Solar Net Metering: What You Need to Know

What is net metering?

The amount of sunlight that strikes the earth's surface in just over an hour is enough to power the entire world's energy usage for a year. It makes sense, then, that solar panels installed on your home could generate more electricity than you need. This excess renewable energy can be returned to the grid, earning you credits through a billing mechanism called net metering.

Solar customers are billed only for their "net" energy usage. Net refers to the difference between the energy produced by solar panels and the energy the customer consumes.

How net metering works

While the true amount of electricity generated by a solar panel depends on several factors – including shading, orientation and sun hours – EnergySage confirms that most solar panels produce between 250 and 400 Watts of power.

Solar panels generate electricity during the day, when electricity demand is typically lower. Excess electricity is sent back to the grid and shared with customers throughout the community. One misconception about net metering is that consumers receive checks for their unused energy.

Here's how net metering works:

  • Excess solar energy is sent back to the grid
  • Your smart meter spins backwards
  • Your utility company gives you a credit for the total value of the electricity that your system sent back

In the evening, when your solar panels are not producing, your electric meter spins forward again as you draw electricity from the grid. As a result, you're generating your own renewable energy for you and others in your community, gaining more control over your electricity bill and, potentially, saving money.

At the end of the billing cycle, the difference between how much electricity you sent to the grid and how much you took from the grid determines your final bill. You are charged only for the net amount of electricity used.

Why net metering is so important

One of the most significant benefits of net metering is that it helps make our planet greener by sharing clean energy with customers across the community. When customers support the grid with their excess solar power, less energy is pulled from nonrenewable energy sources, making the local grid greener.

The average home produces 10 kilowatt-hours (kWh) annually, and net metering makes it possible to significantly reduce your electricity bill via credits. Additionally, solar has never been a better financial investment: Over the last decade, technological improvements to solar-panel manufacturing have decreased the costs of installing solar from more than $8 per Watt in 2009  to $2.75 per Watt in 2019.

Another important advantage to net metering? It creates less demand for nonrenewable energy sources. SEIA reports that, on average, 20 to 40 percent of a solar energy system's output is sent to the grid, where it benefits other customers. This allows net metering to help balance electricity demand with an additional source that can be used during peak times. In addition, when energy is produced near the point of consumption, we eliminate some of the carbon emissions associated with transporting nonrenewable energy sources into the community from further away.

It’s important to remember that net metering is not an incentive, it's a policy that makes solar accessible to everyone. Net metering is one tool that can help us increase solar across the country.

How net metering varies from state to state

The regulations surrounding net metering are determined by each state's net metering laws, which control if and how long banked credits can be used and how much the credits are worth. There are three types of net metering:

  • Perpetual: Credits do not have an expiration date
  • Monthly: Consumers can use solar power generated during the day to be used at night or later in the month. Credits reset monthly, and unused credits are lost 
  • Annual: At the end of the year, customers receive credit for solar power generated throughout the year (and especially in the summer); these credits reset yearly and, at the end of 12 months, the system resets.

If you’re curious about the state of net metering across the U.S., check out this map of the National Conference of State Legislator's metering policies. Thirty-eight states, Washington, D.C., and four territories offer net metering. Seven states — Arizona, Georgia, Hawaii, Indiana, Nevada, Maine and Mississippi — have adopted their own statewide distributed generation compensation rules.

Ready to learn more about solar? Explore these solar terms.