Net Metering Explained

The single most important factor in solar economics isn't your panels, your roof or your installer. It's what your utility does with the energy you export — and that's set by a tariff you don't control.

The basic idea

Solar production and household consumption rarely match instant to instant. You overproduce at midday and underproduce in the evening.

Net metering handles that mismatch by letting exported energy offset imported energy, so you're billed on the net rather than on gross consumption.

In its fullest form, an exported kilowatt-hour offsets an imported one at comparable value — the grid effectively acting as unlimited, lossless storage.

That version is what made solar economics simple. It's also what has been changing.

Net metering vs net billing

The distinction that matters most:

Under full net metering, it barely matters when you produce or consume — a kilowatt-hour is a kilowatt-hour. Size to your annual usage and you're done.

Under net billing, the gap between retail and export rates means energy you use directly is worth considerably more than energy you sell. That single fact reshapes every design decision downstream.

What changes under low export credit

If your export credit is well below retail:

Self-consumption becomes the objective. Every kilowatt-hour you use rather than export is worth the full retail rate.

Smaller arrays may have better returns. Capacity that produces surplus you can't use is earning the low export rate, not the retail rate.

West-facing orientation gains appeal, shifting production into evening hours when you're actually home using it. See solar panel orientation and tilt.

Batteries become genuinely interesting. A battery converts a cheap export into an avoided retail purchase — the arbitrage is the retail-minus-export spread. See solar battery payback.

Load shifting pays immediately. Running the dishwasher, charging the EV and heating water during daylight costs nothing and converts exports into self-consumption.

See solar system sizing mistakes and is solar worth it without net metering.

True-up periods

Credits and charges are reconciled over a true-up period, often annually.

Within the period, monthly surpluses and deficits offset each other — so a summer surplus can cover a winter deficit even though production and consumption are seasonally out of phase. That's genuinely valuable if your consumption peaks in winter, which it will after electrifying heating. See solar production by season.

What happens to leftover credit at true-up varies:

• Some utilities pay out at a wholesale-ish rate
• Some carry it forward
• Some forfeit it

That last case is a real argument against oversizing: excess production that expires unpaid is worth nothing at all.

Check your utility's specific treatment. See utility rates.

What doesn't get offset

A common surprise on the first post-solar bill.

Utility bills often include charges that aren't per-kilowatt-hour:

• Fixed monthly service or customer charges
• Minimum bills
• Demand charges, where applicable
• Sometimes separate delivery components

Solar reduces energy charges. It generally doesn't eliminate fixed charges, so your bill won't go to zero even with a system producing more than you consume.

Some utilities apply specific charges to solar customers. Worth knowing before you model savings.

Grandfathering

Many jurisdictions have grandfathered existing solar customers onto the arrangement in place when their system was approved, for a defined period.

Two implications:

• The terms at your interconnection date may matter for years, which is worth understanding when you sign
• Terms for new systems can differ from what a neighbour with older panels receives

Ask specifically: what arrangement will my system be on, for how long, and what happens after?

Get it in writing. See solar permits and interconnection.

Why is this inherently local?

Net metering rules are set at state and utility level and revised periodically — generally in the direction of lower export compensation as solar penetration grows.

Which means any general claim about net metering is unreliable, including in this guide. The only answer that matters is your own utility's current tariff.

Before sizing a system:

1. Find your utility's current solar tariff
2. Determine whether it's full netting or net billing
3. Find the export credit rate
4. Find the true-up period and what happens to excess credit
5. Ask about grandfathering terms and duration
6. Note any solar-specific charges

That's a phone call and a tariff document, and it's worth more than any amount of general reading.

How to model it

Once you know the arrangement:

Annual value = (self-consumed kWh × retail rate)
             + (exported kWh × export credit rate)

You'll need an estimate of your self-consumption share, which depends on your consumption pattern and the array's orientation. Interval data from your utility, where available, makes this much more accurate.

See how solar payback works and model it with the solar panel payback calculator and electricity cost calculator.

The bottom line

Net metering lets exports offset imports; net billing credits exports at a separate, usually lower rate — and which one you're on determines whether self-consumption matters. Under low export credit, smaller arrays, west-facing orientation, batteries and daytime load shifting all become more valuable. Check your own utility's current tariff, true-up treatment and grandfathering terms before choosing a system size, because that document drives the economics more than any equipment decision.

Model returns with the solar panel payback calculator, compare rates with the electricity cost calculator, or read time-of-use rates and solar.