Net Metering Explained: How Solar Export Credits Work

Net metering is a billing arrangement that credits solar owners for the electricity their panels send to the grid. When your system makes more power than your home is using, the excess flows to the grid and earns a credit that offsets electricity you buy later, such as at night. How much each exported kWh is worth, and what happens to leftover credits, depends on your state and utility, so check the current rules for your area on DSIRE before you size or buy a system.

How net metering works

The Solar Energy Industries Association describes net metering as a billing mechanism that credits solar owners for the electricity they add to the grid. A typical day goes like this:

1. Midday: your panels produce more than your home uses. The surplus flows out through your meter to the grid.
2. Evening and night: your panels produce little or nothing, so you draw power from the grid as usual.
3. On your bill: the utility nets the two. Under classic net metering, you pay only for the difference between what you used and what you exported.

SEIA notes that on average only 20–40% of a solar system's output goes to the grid. The rest is used on-site. So export rules affect a meaningful share of a system's value, but not all of it.

How export credits are valued

The central question is what one exported kWh is worth on your bill. The Congressional Research Service's Net Metering: In Brief explains that the most common method credits customers at the retail rate, so exported energy offsets energy bought from the grid one-for-one. That is often called "1:1" or full retail net metering. The CRS also describes alternatives that pay less than retail, including avoided cost rates and value-of-solar rates, plus related arrangements such as net billing and buy-all, sell-all.

Arrangement	How exports are credited	What it means for you
Retail-rate net metering	Each exported kWh offsets one purchased kWh at the retail rate	Exports are worth about as much as power you buy
Net billing	Exports earn a credit at a set export rate, often lower than retail; imports are billed at retail	Using your solar on-site is worth more than exporting it
Buy-all, sell-all	All solar output is sold to the utility; all household use is bought from it	Value depends entirely on the sell rate vs. the buy rate
Avoided-cost or value-of-solar rate	Exports credited at a rate tied to the utility's costs or a calculated solar value	Often lower than retail; check the current rate

A simple bill example

Here is a hypothetical month to show how the crediting method changes the bill. Suppose a home uses 900 kWh, its panels produce 800 kWh, and 300 kWh of that production is exported because nobody is home at midday. The home therefore buys 400 kWh from the grid (900 used minus 500 used directly from solar).

• Retail-rate net metering: the 300 exported kWh offset 300 of the 400 purchased kWh. The home is billed for a net 100 kWh, plus fixed charges.
• Net billing at a lower export rate: the home is billed for all 400 purchased kWh at the retail rate, and the 300 exported kWh earn a credit at the lower export rate. The bill is higher than under retail-rate net metering, even though the panels produced exactly the same energy.

The numbers are made up for illustration, but the pattern is real: the lower your export rate, the more it pays to use your solar power at home when it is produced, for example by running the dishwasher or charging an EV at midday, or by storing it in a battery.

SEIA also points out that the power you export doesn't go to waste; it is used by nearby customers on the same grid.

What happens to excess credits

If you export more than you use over a billing period, you usually get a credit on the next bill. The CRS notes that states differ on how long credits can carry over. Some roll credits month to month and settle up once a year, sometimes called a "true-up," while others pay out or expire excess credits at a set rate. DSIRE maintains a map of how states treat net excess generation, which is the quickest way to check your state's approach.

Why the rules vary so much

There is no single federal net metering rule. The CRS explains that the Energy Policy Act of 2005 added net metering to the federal list of standards that states must consider, but states are not required to adopt it. As a result, states, their utility commissions and, in some cases, individual utilities set the rules. SEIA reports that 34 states plus Washington, D.C. and Puerto Rico have mandatory net metering rules. Elsewhere, some utilities offer it voluntarily and others use different export arrangements.

The rules also change over time. The main debate, as the CRS describes it, is over whether retail-rate credits shift grid costs to customers without solar. Several states have revised their programs as a result.

Example: California's switch to net billing

California shows how a rule change reshapes solar decisions. The EIA reports that in April 2023 California replaced its NEM 2.0 program, which credited exports at a flat retail rate, with a net billing tariff that offers a variable compensation rate that is, on average, lower. Because the rate is higher in evening hours when demand is high and solar output is low, batteries became more valuable. EIA reports that more than 50% of new residential solar installations in California included battery storage by April 2024, up from just over 20% in October 2023. Our guide to whether solar batteries are worth it covers this in more detail.

Fixed charges still apply

Even with generous net metering, your bill rarely drops to zero. The FTC notes that you will still pay the utility's fixed charges and will probably still buy some power from the utility. Some utilities add charges specific to solar customers. DOE's Energy Saver planning guide advises making sure you understand how billing and net metering will work, along with any additional utility fees, before you install.

How net metering affects system size and payback

• Full retail net metering: exports are worth about as much as the power you buy, so sizing close to your annual use often pays off.
• Lower export rates: every exported kWh earns less, so a system sized to what you use on-site, or paired with a battery, may give better value.
• Time-of-use rates: when exports and purchases are priced differently by hour, when your panels produce matters as much as how much they produce.

Our guide on how many solar panels you need walks through sizing, and you can compare your utility's rates on our electricity rates by state page.

How to check the rules where you live

1. Search DSIRE. The Database of State Incentives for Renewables & Efficiency, run by the N.C. Clean Energy Technology Center at N.C. State University since 1995, lets you search by ZIP code or browse by state for net metering and other solar policies.
2. Read your utility's tariff. Look for the net metering, net billing or distributed generation page on your utility's website. It shows the export credit rate, any fixed or solar-specific charges, and how excess credits are settled.
3. Check for pending changes. Your state public utility commission's website lists open proceedings. Ask whether existing customers are grandfathered if the rules change.
4. Ask installers to model your tariff. A quote should use your actual utility's export rules, not a generic assumption.

Next steps

Once you know your export rules, estimate your savings with our solar panel calculator and compare typical results on solar payback by state.