What is net metering in simple terms?
Net metering is a policy that lets your utility track the solar electricity you send to the grid and subtract it from the electricity you pull back. When your rooftop panels make more power than your house is using at noon, the surplus flows out to the grid and your meter records a credit. When the sun goes down and you draw power back, those credits cancel out the charges. At the end of the billing cycle you pay only for your net consumption.
The classic version is called one-to-one net metering, where every exported kilowatt-hour is worth the same as a kilowatt-hour you buy. So if you export 400 kWh during the month and import 500 kWh, you are billed for 100 kWh. This is the most generous form and it is what made early rooftop solar pay off. Many states have since moved to less generous structures, which is why you have to check your own utility's current tariff rather than assume one-to-one. Our solar panel calculator can estimate how much your system might export.
How does the credit actually show up on your bill?
Your credit shows up as a reduction in the number of kilowatt-hours you are charged for, and sometimes as a banked balance you carry into future months. With a true bidirectional meter, the utility reads both how much you imported and how much you exported. Under full net metering, those two numbers are netted together; under newer net billing rules, your exports are valued at a separate, usually lower export rate and your imports are charged at the full retail rate.
Most utilities let you roll over unused credits month to month, which matters because you tend to overproduce in summer and underproduce in winter. Summer surplus can offset winter shortfalls if the rollover window is long enough. At the end of an annual true-up period the utility settles the account, and any leftover credit is often paid out at a low wholesale rate (or simply forfeited). Read your interconnection agreement so you know whether you get cash, a rolling credit, or nothing for excess production.
Why are utilities replacing net metering with net billing?
Utilities argue that one-to-one net metering shifts grid maintenance costs onto customers who do not have solar, so many states are switching to net billing that pays less for exports. California's NEM 3.0, which took effect in 2023, is the headline example: it cut the value of exported power by roughly 75% compared to the prior rules and pushed homeowners toward adding batteries. Other states have followed with their own export-rate cuts, fixed grid charges, or time-of-use export pricing.
The practical effect is that self-consumption now matters more than export. If your exports are only worth a fraction of retail, it pays to use your own solar directly or store it in a battery and discharge it at night instead of selling it cheap and buying it back expensive. This is a big reason battery attachment rates have climbed. If you are weighing storage, see our review of the best solar battery backup for home and the breakdown of solar lease vs buy.
Does net metering depend on which state you live in?
Yes. Net metering is set by state law and individual utility tariffs, so the same rooftop system can be a strong deal in one state and a weak one across the border. Some states still mandate full retail net metering, some use net billing with a separate export rate, and a handful have no statewide requirement at all, leaving it to each utility. The credit value, the rollover policy, the system-size cap, and any monthly fixed charges all vary by jurisdiction.
Investor-owned utilities, municipal utilities, and rural electric cooperatives within the same state can also run different programs. Before you size a system, look up your specific utility's interconnection rules and the current export rate, because those numbers drive your payback far more than panel brand does. The Database of State Incentives for Renewables and Efficiency (DSIRE) is a good free starting point for finding your state's rules.
How does net metering change what you should buy?
Strong one-to-one net metering rewards a larger panel array because every exported kilowatt-hour is worth full retail, so oversizing toward your annual usage makes sense. Under a weak net billing rate, the math flips toward a smaller, self-consumption-focused system paired with a battery so you keep more of your own power instead of selling it cheap. The policy, not just the hardware, decides the right system size.
Inverter choice matters too, because exporting power cleanly to the grid requires grid-tied equipment that meets your utility's interconnection standards. If you want production data per panel and partial-shade tolerance, microinverters can help; our comparison of a string inverter vs microinverter walks through the tradeoffs. Note one money point that changed recently: the 30% federal residential solar tax credit (Section 25D) expired for systems placed in service after December 31, 2025, so a homeowner buying an owned system in 2026 gets no federal residential credit. Only leases and PPAs can still reach the commercial 48E credit through 2027, and that goes to the system owner, not you.
Frequently asked questions
Does net metering mean my electric bill drops to zero?
Not usually. Net metering offsets your energy charges, but most utilities still charge a fixed monthly connection or grid-access fee that solar cannot erase. Even a system that produces 100% of your annual usage typically leaves a small minimum bill. Your savings come from wiping out the per-kilowatt-hour energy charges, not the base fee.
What happens to extra credits I do not use?
It depends on your utility's rollover and true-up rules. Many programs let unused credits roll over month to month and then settle once a year. At the annual true-up, leftover credit is often paid out at a low wholesale rate or forfeited entirely. Check your interconnection agreement so you are not surprised at year end.
Do I need a special meter for net metering?
Yes. You need a bidirectional (or net) meter that measures both the power you import and the power you export. Your utility almost always installs it as part of the interconnection process, sometimes at no cost and sometimes for a fee. You generally cannot legally export to the grid until that meter and a signed interconnection agreement are in place.
Is net metering the same as getting paid cash for my solar?
No. Net metering gives you bill credits measured in kilowatt-hours or dollars, not a cash payment. A separate arrangement called a feed-in tariff or buyback program pays cash for every unit you export, but those are far less common in the United States. Under most net metering programs, any surplus left at the annual true-up is the only part that might convert to a small cash payout.
Should I add a battery if my state cut its net metering rate?
Often yes. When exports are valued well below the retail rate, storing your surplus and using it at night beats selling it cheap and buying it back expensive. A battery raises your self-consumption and can also provide backup during outages. Run the numbers on your specific export rate first, since a battery only pays off when the gap between import and export prices is large enough.