Getting a good, accurate estimate of your savings is a huge part of deciding to go solar. One key policy in that regard is net metering, which earns you bill credits for the electricity your panels send back to the grid. You may have more credits than you can use in a year, but that doesn’t mean you’ll lose out on them. Many utilities offer a true-up payment that compensates you for those credits on a set date.
What does a true-up payment mean to the bottom line of your home solar energy system? What you can expect depends on your local utility company and how you use your solar power.
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A Quick Look at Net Metering
To understand solar true-up payments, you need to know how solar and the grid work together. In many parts of the country, net metering programs are the plans between residential solar producers and local utility companies.
Solar system owners are paid back in credits on their electric bill for the electricity their system sends back to the grid. Net metering, sometimes abbreviated NEM, is a major factor in how much money you could save with home solar panels.
Here are the basic steps to how solar true-up payments work in general.
- When solar power is shared with the grid, local utilities with net metering policies compensate the energy producers with electricity bill credits.
- If you produce more kilowatt-hours of solar in one month than your home’s electricity consumption, the extra net metering credits may roll over to the next month.
- At the end of 12 months, any accumulated solar credits may be redeemed in the form of a true-up payment.
Solar True-Up Payment Definition
A solar true-up is the annual payment an energy utility sends a solar producer for the accumulated credits not redeemed on monthly bills. Utility solar programs vary across the country. True-up payments may not exist in some areas where bill credits are allowed to roll over indefinitely.
When Is a Solar True-Up Payment Made?
In most utility service areas, solar true-up payments are made at the end of a solar billing cycle, or one year after the panels are first connected to the grid. For instance, if your panels are activated on June 5, 2024, you will receive your first true-up payment on or about June 5, 2025, if you have excess bill credits.
Some utilities may make true-up payments at different times, such as the end of the calendar year or at the end of the month when the panels were originally installed.
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How Much Is a True-Up Payment?
Of the ways to save money with solar panels, a true-up payment is not typically high in value. Even if you have accumulated a significant amount of net metering credits at the end of your solar billing cycle, true-up payments are usually redeemed at much lower rates than ordinary month-to-month credits.
For this reason, most home solar energy systems are designed to produce roughly the same amount of power (or slightly more) than the home consumes each year. This way, homeowners can decrease their monthly electricity bill as much as possible while not overpaying for an oversized solar system.
How Is a Solar True-Up Calculated?
Unlike true net metering credits, the excess credits redeemed in a solar true-up payment are typically calculated using a lower rate, like the avoided cost rates. These rates vary across the US but are usually lower than the average US retail electricity prices, which was about 16 cents per kilowatt in 2023.
Step-By-Step Solar True-Up Example
To illustrate how solar true-up payments work, let’s walk through a hypothetical customer experience in which you receive a true-up payment from the local electric utility after one year with solar panels.
Step 1: Your solar panels are installed and interconnected to the utility grid. For this example, let’s say this occurred on February 2, 2024.
Step 2: The solar power you export to the grid is credited to your electricity bills each month. Throughout February, March, April, May, and June, your solar production is roughly equal to your home’s electricity consumption, with slight month-to-month variance.
Step 3: In July, you spend two weeks visiting family and friends while your solar panels stay home and produce electricity. Since you are not at home consuming much power, you accumulate a significant amount of solar credits that can be applied to future monthly energy bills.
Step 4: Throughout the fall, you make a few home energy efficiency improvements that lower your monthly power consumption and help maintain this surplus of solar bill credits.
Step 5: When February 2, 2025 rolls around, you have 150 kilowatt-hours of solar credits to be redeemed. Your utility credits your account for the accumulated solar surplus at its predefined true-up rate.
Things to Consider and Next Steps
As we mentioned above, it’s important to understand solar true-up payments work differently with every utility and policies vary from state to state. Before you go solar, it is good to have a basic understanding of your local utility's specific renewable energy policies to determine whether or not solar will be worth it for you.
A reputable solar installer will have the local knowledge you need to make the right decision for you. Speak with a Palmetto solar advisor today or estimate your solar savings for free if you’re interested in learning more.
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Frequently Asked Questions
What is a solar true-up payment?
If your home solar system sends electricity to the grid and you have net metering or net billing, you'll receive credits from your utility on your monthly bill. A true-up payment is how a utility company pays you for the extra bill credits at the end of a preset period of time which may be, for example, a 12-month period, the end of a calendar year, or in a certain month each year.
Will my electric utility company pay me for going solar?
Your electric company will not pay you just for going solar. The federal government and some utilities, localities, or states may have incentives such as rebates or tax credits for going solar. Your utility company may have a plan to give you bill credits for solar power your system sends to the grid.
Can I change my solar true-up payment date?
The true-up payment date, rate, and policy are determined by your electric utility company. In some cases you may be able to change your true-up date once.
Andrew GiermakWriter and EditorAndrew joined Palmetto in Charlotte in August 2024. He’s been a writer in journalism, then in business, going back to almost the 20th century. He’s lived in Indiana, Virginia, Pennsylvania, Virginia again, and now North Carolina for the last 12 years. He likes golf. Is he good at it? Not so much.
