Net metering is the billing arrangement that decides how much your surplus solar power is worth. It’s often the difference between a 7-year payback and a 15-year one, so it deserves as much attention as the panels themselves.
This guide explains how it works, the shift toward “net billing,” and what each means for your savings. To see how export rules change your numbers, use the solar payback calculator.
How does net metering work?
During the day your panels often produce more than your home uses. That surplus flows to the grid, and your utility gives you a credit. At night or on cloudy days you pull power back and use up those credits.
- Full (retail) net metering: one exported kWh offsets one imported kWh, valued at your full retail rate. This is the most generous arrangement.
- Your meter “spins backward” during net-export periods, and you’re billed on the net at the end of the period.
Under full net metering, the grid effectively acts as a free battery, so it barely matters whether you use power at noon or at midnight.
Net metering vs net billing
Many states have moved away from full retail credit toward net billing, where exports are paid at a lower rate — often the utility’s “avoided cost” or a wholesale-style price.
| Feature | Full net metering | Net billing |
|---|---|---|
| Value of exported kWh | Full retail rate | Lower (avoided cost / wholesale) |
| Best strategy | Size to cover annual usage | Self-consume; consider a battery |
| Payback impact | Shorter | Longer (unless you self-consume) |
| Example | Many Northeast/Midwest utilities | California NEM 3.0 |
The most-cited example is California’s NEM 3.0 (net billing, in effect since 2023), which cut export values sharply and made pairing solar with storage far more attractive.
A simple example
Say your retail rate is $0.25/kWh and your panels export 4,000 kWh of surplus over a year:
- Full net metering: 4,000 × $0.25 = $1,000 of credit.
- Net billing at $0.06/kWh export: 4,000 × $0.06 = $240 of credit.
That’s a $760/year difference on the exported portion alone — enough to swing payback by several years. It’s why, under net billing, you want to use power as you make it (run the dishwasher, EV charging and AC during the day) or store it.
Why net metering rules vary so much
Net metering is set at the state and utility level, not federally, so terms differ widely and change over time:
- Some states mandate full retail net metering for major investor-owned utilities.
- Others have capped programs, tiered credits that shrink as more solar is added, or have transitioned to net billing.
- Time-of-use rates increasingly interact with exports, so when you export matters, not just how much.
Because the federal solar tax credit expired at the end of 2025, favorable net metering is now one of the most important remaining levers for a fast payback. Each state page notes the general net-metering situation; always confirm the current tariff with your own utility.
What this means for sizing and batteries
- Generous net metering → size to cover ~100% of annual usage. See how many solar panels do I need.
- Net billing / low export value → prioritize daytime self-consumption, or add storage. We weigh that trade-off in solar battery ROI.
Either way, plug your retail rate and production into the payback calculator to see the effect for your situation.
General information only. Net-metering terms change frequently — verify the current tariff directly with your utility before deciding.