What Is Net Metering (Net Energy Metering)
Net metering, also known as net energy metering (NEM), is a billing arrangement that credits solar customers both homeowners and businesses for the excess electricity their solar panels produce and send back to the electric grid. When your solar panel system generates more electricity than you use on site, the surplus electricity flows to the grid, and your utility company provides net metering credits that offset the electricity you draw from the grid later. This system allows solar customers to maximize the value of their solar investment and participate in renewable energy generation.
How Net Metering Works: Net Meter, Excess Energy, and Electric Bills
Net metering uses a bidirectional electric meter to track the electricity your solar panels generate and send to the grid, as well as the electricity you consume from the grid. When your solar panels produce more energy than you need, the excess flows to the grid, running your meter backward and earning you credits. These credits accumulate on your energy bill and can offset costs when your system produces less power, such as at night or on cloudy days. At the end of each billing cycle, you pay only for your net energy consumption after subtracting these credits.
- Bidirectional meter tracks electricity flow both ways
- Excess solar energy sent to the grid earns net metering credits
- Credits accumulate and offset future energy costs
- Net billing occurs at the end of each billing cycle based on net consumption
- Helps reduce electricity bills by using stored credits when solar production is low
Pros and Cons of Net Metering
| Significant savings and predictability by reducing or eliminating monthly energy bills | Future policy changes may affect net metering rates or credit expiration |
| Fairness by crediting solar customers for the full retail value of the electricity produced | Some utilities argue net metering shifts grid maintenance costs to non-solar customers |
| Maximizes the value of solar investments | Adjustments in net metering rates and caps have occurred in certain regions |
| Helps offset electricity costs during periods of low solar production | Net metering policies vary widely by state and utility, causing inconsistency |
Interconnection and Net Meter Installation
Before your solar panel system can participate in net metering, it must be interconnected with the utility’s electric grid. This process requires submitting interconnection paperwork, which your solar installer typically handles on your behalf. Once approved, your utility company will install a two-way net meter that accurately tracks electricity flow in both directions. You will receive permission to operate your solar system once all inspections and approvals are complete, allowing you to start generating solar energy and receiving net metering credits.
Net Billing Versus Net Metering and Alternatives
While net metering credits excess electricity at retail rates, net billing credits excess solar energy at a lower avoided cost rate. Another alternative is the buy all/sell all approach, which involves a second meter to measure the solar power you produce and sell back to the utility, but you buy all your electricity at retail rates. Solar self-consumption lets you use the electricity your solar panels produce on site without relying on the grid, offering complete independence but requiring battery storage. The rates and policies in your area will affect how much you receive in credits or compensation for excess power.
State Policies, Eligibility, and Excess Generation Rules
Net metering policies vary widely by state and utility company. Some states limit system size or cap net metering participation to a percentage of total utility sales, often between 3% and 4%. Excess generation credits may roll over monthly or annually, but in some cases, net metering credits expire if unused after a certain period. For example, Pennsylvania, New Jersey, and Delaware have specific net metering rules that solar customers should review. Checking your state net metering policies and your utility’s tariff is essential to understand eligibility and compensation for your solar panel system.
Financial Impacts: Electricity Bills, Savings, and Enough Energy
Net metering helps reduce your electric bill by applying net credit for every kilowatt hour (kWh) of excess electricity your solar panels produce. If your solar panel system produces enough energy annually to meet or exceed your total electricity use, you can significantly lower your energy costs and achieve a faster payback on your solar investment. The value of credits depends on whether your utility pays retail rates or avoided cost rates. By designing your solar system to generate enough power yearly, you can maximize savings and reduce reliance on the grid.
Battery Storage, Community Solar, and Managing Excess Energy
Battery storage systems complement net metering by storing excess electricity your solar panels produce on site, allowing you to use more solar energy directly and reduce energy costs further. Community solar projects and virtual net metering provide options for customers who cannot install rooftop solar panels, offering bill credits based on their share of a shared solar array. While exporting excess electricity to the grid earns credits, storing it in batteries can provide backup power during outages and reduce demand charges. Pairing battery storage with net metering can optimize your solar energy system’s performance and financial returns.
Practical Steps to Go Solar with Sunwise Energy
Net metering is a key benefit for solar customers, allowing you to receive credits for excess electricity your solar panels produce. Sunwise Energy offers a full service solar installation experience, including a free consultation to evaluate your home or business’s solar potential. With $0-down financing options, in-house installation crews, and strong system warranties, Sunwise Energy ensures a smooth solar adoption process. They handle all permitting and interconnection paperwork with your utility company, including installing the necessary two-way net meter. A site assessment helps determine the optimal solar panel system size to generate enough power to meet your energy needs and maximize your net metering benefits.
Net Metering FAQs
What is net metering in simple terms?
Net metering is a billing arrangement that credits solar homeowners for excess electricity their panels send to the grid. When your system produces more than your home is using, the surplus flows out through your meter and you earn a credit. When you draw power from the grid at night or on cloudy days, the credits offset what you owe. You are billed only on the net difference.
How do net metering credits work?
A bidirectional meter tracks electricity flowing in both directions. Exports earn credits, typically at the full retail rate in PA, NJ, and DE. Credits accumulate in a bank and automatically apply against future consumption, so summer overproduction can cover winter usage. Accounts reconcile on an annual cycle called a true-up.
Is net metering going away?
It depends on your utility, and the honest 2026 answer has nuance. In Pennsylvania, PECO, the FirstEnergy companies, and Duquesne Light keep 1:1 retail net metering, but PPL and UGI are moving customer-generators to lower hourly-wholesale export credits through rate cases (PPL’s is expected mid-to-late 2026). New Jersey is studying a successor structure but has enacted nothing and retains 1:1 retail. Delaware is expanding net metering. Across all of them, systems already interconnected are typically grandfathered under the rules in place at activation, which is the practical argument for not waiting in territories where a change is filed.
What is the difference between net metering and net billing?
Under net metering, exported electricity is credited at the same retail rate you pay for imports, a one-to-one exchange. Under net billing, exports are credited at a lower rate, often based on wholesale or avoided cost, while imports are still billed at retail. Net metering is significantly more valuable to the homeowner. PA, NJ, and DE all use retail-rate net metering.
When do net metering credits expire?
Credit expiration varies by state and utility; many allow credits to roll over monthly or annually, but some credits may expire if unused.
Do net metering credits convert to cash?
Typically, credits are applied to your future energy bills and do not convert to cash unless specified by your utility’s net surplus compensation policy.
What happens to my net metering credits if I move?
Usually, credits remain with the property, but check your utility’s policies for transferring credits or compensation.
Can I participate in community solar programs?
Yes, virtual net metering allows participants to receive bill credits for their share of a community solar project’s output.
