Net Metering
Net metering (also called net energy metering or NEM) is a utility billing arrangement that allows solar system owners to export excess electricity to the utility grid and receive credit for that electricity, which offsets their future electricity consumption. It is one of the most important policy mechanisms supporting residential and commercial solar economics in the United States.
Under net metering, a bidirectional electricity meter tracks both the electricity consumed from the grid and the electricity exported by the solar system. The customer pays only for the "net" difference — if they export more than they consume in a month, they receive a credit (typically at the retail electricity rate) applied to future bills.
Net Metering Economics
Net metering at the full retail rate provides the most favorable economics for solar customers. With retail-rate NEM, each kWh exported has the same value as a kWh consumed — effectively allowing the customer to "store" electricity in the grid at no cost.
Many utilities have moved to modified NEM structures that compensate export at lower rates:
- NEM 2.0 / NEM 3.0 (California): Export compensation at avoided-cost rates, lower than retail
- Buy-all, sell-all: Customer sells all generation to the utility and buys all consumption at separate rates
- Time-of-use NEM: Export compensation varies by time of day
Understanding your utility's specific NEM tariff is essential for accurate solar economics. The SolarScope AI Assistant can help analyze how different NEM structures affect your project's payback period.
Net Metering by State
As of 2024, approximately 40 US states have mandatory net metering policies. Policy details vary significantly by state and utility. Some states (like California with NEM 3.0) have substantially reduced retail-rate NEM compensation in recent years, shifting solar economics toward self-consumption and battery storage.