Net Metering + Solar Billing Reference
Overview
Net metering is how grid-tied solar customers get credit for excess production. Understanding the math + variations is essential to explaining solar economics to customers.
How net metering works
Basic concept:
- Solar produces during day, often more than home uses
- Excess flows to grid
- Utility credits customer for excess
- At night / cloudy days, home draws from grid
- Customer "nets" production vs consumption
Result: Customer's electricity bill = consumption − production (credits used)
Net metering types
1:1 Net metering (best for customers)
- Every kWh exported = 1 kWh imported credited
- Customer's solar is worth full retail rate
- Best economics
- Some states: Massachusetts, New York, parts of New Jersey
Wholesale rate compensation
- Exported kWh credited at wholesale rate (typically 30-50% of retail)
- Customer's solar still worth something but less
- More common in states with utility lobbying
- Example: Arizona (after 2017 changes)
Time-of-use (TOU) net metering
- Credits vary by time of day
- Peak hours credited highest
- Customer's solar production timing matters
- California: now standard
Net billing
- Customer billed for full grid use; credited for solar exports at predetermined rate
- Less favorable than net metering
- Some states moving this direction
No net metering / value-of-solar
- Direct compensation at "value of solar" calculation (often less than retail)
- Variable; depends on utility
- Some states transitioning to this
Reading a net-metered bill
Customer bills typically show:
- kWh consumed (from grid)
- kWh produced (sent to grid)
- Net kWh = consumed - produced
- Bill amount based on net kWh × rate
Examples:
Month 1 (low production, winter):
- Consumed: 800 kWh
- Produced: 200 kWh
- Net: +600 kWh
Month 2 (high production, summer):
- Consumed: 400 kWh
- Produced: 700 kWh
- Net: -300 kWh
Annual reconciliation (typically Oct-Mar settlement):
- Banked credits from summer offset winter draw
- Cumulative net positive = bill
- Cumulative net negative = either rolled over OR paid out at wholesale
True-up
Each utility has a "true-up" period:
- 12-month accounting cycle
- Net credits accumulated reset to zero
- Sometimes paid out (at wholesale rate, usually unfavorable)
- Sometimes simply expire
Implications:
- Over-produce, you lose excess at year-end
- Under-produce, you owe at retail
- Optimal: production = consumption annually
Production estimating
Annual production:
For typical 6kW system in different climates:
| Region | Annual kWh production |
|---|---|
| Phoenix AZ | 9,500-11,000 |
| Denver CO | 8,500-9,500 |
| Atlanta GA | 7,500-8,500 |
| Boston MA | 6,500-7,500 |
| Seattle WA | 5,500-6,500 |
Use PVWatts (NREL free tool) to estimate for specific address.
Customer payback calculation
Inputs:
- System cost (after federal + state incentives): $X
- Annual production: Y kWh
- Electricity rate: Z per kWh
- Annual savings: Y × Z
Payback:
X ÷ (Y × Z) = years to break even
Example:
- 8,000 kWh annual production
- Payback: system cost divided by annual savings, roughly 10 years
Plus appreciation:
- System adds 4-7% to home value
- Selling within payback period may still profit
Return on investment (ROI)
20-year analysis:
- Annual savings compounds with rate increases
- 20-year total savings often substantial
- ROI: 15 - 25% IRR (better than most investments)
Customer's monthly bill scenarios
Scenario A: Customer's solar produces 100% of usage annually
- Some months credit (summer)
- Some months bill (winter)
- Net: minimum-bill only (a small flat connection fee)
Scenario B: Customer's solar produces 70% annually
- Bill is 30% of pre-solar
- Most months: roughly a third of the prior bill
Scenario C: Customer's solar produces 30% annually
- Bill is 70% of pre-solar
- Limited offset
Sizing recommendation: aim for 80-100% offset for best economics.
Solar incentives (2025)
Federal (Solar Investment Tax Credit):
- 30% of total system cost
- Tax credit (reduces tax owed; not refundable)
- Must have tax liability to use
- Extended through 2032
State incentives:
- Varies dramatically
- Rebates (meaningful in some states)
- Tax credits
- Net metering rules (above)
- SRECs (Solar Renewable Energy Certificates): NJ, MD, MA, DC, PA, OH, DE, NC
Utility incentives:
- Some utilities offer rebates
- Some have higher net metering rates
- Time-of-use bonuses
Property tax exemption:
- Many states exempt solar from property tax assessment
- House value goes up, but property tax doesn't
SRECs explained
Available in: NJ, MD, MA, DC, PA, OH, DE, NC, others
- 1 SREC = 1 MWh (1,000 kWh) produced
- Sold separately from electricity savings
- Brokers facilitate sale
- Pricing varies widely state-to-state per SREC
For a typical 6kW system producing 8 MWh annually:
- 8 SRECs per year
- Value: modest but real additional income each year
- Over 15-year SREC eligibility: roughly 15x the annual value, adding up to a meaningful sum
Net metering policy trends (2025)
Many states reducing benefits:
- California: NEM 3.0 reduces compensation
- Arizona: more complex tariffs
- Hawaii: high adoption created grid constraints
- New York: maintained 1:1 (best in country)
Customer should be aware that net metering policies can change; existing systems usually grandfathered.
When to consider battery storage
If net metering is unfavorable:
- Battery makes "self-consumption" valuable
- Store excess solar; use later
- Less reliant on net metering
- Combined system: better economics in unfavorable regions
Battery storage:
- Tesla Powerwall: a premium price point, varies by installer
- Enphase IQ Battery: roughly half to two-thirds of Powerwall pricing
- LG RESU: similar range to Enphase
- Generac PWRcell: among the priciest options, close to Powerwall
Customer questions you'll hear
"Why is my bill higher this month?"
- Cloudy weather; less production
- Increased consumption
- Rate changes
- True-up reconciliation
"Can I just turn off the meter?"
- No; net metering requires bidirectional metering
- Utility owns the meter
"What if I produce way more than I use?"
- Depends on net metering rules
- May get credited (good) or excess wasted (bad)
- Size system for ~100% offset
"Will solar lower my taxes?"
- Federal: yes (30% credit)
- Property tax: usually exempted (state-specific)
- Income from SRECs: taxable
Calculator tools
For accurate estimates:
- NREL PVWatts: production estimate by address
- Utility's solar calculator: bill impact for specific rate
- Solar installer's proprietary tools: ROI analysis
Always use real customer rate + address; generic numbers don't apply.
The single biggest customer expectation mismatch: ASSUMING THE SOLAR BILL DROPS TO NOTHING IMMEDIATELY. Reality: monthly bills run near zero in summer + climb back up in winter (in temperate climates). Annual net is what matters. Customer who expects a zero bill every month is disappointed every winter. Educate at quote: monthly bills vary; annual net is the savings.
References
- DSIRE database (state incentives)
- IRS Form 5695 (residential energy credit)
- NREL PVWatts solar production calculator
- Manuall internal: Residential Solar PV Installation SOP, Solar Panel Types + Technology Reference