Net metering allows solar homeowners to receive credits for the extra energy generated that is sent to the power grid. Sometimes, people call this “selling energy back to the grid.” These policies can help reduce energy expenses, allowing solar homeowners to use these credits when they draw energy from the grid. A homeowner might draw from the grid at night, during a storm or when there is excess use (like a family get-together). Net metering policies help make solar energy more affordable for homeowners.
Net metering has contributed significantly to the development of solar energy installations throughout the United States. Many states offer net metering policies and offer homeowners added financial benefits for going solar. From a bird’s eye view, net metering increases demand for solar and is crucial in the transition to clean, renewable energy. Every small step helps reduce carbon emissions and create a more sustainable future.
What is Net Metering?
Net metering enables users who create their own power, generally using solar panels, to utilize it at any time, not only when it is produced. When solar panels create more power than the household requires, the excess is released back to the grid, causing the electric meter to run backwards and giving the homeowner a credit for the excess electricity. Electricity generated from solar panels has to be used or stored in a battery, otherwise it needs to be sent to the power grid. When your household uses more electricity than the solar panels can generate, it takes power from the grid as normal, guaranteeing a continuous energy supply.
Net metering can be advantageous for homeowners with solar energy systems, helping further reduce utility bills. Assuming a homeowner has solar panels but no battery, they can use solar-generated electricity throughout the day — with the excess being sent to the grid. At night, when their panels are not producing, they can receive a credited utility rate and see lower bills.
How Net Metering Works
Net metering is a kind of billing mechanism that allows a consumer with solar panels to feed excess electricity back into the grid for credits in return. In this setup, consumers are billed for only the “net” energy consumed from the grid, or total energy consumed from the grid minus energy sent to the grid from their solar system. Here’s how it works:
- Excess Energy: As your solar panels generate clean energy from the sun, whatever energy is not immediately used by your home is sent back to the grid. Solar energy must be used or stored, in devices called home batteries.
- Credits: Your utility company credits the excess energy at a predetermined rate. Depending on your state and situation, credits can be rolled over from month to month — or year to year.
- Electricity Drawn from the Grid: When your home uses electricity from the utility grid, such as at night or during a storm — you will be charged for the net amount of electricity. Meaning, your utility bill will subtract the total credits earned per cycle from the amount of energy you drew from the grid.
What Are The Benefits of Net Metering
Net metering offers significant benefits for homeowners, making a solar energy system an impactful investment. These policies reward solar owners for excess energy, which can help increase the financial benefits of going solar. These benefits include:
- Lower Electrical Bills: Net metering offers credits provided from excess production, which can be used toward electricity consumed from the grid. These credits will lower the costs of electricity purchased from the grid. When added to the power used from your own solar panels, your electrical bills will be further reduced or almost wiped out.
- Faster Payback Period: Net metering rewards solar owners for additional energy sent to the grid with credits. These credits reduce the cost of electricity used from the grid, increasing the amount of energy savings. As these savings stack up, your solar system will pay itself off — net metering can help shorten the payback period.
- Credit Rollover Flexibility: In some states, net metering credits can rollover from month to month. The credit banked in the high-production months could be subtracted from consumption in the low-production months.
How Net Metering Impacts Solar Homeowners
Many solar homes benefit from net metering, which can result in higher financial savings. The primary advantage for homeowners is frequently lower electricity costs. Net metering allows homeowners to balance their electricity use by crediting excess solar energy generated by their panels to the grid. This can balance energy use even if it does not completely match solar production. For example, on bright days, when solar panels create more electricity than is needed, the excess is sent back into the grid, earning credits for the homeowner. These credits can be used to minimize the cost of grid-drawn power during low solar-production periods, such as at night or on cloudy days.
Net metering can contribute to the return on investment (ROI) for solar systems in many circumstances. Since the surplus electricity supplied by the solar panels is credited via net metering, homeowners may maximize the financial benefits of their solar system by further saving money on utility bills. This can result in a speedier recovery of the initial investment expenses, making solar panels a more appealing alternative with a shorter payback time. It is important to note the actual ROI varies depending on local conditions.
Net metering can also make energy management easier for solar homes. Without net metering, homeowners may consider investing in battery storage systems to store excess energy for later use. With net metering, the grid functions as a virtual storage system. Homeowners can utilize credits gained from transferring excess energy to the grid to offset future power consumption. This may lessen the immediate need for additional storage choices, although some homes prefer batteries for backup power or to maximize self-consumption. Net metering has the ability to reduce total system complexity, making solar adoption more viable.
Net metering laws and advantages can differ by region and utility provider, and some locations are moving towards alternate arrangements like net billing or time-of-use charges.
Does My State Offer Net Metering?
Over 25 states plus the District of Columbia offer net metering state-wide. Additionally, Idaho, Tennessee and Texas have no mandatory net metering policy — but some utilities in those states allow net metering.
Of the states without mandatory net metering, many have alternative solar compensation available. These incentives continue to reward solar owners for energy sent to the grid. Prominent states that offer non-net metering compensation include California, Hawaii, Arizona and Georgia. New York is transitioning from net metering to an alternative compensation system.
For accurate information, check out the Database of State Incentives for Renewables & Efficiency or schedule a consultation with Enact’s team of home energy advisors.
Net Metering in California
California has long been the leader in solar energy deployment, making it easier for homeowners to go solar. The state’s most recent iteration, known as NEM 3.0 (Net Energy Metering 3.0), represents a substantial shift in how solar consumers interact with the grid and get compensation for their extra energy. NEM 3.0 marks a move from net metering toward a net billing structure from net metering.
Key Adjustments Under NEM 3.0
California’s new policy, approved by the California Public Utilities Commission in 2022, is a transition toward net billing tariffs. NEM 3.0 makes numerous adjustments that impact solar owners:
- Reduced Export Rates: NEM 3.0 compensates for surplus energy exported to the grid based on the “avoided cost” to the utility, which is determined using an Avoided Cost Calculator (ACC). Export rates are roughly 4 to 8 cents per kWh, which is around a 75% decrease than the average retail pricing.
- Storage Incentives: While NEM 3.0 does not expressly incorporate incentives for combining solar and batteries, the new rate structure and export compensation make battery storage more cost-effective. This encourages users to keep extra energy for use during high demand periods rather than sending it to the grid. Enact customers with solar-plus-storage systems see improved payback periods.
- Time-of-Use (TOU) Rates: NEM 3.0 uses “high differential” or “electrification” TOU rates. These rates have significantly higher pricing during peak demand hours (usually 4:00-9:00 p.m.) and reduced costs during low demand periods.
- Monthly Fixed Charge: Contrary to the first declaration, NEM 3.0 does not impose a grid participation price depending on system size. Rather, it includes a monthly fixed price of around $14 to $16, which is part of the mandatory electrification rates for all consumers on these plans, not just solar users.
- Avoided Cost Calculator Plus Adder: The California Public Utilities Commission adopted a NEM 3.0 measure, referred to as “ACC Plus Adder” — a temporary and declining cents-per-kilowatt-hour addition to ease customers under California’s transition to net billing tariffs. The ACC Plus Adder will be available for residential customers for the first five years — or until April 2028 — but will not impact San Diego Gas and Electric customers.
How California Homeowners Can Benefit Under NEM 3.0
California homeowners can still benefit from solar energy systems under NEM 3.0. While NEM 3.0 may be less advantageous compared to previous policies, solar owners continue to see monthly savings that stack up. Solar continues to be a worthwhile investment for Californians, especially as utilities — like PG&E — continue to raise utility prices.
Enact’s team of solar professionals design custom proposals that meet our customers’ needs. For Californians seeking home solar, Enact can model for NEM 3.0 and design the right solar and energy storage system for your home. Post-NEM 3.0, Our customers have seen payback periods of around 4.5 years for a solar-only system and 5.2 years for one with a home battery. There are many solar providers to choose from, Enact offers its consumers choice, transparency and simplicity throughout the installation journey.
How Enact Helps Homeowners Go Solar
Net metering — along with government incentives — continue to make solar a strong option for homeowners. At Enact, we make going solar simple and tailored to your needs. With our team of expert energy advisors, transparent pricing and customizable solar solutions, homeowners can feel confident they’re making the right investment. From design to installation, we guide you every step of the way. Enact empowers our customers beyond installation with ongoing monitoring through the Enact Home app, where you can stay connected to your solar system’s performance.
Schedule your free consultation today and receive a custom solar proposal designed specifically for your home. There’s no obligation—just an opportunity to explore the financial and environmental benefits of going solar with Enact.