How Net Metering Works for Homeowners

Net metering is a billing arrangement that credits you for solar electricity your system sends to the grid. When your panels produce more than your home is using, the extra kilowatt-hours (kWh) flow out through your meter. When you use more than the panels are producing — at night, on a cloudy afternoon, or when the air conditioner is running — you draw power back from the utility. The bill then reflects both directions.

That description is the idea. The dollar value of those exported kWh is set by your utility and your state, not by the solar company. Two quotes can show very different “savings” for the same roof if they assume different export credits. Before you compare offers, read what a solar quote should include and ask which export rule the model used.

What happens to solar power you do not use immediately?

A typical home solar system is connected to the grid. It does not store energy unless you add a battery. Production and use rarely match minute by minute:

• Midday, on a clear day, a house with people at work often exports power.
• Evenings, the panels are weak or dark and the home imports power.
• Across a month, the bill depends on how the utility nets those flows.

Some utilities still credit exports at or near the retail rate you pay for electricity. Others credit exports at a lower “avoided cost” or wholesale-style rate, or on a schedule that changes by hour. A few apply a minimum bill, non-bypassable charges, or a cap on system size or program enrollment. Those details decide whether a kilowatt-hour you export is worth about the same as a kilowatt-hour you avoid buying, or much less.

California is a clear example of why you cannot assume the old version of net metering. New customers there are under a net billing tariff that values exports differently from the earlier retail credit. Chicago is another. ComEd credits a new residential interconnection against supply charges, while customers who interconnected by the end of 2024 can still be on a broader legacy credit. The city permit is a separate step from that tariff. Both are spelled out in the Chicago solar installation guide. Other utilities have their own schedules, and one utility can have more than one. The only reliable source for your house is the tariff your utility would actually apply to a new interconnection, plus any program that is still open.

Net metering, net billing, and buy-all sell-all

People say “net metering” for several different tariffs. When you talk to an installer, ask which of these the quote used:

1. Retail net metering. Exports offset imports, often inside a billing period, sometimes with credits that roll to a later month. An annual true-up may cash out leftover credits, sometimes at a lower rate, or they may expire.
2. Net billing. Imports are billed at the retail rate. Exports are credited at a separate export rate. The two rates are not the same, so the timing of your use matters more.
3. Buy-all, sell-all, or similar. You buy all the electricity you use from the utility, and the utility pays a stated rate for solar production. Your on-site use may not “cancel” a retail kWh the way classic net metering does.
4. Time-of-use rates. The price of an imported kWh, and sometimes the credit for an exported kWh, depends on the hour. A system that exports mostly in low-price midday hours and leaves you importing in a high-price evening can look very different from a flat-rate model.

None of these is automatically “better” in the abstract. A household that uses a lot of power while the sun is out (someone working from home, a pool pump on a timer, daytime EV charging) relies less on the export credit. A household that is empty all day relies on it more.

If you are weighing a battery because export credits are low, read whether a home solar battery is worth adding before you treat storage as a default add-on.

What to ask about the savings estimate

A production estimate and a bill-savings estimate are different documents. Production is how many kWh the array might generate. Savings are what those kWh are worth under a tariff, a rate-increase assumption, and your usage pattern. Ask for all of the following in writing:

• The utility and the exact rate schedule or export program used in the model.
• Whether exports are credited at the retail rate, a lower export rate, or an hourly schedule.
• Whether credits roll forward, for how long, and what happens at the end of the year.
• Any minimum bill, fixed charges, or fees that solar does not reduce.
• The usage the model started from: ideally the last 12 months of your kWh, not a single summer bill. See how to size a home solar system from your bills.
• Any assumed increase in utility rates. If the quote needs a steep increase to look attractive, treat that as an assumption, not a fact.
• What happens in an outage. Standard grid-tied solar without a battery shuts off when the grid is down, even if the sun is shining. That is a safety rule (anti-islanding), not a defect in the panels.

You can cross-check the production side with a public tool such as NREL PVWatts. PVWatts does not know your utility’s export price. It is a way to see whether the kWh number is in a plausible range for your location, tilt, and shading — not a bill forecast.

How this shows up when you compare quotes

Put the export assumption next to price per watt, equipment, and warranty. A cheaper system paired with an optimistic retail-credit assumption can “win” a side-by-side that a more careful model would lose. Our solar quote FAQ lists the other fields that should be on every proposal: system size, equipment models, annual kWh, warranties, who pulls permits, and the payment schedule.

How you pay changes the picture again. If you own the system (cash or a loan), the export credit is part of the value of the energy the system produces for you. If a third party owns it under a lease or a power purchase agreement, you are paying that company under the contract, and the utility credit may or may not flow to you the way a sales sheet implies. Compare those structures in solar financing options: cash, loan, lease, or PPA.

Export rules also matter if you later sell the house. A buyer will ask how the system is billed and whether the credit transfers. Start with selling a home with solar so the paperwork is not a surprise at closing.

Interconnection is the step that locks the rule in

Net metering is not something you turn on yourself. After the system is designed, the installer (or you, depending on the contract) applies to the utility for interconnection and permission to operate. The utility’s approval states the program you are actually on. Until that approval exists, a sentence in a proposal is a plan, not a guarantee that the program still has room or that your site qualifies.

Ask who files the interconnection application, how long the utility has been taking in your area, and what changes if the program you were quoted is closed before approval. Timelines vary by utility. There is no single national waiting period.

Permits from the city or county are a separate track from the utility application. Both have to be finished before the system should operate. A quote that says “we handle permits” should say whether that includes the utility application and any studies the utility requires.

What net metering does not do

• It does not make every home a good site. Shade, roof direction, and roof condition still dominate production. If the roof is near the end of its life, read should I replace my roof before solar before you design around a covering you plan to tear off.
• It does not, by itself, provide backup power.
• It does not set the price of a lease or PPA. Those prices are in the contract.
• It is not the same product for a store, warehouse, or other commercial meter. Commercial accounts often pay demand charges, which are based on peak draw and are not erased by exporting midday energy. That difference is covered in residential vs commercial solar.

How does net metering work on a home electric bill?

Your meter records energy you take from the grid and energy you send to the grid. The utility applies its tariff to those readings. Under classic net metering, exported kWh can offset imported kWh. Under net billing, imported kWh are charged at one rate and exported kWh are credited at another. Fixed customer charges often remain either way. The bill is the place to check the assumption in a quote: ask the installer to mark which lines on a sample bill would change, and which charges would stay.

Do all utilities offer the same solar export credit?

No. Export compensation is set by state regulators and by each utility’s tariff. Two neighboring utilities can credit the same exported kWh differently, and a utility can close an older program to new applicants while existing customers stay on it. A national “average savings” figure cannot tell you what your meter will do. Get the tariff name from the installer and confirm it on the utility’s current schedule or with the utility itself.

Will solar panels run my house during a blackout?

Not with a standard grid-tied system and no battery. The inverter is required to stop sending power when the grid is down so it does not energize a line that crews are repairing. Backup power takes extra equipment: a battery and a transfer or gateway device, usually backing up selected circuits rather than the whole house. Ask which circuits and about how long they would run. More on that choice is in the home solar battery guide.

Where can I check my state’s solar incentive and metering rules?

Your utility’s tariff is the document that bills you. For a starting map of state and utility programs, the public DSIRE database lists many renewable energy policies and incentives. It is a directory, not a determination of what you qualify for. Tax treatment of a system you own is separate from net metering; confirm any credit with a tax professional or the IRS, and do not treat a percentage printed in a sales proposal as permanent. Federal rules change.

This page is general information for homeowners comparing solar. It is not legal, tax, or utility advice. Your interconnection agreement and rate schedule control.

For a no-cost look at a specific property, you can request a free energy analysis. To see local pages already on this site, browse the GoBien directory and the solar guides.