11/21/23, 4:34 PM Solar Net Metering Explained (2023)
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MarketWatch › Guides › Solar
Solar Net Metering Explained (2023)
In this guide, we discuss net metering and how it benefits solar owners. Read on to see if a
program is available in your state.
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Updated: Oct 10, 2023
Written by Leonardo David Edited by Tori Addison
Net metering is a billing tool that allows you to send the excess energy your panels
generate to the local grid in exchange for credits on your monthly electric bills. Many
states offer net metering programs as an incentive for going solar, but energy credit
rates may vary.
We at the MarketWatch Guides Team have researched the cost of solar systems
nationwide to help you decide if solar is a worthwhile investment. Read on to see how
net metering can help you save on electricity and if a program is available in your area.
+ In This Article:
What Is Net Metering And How Does It
Work?
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Solar panels only generate electricity when exposed to sunshine, with the most energy
production around noon. For example, solar owners away at work may not use all the
energy their panels produce during the day, creating a surplus. But with net metering,
you can sell excess, unused energy to help lower your electricity bill.
Here’s a quick overview of how net metering works:
Net metering is a billing method that measures your excess energy production in
exchange for credits to subtract from your next monthly bill. In other words, you can
sell surplus solar energy to the local electric company.
Net metering is also known as solar buyback, net billing and net energy metering
(NEM).
Depending on your location, net metering may be available for other renewable
energy systems other than solar photovoltaic (PV) panels.
Net metering can help offset grid consumption costs when sunlight is not readily
available, like at night or on cloudy days.
Without net metering, the only option for homeowners is to use a battery system to
store surplus solar production. A home battery can cost more than $10,000, extending
the payback period of your solar power system. With net metering, the local electric grid
acts as your “solar battery” to absorb surplus production, and you can offset your
nighttime grid consumption using net metering credits accumulated during the day.
However, a battery can still be worthwhile if you live in an area prone to blackouts.
Net metering works as an incentive for solar customers since you can subtract excess
electricity generation from your utility bills. Net metering policies vary by state and local
utility companies, but programs are currently available in 38 states and Washington, D.C.
Benefits of Net Metering
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Generating your own electricity with
residential solar panels becomes a
more attractive investment when net
metering is available. The following
are some of the benefits you can
expect:
Converts Solar
Generation Into
Power Bill Savings
Without net metering, you only save
the value of solar electricity you
directly consume. If you have excess
production to send to the power grid,
you are essentially giving that energy away for free. Net metering policies ensure you
receive compensation for unused solar generation.
For example, assume your home solar system produces 1,000 kilowatt-hours (kWh) of
energy per month. If you only use 700 kWh, the remaining 300 kWh will go to the grid.
Without net metering, you would only save the value of 700 kWh of direct energy
consumption.
With net metering, your utility converts the remaining 300 kWh into a power bill
credit, so you receive value from all your solar generation.
Receiving credit for surplus solar generation increases your monthly power bill savings.
You can use those savings to shorten your solar panel payback period, which increases
your annual return on investment (ROI).
Makes Home Solar Systems More Affordable
Since net metering uses the local grid as your “solar battery,” purchasing your own
battery becomes optional. An energy storage system can double the cost of a solar
installation in some cases, which means your payback period can become twice as long.
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A solar battery becomes necessary if you don’t have access to net metering, since you
will not receive credit for excess generation. In this case, a battery is your only option for
storing surplus energy for later use.
Reduces Transmission Costs for Utility Companies
Home solar systems generate electricity at the point of use, meaning energy does not
travel through power lines and substations before reaching your home. When one home
has excess generation from a solar panel system, the power company can purchase that
energy and resell it to neighboring homes without solar panels.
Without net metering, a power company can only sell electricity from large-scale power
plants. This energy must travel through transmission lines, substations and local
distribution grids to reach the point of use. Net metering can reduce the reliance on
distribution systems, which can help prevent energy losses as electricity travels across
power lines.
Limitations of Net Metering
Net metering makes solar panels and other clean energy sources more affordable by
eliminating the need for batteries, increasing your annual energy savings and boosting
your ROI. However, net metering programs have some limitations to keep in mind.
Some Utilities Offer Reduced Tariffs
Most net metering and solar buyback programs do not issue credit at the full retail rate
of electricity. For example, a homeowner typically charged 16 cents per kWh may
receive a net metering compensation tariff of only 10 cents per kWh.
As mentioned above, net metering policies vary by state and utility company. While some
states may compensate you for each kilowatt-hour at the full retail rate, most net
metering programs offer a reduced solar buyback tariff.
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Credits Cannot Exceed Your Annual Consumption
Most net metering programs will not let you accumulate credits higher than your annual
energy consumption. If there is a month when your solar generation credit surpasses
your consumption, most programs will roll over the difference to the next billing period.
In most cases, you will not be paid for excess generation accumulated over a 12-month
period.
You may find a few net metering programs throughout the U.S. that pay you in cash for a
billing cycle where credits exceed your consumption. However, these payments are rare
and subject to limits.
You can work with a solar installer to design a system that generates enough electricity
for your home, without producing too much excess energy.
Net Metering Availability
There are still some parts of the U.S. where net metering is not available for solar panel
owners, and storing excess energy in batteries is the only option. Some states also have a
basic net metering policy required by law, but utility companies can set the terms and
conditions. As a result, you may find net metering programs with unfavorable conditions,
such as low compensation tariffs for unused solar energy.
The Solar Energy Industries Association (SEIA) has a detailed map that shows the
availability of net metering and net billing programs throughout the U.S.
How To Participate in Net Metering
Since states have individual net metering policies, requirements for solar owners vary by
location. Net metering rules can also vary within your state since local utility companies
often have different terms and conditions. The best solar companies are familiar with net
metering requirements in your area and can make sure your home solar system qualifies.
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Below are common net metering requirements, regardless of the specific program in
which you participate:
Your solar installer can help you complete any required steps to participate in net
metering. For example, some states may require you to complete an interconnection
application.
Most electric companies require a professional solar installation to connect a power
generation system to the local grid. For this reason, DIY solar projects are not eligible
for net metering programs.
Local power companies have interconnection requirements for home solar systems.
For example, most companies require a solar inverter that meets specific guidelines.
Your installer can help ensure your system meets these requirements.
The following table provides a list of major net metering programs available in the U.S.
State Net Metering Programs*
Pacific Gas & Electric (PGE)
San Diego Gas & Electric (SDG&E)
California
Southern California Edison (SCE)
Los Angeles Department of Water and Power (LADWP)
Colorado Xcel Energy
Connecticut Eversource
Duke Energy
Florida
Florida Power & Light (FPL)
Georgia Georgia Power
Illinois Commonwealth Edison (Comed)
MidAmerican Energy
Iowa
Interstate Power and Light / Alliant Energy
Maryland Pepco / Exelon
Massachusetts Eversource
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National Grid
Minnesota Xcel Energy
NV Energy
Nevada
Valley Electric Association
New Hampshire Eversource
Jersey Central Power & Light / First Energy
New Jersey
PSEG
New Mexico Xcel Energy
Consolidated Edison
New York National Grid
PSEG Long Island
Dominion Energy
North Carolina
Duke Energy
Ohio Duke Energy
Pennsylvania PECO / Exelon
Dominion Energy
South Carolina
Duke Energy
Offers multiple solar buyback plans from
Texas retail electricity providers, municipal power
companies and electric cooperatives
Utah Rocky Mountain Power
Vermont Green Mountain Power
Virginia Dominion Energy
Washington. DC Pepco / Exelon
Wisconsin Xcel Energy
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*Note: This chart includes major net metering programs in each state. It does not reflect all
options for solar buyback plans.
The Database of State Incentives for Renewables and Efficiency (DSIRE) has a map
where you can find general information about net metering policies in any state. Note
that Alabama, South Dakota and Tennessee do not have state policies or local utility
programs as of 2023.
If you do not have space for solar panels, you can participate in net metering by joining a
community solar project. Participation in a community garden entitles you to a fraction
of the electricity generated by a shared solar array, which you can subtract from your
monthly power bills.
The Bottom Line
Net metering makes solar panels more valuable for homeowners. You benefit from
power bill savings for all the electricity your solar energy system generates — not only
the portion you directly consume to power your home appliances, lighting and
electronics. With net metering, you can send excess generation to the grid in exchange
for power bill credits, and installing a solar battery becomes optional.
Net metering programs are not available in all states and have some limitations, but in
most cases, the pros outweigh the cons. Many states do not pay the full retail price for
each kilowatt-hour of energy you export to the grid, and you cannot accumulate credits
above your annual consumption. However, this is not a problem if your solar panel
system is sized optimally based on your home energy use.
Net metering can increase the ROI of your home solar system when combined with the
federal solar tax credit and other solar incentives and rebates. Plus, the best solar panels
come with a product warranty of up to 25 years, helping to guarantee your power bill
savings for a long time.
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Frequently Asked Questions About Net
Metering
What are the disadvantages of net metering?
Is net energy metering worth it?
Who can benefit from net energy metering?
Is the NEM 2.0 program still in effect in California?
https://www.marketwatch.com/guides/solar/solar-net-metering/ 9/11
11/21/23, 4:34 PM Solar Net Metering Explained (2023)
Leonardo David
Author
Leonardo David is an electromechanical engineer, MBA, energy consultant and
technical writer. His energy-efficiency and solar consulting experience covers sectors
including banking, textile manufacturing, plastics processing, pharmaceutics,
education, food processing, real estate and retail. He has also been writing articles
about energy and engineering topics since 2015.
Tori Addison
Editor
Tori Addison is an editor who has worked in the digital marketing industry for over
five years. Her experience includes communications and marketing work in the
nonprofit, governmental and academic sectors. A journalist by trade, she started her
career covering politics and news in New York’s Hudson Valley. Her work included
coverage of local and state budgets, federal financial regulations and health care
legislation.
MORE RESOURCES:
The Best Solar Companies of The Best Solar Panels for Homes Federal Solar Tax Credit Guide for
November 2023 in 2023 Homeowners (2023)
https://www.marketwatch.com/guides/solar/solar-net-metering/ 10/11
11/21/23, 4:34 PM Solar Net Metering Explained (2023)
How Much Do Solar Panels Cost?
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