What Is Solar Net Metering? All You Need to Know

When it comes to the solar power movement, even a novice knows there are many benefits to equipping one's home with a solar energy system. There are, of course, unique features to make converting from traditional power more attractive for prospective users. One of these features is a concept and process known as net metering. Net metering allows you to take advantage of stored excess power and save on your regular utility bills.

Let's explore this concept in further detail.

What Is Net Metering?

Net metering is a billing system that allows homeowners and businesses with solar panels to send excess electricity back to the grid and receive credits on their utility bills. This process helps reduce energy costs by offsetting the electricity consumed when solar production is low—such as at night or on cloudy days.

By allowing customers to "store" extra energy in the grid, net metering makes solar power more financially viable and encourages the adoption of renewable energy.

How Net Metering Works

When a solar energy system produces more electricity than a home or business consumes, the excess power is sent to the utility grid. This process effectively causes the electric meter to run backward, providing the homeowner or business with credits.

Later, when the system produces less energy than needed, electricity is drawn from the grid, and the meter runs forward. At the end of the billing cycle, the utility company calculates the net amount of energy used—electricity consumed minus excess electricity sent to the grid. Customers are billed only for this net usage, which can significantly lower monthly energy costs.

In most cases, standard utility meters can track this two-way energy exchange, but in some instances, a utility company may need to install a specialized meter.

Benefits of Net Metering

1. Financial Savings

Net metering can significantly lower electricity bills. Since homeowners receive credits for surplus energy, they can offset the cost of electricity drawn from the grid. According to the Solar Energy Industries Association (SEIA), California public agencies and schools using net metering are projected to save $2.5 billion in utility costs over the next 30 years.

Homeowners can also see direct savings. For instance, California residents save an estimated $700 to $1,000 annually on utility bills through net metering.

2. Faster Return on Investment

Solar panel installations can be expensive, but net metering accelerates the return on investment by providing ongoing energy savings. The ability to reduce energy bills helps homeowners and businesses recover the cost of their solar power systems more quickly.

3. Environmental Impact

Net metering contributes to sustainability by encouraging the use of clean energy. By reducing reliance on fossil fuels, net metering lowers greenhouse gas emissions and promotes a more sustainable energy future.

4. Economic Growth and Job Creation

As more people adopt solar energy, the demand for solar panel installations, maintenance, and manufacturing increases. Currently, the U.S. solar industry employs over 170,000 workers, and with the growth of net metering, this number is expected to rise. Expanding solar energy adoption creates job opportunities for installers, electricians, and manufacturers.

Net Metering Policies by State

Net metering is legal and implemented in 43 states, as well as Washington, D.C., and Puerto Rico. However, seven states—Idaho, Texas, South Dakota, Tennessee, Mississippi, Alabama, and South Carolina—do not have state-wide net metering policies.

Each state sets its own rules regarding system size limits and how long customers can roll over energy credits. Some states have adopted policies that reduce compensation for solar customers, sparking debates over the fairness of net metering.

Challenges and Evolving Policies

Despite its benefits, net metering has been a subject of controversy. Utility companies argue that solar customers do not contribute fairly to grid maintenance costs, shifting financial burdens to non-solar users. This concern has led to changes in net metering policies in certain states.

For example, California recently revised its net metering rules (NEM 3.0), reducing compensation rates for new solar customers. This change aims to balance costs between solar and non-solar consumers while still incentivizing renewable energy adoption.

Final Thoughts

Net metering remains one of the strongest incentives for adopting solar power, providing financial, environmental, and economic benefits. While policies may continue to evolve, understanding how net metering works and staying informed about state-specific regulations can help homeowners and businesses make the most of their solar investments.

Before installing a solar system, it's crucial to check local net metering policies and work with reputable solar providers to ensure the best financial return.