |
| 50 kWhs | 100 kWhs | You earn 50 kWhs of credit |
| 100 kWhs | 100 kWhs | No payment or credit |
What is net billing, and how is it different?
Net billing works similarly, with one key difference: the credit for power you send to the grid is lower than the retail rate. Depending on the utility, it might be tied to wholesale electricity prices, the utility’s avoided costs, or the time of day you export.
When you pull power from the grid, you still pay the full retail rate. So one kWh sent out doesn’t cancel out one kWh taken in. Exporting is worth less, and using your solar power as it’s produced is worth more.
How does net metering affect my electric bill?
Here’s a simplified example with illustrative numbers. Say your utility charges 20 cents per kWh. During the day, your panels send 100 kWh to the grid, and later you take 100 kWh back.
- With net metering: Your 100 kWh of credit cancels the 100 kWh you took back. That portion of your bill is $0.
- With net billing: At an 8-cent export credit, you earn $8 but pay $20 for the power you took back, leaving $12.
You’ll likely still receive a bill. Fixed monthly charges, minimum bills, and nights or seasons when you use more than you produce can all leave a balance.
Under net billing, avoiding grid electricity is more valuable than sending electricity to the grid. So, shifting some electricity use to when your panels produce, like running the dishwasher during the day, can help you use more of your own solar power. A home battery can also store extra solar for the evening.
Where is net metering available?
There’s no single national rule. State lawmakers, state utility regulators, and sometimes individual utilities set the policy, so it differs by state and even by utility. Some states require one-to-one net metering, some have moved to net billing, and some are changing their programs.
To check the rules where you live:
- Check your utility’s website for a net metering or solar tariff page, or look up your state’s public utility commission.
- Talk with a knowledgeable solar installer. Installers work with local rules daily. These questions to ask your solar installer are a good starting point.
If you’re weighing solar as one way to lower your electric bills, Palmetto can help you see what it could look like under your utility’s rules. You can explore Palmetto’s solar options to find out whether solar fits your roof and energy use. It’s one option among several, and it isn’t right for every home.
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Frequently asked questions
What are the downsides of net metering?
Its value depends on local rules, which can change. Fixed charges and minimum bills may remain even if credits cover your usage, and credits may expire or reset on a schedule your utility sets. Where it’s available, though, it remains a key piece of solar savings.
Why is my electric bill so high if I have solar panels?
Possible reasons include a system smaller than your electricity use, especially if your use has grown; lower winter and cloudy-day production; low export credits under net billing; and fixed charges. If your bill jumped suddenly, ask your installer to check for an equipment issue.
Will I have an electric bill with net metering?
Most likely, yes. Even with credits, you may owe fixed charges, minimum bills, or the cost of grid power when your panels aren’t producing. If your bill is $0 in some months (not possible everywhere), you’ll still receive a bill saying so.
Is net metering going away?
Some states are keeping one-to-one net metering, some are moving to net billing, and some are requiring different successor programs. Because it’s local policy, what’s true in one state may not be true in yours. In some places, changes apply only to new systems, so ask your utility or installer how terms are set for systems connected today.
Disclaimer: This content is for educational purposes only. Palmetto does not provide tax, legal, or accounting advice. Please consult your own tax, legal, and accounting advisors.
