Net metering

How it works

A solar system often makes more power than the house is using at midday and less than it needs at night. Net metering settles the difference on the bill. A bidirectional meter measures both the electricity the customer takes from the grid and the excess the system sends back, and the exported power offsets power used from the grid at other times ¹.

In its simplest form, an exported kilowatt-hour cancels a purchased one, so the customer is billed on the net. Real programs add details: how long credits carry over, what happens to extra credits at the end of a year, size limits on systems and fixed charges that never net out.

It's a state and utility rule, not a national one

Policies for compensating customers who generate their own power vary by state ², and individual utilities have their own tariffs within those rules. DSIRE, the Database of State Incentives for Renewables and Efficiency, keeps a net metering policy summary map that it updates quarterly ³. Use it as a starting point, then read the current tariff for each utility you serve.

Rules also change. In California, customers of the utilities the CPUC regulates who applied for interconnection on or after April 15, 2023 take service on a net billing tariff, which credits exports at values that vary by hour instead of close to the retail rate. Customers who applied by April 14, 2023 stay on their existing net energy metering tariff for 20 years after their system connects ⁴. That's one state's rule; yours may be quite different.

Why installers have to get this right

Export credits change what a system is worth to the customer, which changes the right size and the honest savings number.

Example: A customer uses 10,000 kWh a year, and a proposed system would make about the same. Half its output is used in the house and half is exported. If exports are credited like purchases at $0.20 per kWh, the exported 5,000 kWh are worth about $1,000 a year. If the utility credits exports at $0.07 instead, they're worth about $350. Same panels, same production, $650 a year apart. The rates are made up for illustration.

Where exports earn less than retail, a smaller system that covers more on-site use, or one paired with a battery, can make more sense.

Common mistakes

• Promising "zero bills." Fixed monthly charges and export rates mean a system that matches annual kWh can still leave a bill.
• Using an old tariff. Note the effective date of the rate schedule your proposal relies on, and recheck it before you sign.
• Assuming a neighbor's utility has the same rules. A service area that spans two utilities can need two sets of assumptions.
• Turning it on early. Credits depend on the utility's permission to operate. Until the interconnection is approved, the system stays off.

Put your export assumptions in writing next to any savings figure. The solar proposal guide shows how.