One of the many perks of going solar is the idea you can bank cash or credit when you generate excess energy.
It’s called net metering or net billing — and not every state or utility offers it.
Each state has its own policies around net metering, which can make it hard to sift through what exactly net metering means for you. And those policies are shifting, with California’s recent policy change having significant ripple effects throughout the rooftop solar industry.
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With net metering, owners of solar panels can offset their energy use by transferring the excess energy they generate back to their utility’s electrical grid. In some cases, electrical customers enrolled in net metering programs can save or make money on their electric bill when they generate more energy than they need to power their home with.
To help you understand what net metering is, we’ve answered the biggest questions you need to know as you research net metering policies in your area.
Here are the basics of net metering: what it is, how to get it and how to know if your state has it.
What is net metering?
Net metering is a general term for the practice of compensating owners of solar panels for the excess energy that they generate. If you’re on a power grid and you have solar panels installed on your home — there will be periods of time where you can power your home exclusively from your solar panels and periods of time where you will need to pull from the grid to power your home.
And there may be times, according to Ben Delman, communications director of Solar United Neighbors, a solar energy cooperative, that “during the day, you’re off at work and you don’t have any lights on, nothing is running in your house. The sun is shining down [and] you’re sending electrons back out through your electric meter.”
In these situations, net metering is “a fair crediting system that allows solar owners to earn credit for the electricity they generate but don’t use themselves,” Delman said.
Your utility will look at how much power you are pulling from the grid and how much you are returning, and then credit you for the energy you’ve sent to the system. If you are providing more energy to the grid than you are using, these credits can reduce your energy bill.
While most states have net metering laws, the policies differ from state to state and even utility to utility. Some states set a cap on how much credit you can receive from your extra electricity. Others let credits you generate roll over from month to month. Some states even have net metering policies that only apply to certain types of utilities, whereas other states have net metering policies that apply to all utilities in the state.
Here’s a look at each state’s type of net metering policies and which don’t have any.
Note: These net metering policies are for residential electric customers only and are accurate as of Aug. 18, 2023. Since programs, policies and laws can change often, it’s best to follow up with your local government, utility or energy provider to confirm.
How is net billing different from net metering?
Net billing works similarly to net metering — the main difference is a lower rate of compensation for your surplus energy. You still send your excess electricity back to the grid and your utility credits you.
But there’s a catch. Net metering gives you the retail value of electricity, essentially what it costs on the open market, Delman explains. With net billing, you get the wholesale value — the cost the utility purchases the energy for, he said.
Since net billing credits you at a lower rate than net metering, Delman believes some utilities are adopting net billing over net metering as a way of saving costs.
Each state and utility will have different regulations and policies for the practice. Like with net metering, contacting your local utility is the easiest way to get the information you need for your home.
A handful of states have adopted some variation of the net-billing model, where customers receive some percentage of the retail price of electricity fed back into the system. California, for example, moved this past spring to a new net energy metering program. California’s previous program, called NEM 2.0, gave utility customers a credit for the full retail value of the energy they fed back into the grid, allowing them to basically buy back energy they fed into the grid at the price they sold at.
Under the revised program, called NEM 3.0, utilities buy back energy at a lower rate during daylight hours and at a higher rate during the night. The California Solar & Storage Association estimates under NEM 3.0, the average compensation rate for solar customers would drop by 75%. One intent of the new net-metering policy is to encourage people to use a solar battery to store excess energy instead of relying on the grid.
What if my state doesn’t have net metering laws?
There are some states that don’t officially have either a net metering or a net billing law, but instead they have what’s called a solar buyback program. These programs work similarly to net metering and net billing. You’re credited for the excess energy you generate with your solar panels and then send back to the grid. The only difference is the rate at which you are paid, which will differ from each solar buyback program.
Sometimes, it’s not the state but a local utility that has a net metering policy, even if your state doesn’t have any official laws governing these policies. Based on our research, every state has some form of net metering, net billing or other solar buyback program — whether the program is controlled by the state or the utilities. Again, the best way to identify your specific net metering, net billing or other solar buyback program is to contact your solar installer or your local utility.
In some cases though, it might be more beneficial to invest in a solar battery and bank the excess energy you generate to use during the non-sunny hours of the day. If you want to learn more about solar batteries check out this story on why solar batteries might be right for you.
“The important thing for consumers looking into solar is [to] make sure you’re asking good questions of your installer, and they should be able to walk you through it,” Delman said.