An Overview of Net Metering for Residential Solar.


Net metering, also called NEM (Net Energy Metering), is a program that allows homeowners to send extra solar energy that their solar power system generates to the electric grid. In return, they earn credits that can offset the cost of electricity consumed from the grid when the sun is not shining. To take advantage of net metering, your solar installation needs to be tied to the electric grid.

Net Metering policies differ at the state and local level, so it is important to consult with a solar professional to find out the exact net metering policies that would apply to your home.

How Net Metering Works

The concept of net metering for your home solar energy system is easy to understand. When the sun is shining on your home’s solar panels during the peak sunlight hours of the day, your system will produce more energy than your home is consuming.

Your solar panels send the excess energy they produce back to your utility’s electric grid through a bidirectional meter. The meter essentially “rolls” backwards and gives you credits of electrical energy that you can use to power your home.

Do you need a new meter installed for net metering?

In order to take advantage of net metering, you need a bidirectional meter. Many smart meters already have bidirectional metering capabilities. You will need to check with your utility company to see if you have a bidirectional meter. If not, you will need to have a bidirectional meter installed by your utility.

Net Metering Sends Excess Energy During Peak Daylight Hours Back to the Grid

In the graph above, the blue line represents the amount of electricity a home is consuming over the course of a 24 hour day. The black line represents the electric production the home’s solar energy system produces throughout the day.

Notice that when the sun is high, your solar panels are producing more electricity than your home is consuming. This excess electricity is the dark orange region of the graph. The excess electricity is sent back to the grid through a bidirectional meter, giving the homeowner credits to use when the sun is not shining.

The solid blue part of the graph represents the electricity the homeowner is pulling from the grid when the sun is not shining. If the homeowner accumulated enough energy credits when the sun was producing, then they use the energy credit during these times and avoid being charged for their electricity usage during these times.

Do Net Metering Credits Roll Over?

Yes, net metering credits roll over on a monthly and yearly basis in most cases. The specifics of your net metering agreement will depend on your contract with your local utility company and your state laws. Some utilities allow net metering credits to be rolled over forever.

This allowance to roll over credits is very important, particularly in northern states, because your home’s solar energy system will not be producing electricity at its highest capacity throughout a year.

In the winter months, the sun-hours will be lower and the angle of the sun will be lower, resulting in lower electric production from your solar energy system. In the winter, the electrical credits your solar system produces may not compensate for your home’s electrical usage daily. However, if you have a properly designed solar system, you can use the credits accumulated during the high-production summer months in the winter.

If you install your solar system during the winter, you will probably still receive electric bills, although they will be lower, until the spring and summer months when you will generate excess electric credits. When the next winter comes, you will then be able to use the excess credits generated in the summer to cover the cost of the electricity pulled from the grid during the winter months.

What is 1:1 Net Metering?

Most states offering net metering give a one-to-one credit for the electricity produced by your home solar energy system. This means that the electricity produced by your solar system is equal in value to electricity drawn from the grid. This is the most ideal situation for homeowners.

Unfortunately, many states are moving away from 1:1 net metering and will pay less for the electricity your home produces than they charge for electricity drawn from the grid. This change can be called net billing. Net billing is similar to net metering but not as helpful for the homeowner. The customer still can send excess energy to the grid, but instead of receiving a direct one-to-one credit, the utility compensates them at a specified rate (often a feed-in tariff or a wholesale rate).

California is an example of a state that has moved away from 1:1 net metering to net billing. In December 2022, California passed NEM 3.0. Under NEM 3.0, California utilities are purchasing solar for around 25% of the rate they are charging customers to draw from the grid.

What States Offer Net Metering?

You can check below to see if your state offer net metering. Keep in mind that many states are moving away from net metering, so you will want to check with a qualified solar consultant for the latest information on your area. If your state is transitioning away from net metering, they will grandfather your system under the old net metering policy if approved prior to the change.

Are There Any Fees or Charges Associated With Net Metering?

Yes, there are fees for participating in a net metering program. You will need to pay an interconnection fee to get started in the net metering program for your local utility company. You will also need to pay a small monthly connection fee.

Initial Interconnection Fees for Net Metering

Utility companies do not simply allow any solar energy system to connect to their grid; they must verify that your solar energy system complies with electrical safety standards. They will also confirm that your solar panel system aligns with their specific net metering guidelines.

Interconnection applications typically necessitate details about your property, historical electricity usage, and the specifics of your proposed system, including equipment, size, production estimates, design, and location. Solar installation companies generally handle the interconnection application for the homeowner.

After receiving approval from your electric utility for the installation, you and your installer can proceed with the remaining steps of the installation process. The final stage of solar interconnection, known as permission to operate (PTO), will take place after the installation of your solar equipment.

The cost of the interconnection application fee will vary according to your utility. You can expect this fee to be somewhere between $50 to $150.

Monthly Net Metering Connection Fees

Utility companies charge every customer connected to the grid, including net metering participants, a monthly connection fee. This connection fee helps keep the utility revenue stable and provides ongoing support for the operation and maintenance of the electrical grid.

Monthly connection fees range from a few dollars to $30, but sometimes they can be more. Keep this in mind, because you will never have a $0 bill from your utility company. The lowest bill you can receive is the bill for the connection fee. Your bill will only be higher than the connection fee when you draw excess electricity from the grid and you do not have net metering credits to cover the excess electricity.

Do You Need a Battery When Participating in Net Metering?

No, battery storage is unnecessary when using net metering. The electrical grid acts as a battery, storing the excess electricity produced from solar as credits that homeowners can use at a later time when the sun is not shining.

The availability of net metering is helpful for homeowners on a budget because it is unnecessary to purchase a battery storage system. Adding battery storage to your home’s solar energy system can add $10k and more to the total cost.

However, homeowners who want emergency electricity backup may still choose to add a battery to their solar system. Even when the sun is shining and your solar panels are producing, the power to your house will shut off when there is an outage on the grid. The reason for shutting down your home’s electric power during a grid outage is to stop the electricity produced from your home’s solar panels from flowing back into the grid and electrocuting workers or bystanders.

You could also use a generator instead of a battery for emergency backup power. In some newer solar energy systems you can even use your electric vehicle as emergency backup power.


Net metering is a complex topic and the nuances of how you can best take advantage of it depend on the state you live in and the utility company you partner with. If you are interested in finding out more about net metering and going solar, you can talk with me by scheduling a quick, friendly consultation call with me and we can discuss your situation and goals.

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