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What is Net Metering and How it Works

What is Net Metering and How it Works

Learn what net metering is and what it means for your solar system.

Thad Warren
September 2021
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2 Minutes

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Net metering is a billing mechanism that allows your solar panels to give you a credit for putting electricity into the grid. When your solar panels produce more electricity than you can use, the leftover energy is back on to the grid and you get credit for the energy you produced.

For example, if your solar panels generate 1,000 kWh in a month and your home used 900 kWh you would receive a credit for the difference.

Net metering can make solar panels significantly more cost-effective since it allows you to build up credits and ideally eliminate your electric bill.  

How does Net Metering Work?

When your solar panel system generates more electricity than you used the leftover power is put back into the grid. Inversely, when your solar panels aren’t able to produce enough electricity to meet your demand you pull electricity from the grid. At the end of the month, your utility calculates how much energy you put into the grid versus how much you took out. If you put in more than you used you receive credits to your bill for the following month. 

Net metering does not mean that you get paid by your utility for generating electricity. While you receive credits on your bill utilities do not send you a check or pay you directly. 

Think of the energy grid as your own personal battery. You get all the electricity you produce for free even if you use it later, like at night or on a cloudy day when your solar panels are as efficient. 

Benefits of Net Metering

Net metering has benefits for your pocketbook and the energy grid. 

Payoff Your Solar Panels Faster

The bill credits you receive save you money out of your pocket when your solar panels aren’t producing electricity. While you aren’t getting paid directly, the bill credits make solar panels much more cost-effective.

Reduce (or Eliminate) Your Electric Bill

If you are able to produce enough electricity it means that you could essentially eliminate your electric bills. 

Reduce Stress on the Energy Grid

As the population increases utilities struggle to meet the energy needs of homes and businesses. By installing solar panels tied to the grid you are helping reduce stress on the grid by pumping electricity into it rather than pulling energy out of it. 

Is Net Metering Available Everywhere?

No, net metering is mandated in some form in 34 states/ Washington D.C. While not all states have mandated net metering many local utilities have net metering in some form. We recommend using the database on DSIRE to research what’s available in your area.