What is the difference between net metering and net billing?

Net metering typically credits excess solar production at or near your full retail electricity rate. Net billing (used in some states as a replacement for traditional net metering) usually credits excess production at a lower rate, closer to the wholesale cost of electricity, which reduces the value of that excess production for the homeowner.

Does my system need to be sized to send power back to the grid to benefit from net metering?

Not necessarily — even a system sized to mostly offset your own usage will occasionally send small amounts of excess power to the grid during low-usage, high-production hours (like sunny afternoons when you're not home), and net metering determines what that excess is worth.

Can my utility change its net metering policy after I install solar?

In many states, changes to net metering policy do not apply retroactively to systems already installed under the prior rules — often called "grandfathering." However, rules vary by state and utility, so ask your installer specifically whether your system would be grandfathered if policy changes after you go solar.

Net Metering Explained: How It Affects Your Solar Savings

Net metering is one of the least glamorous parts of the solar conversation — and one of the most financially important. Here’s what it actually means for your bill.

What net metering is

When your solar system produces more electricity than your home is using at a given moment — a common scenario on sunny afternoons — the excess flows back onto the grid. Net metering is the policy that determines what credit you receive for that exported electricity, typically applied against your usage at other times (like at night, when your panels aren’t producing).

Why it matters so much

Two identical solar systems in two different states — or even on two different utilities in the same state — can produce very different savings depending on the net metering policy, because it determines how much of your system’s total production actually offsets your bill at full value.

The main policy types you’ll encounter

Full retail net metering

Excess production is credited at the same rate you pay for electricity you buy. This is the most favorable policy for solar owners, since every kWh you export is worth the same as a kWh you’d otherwise purchase.

Net billing (avoided-cost or wholesale-rate compensation)

Excess production is credited at a lower rate, often closer to the wholesale cost of electricity rather than the retail rate. This reduces the value of any production you don’t use directly in your home, which can meaningfully lengthen your payback period, especially for larger systems.

Time-of-use net metering

Credit varies by the time of day production occurs, reflecting that electricity is more valuable to the grid at some hours than others. This can favor systems paired with battery storage, since you can shift when you draw stored power to higher-value hours.

How to find your state’s and utility’s policy

Net metering policy is set at the state level (often by the public utility commission) but can also vary between individual utilities within a state. Check our state guides for general notes, but confirm the specific, current policy with your actual utility — this is one of the details that changes often enough that a general article can’t guarantee it’s current for your exact utility today.

How net metering interacts with system sizing

Under full retail net metering, sizing your system close to 100% of your annual usage generally makes sense, since every kWh — whether used directly or exported and later offset — is worth full value. Under a less favorable net billing policy, there’s more financial benefit to sizing your system to closely match your own real-time usage patterns (sometimes with the help of a battery) rather than maximizing total production, since excess exports are worth less. See our sizing guide and battery storage guide for how this plays out.

Grandfathering: why timing can matter

Some states allow existing solar customers to keep their original net metering terms for a set number of years even after the state changes policy for new customers — often called grandfathering. If your state is discussing a net metering policy change, ask your installer directly whether new systems installed now would be grandfathered under current terms, since this can be a meaningful factor in the total value of your system over its lifetime.

Bottom line

Net metering policy can matter as much to your solar payback as your electricity rate or system cost — and unlike system cost, it’s set by policy, not by your installer. Always confirm your specific utility’s current net metering or net billing terms before finalizing your system size and financial expectations.