NEM (Net Energy Metering)

Net Energy Metering (NEM) is a utility billing mechanism that allows solar customers to export excess electricity generated by their PV system to the grid and receive energy credits in return. These credits offset electricity drawn from the grid when the solar system is not producing enough—such as at night or during cloudy conditions.

For professionals involved in solar designing, installation, EPC delivery, and solar sales, NEM plays a central role in system sizing, solar proposals, ROI modeling, and long-term utility bill savings calculations. It directly influences payback periods, annual savings forecasts, and customer decision-making.

Because NEM rules vary widely by region, accurately modeling them inside workflows like Shadow Analysis, Auto-Design, and financial simulation tools is essential for reliable system performance and economic projections.

‍

Key Takeaways

NEM allows solar customers to offset electricity costs using export credits
Compensation structures vary widely and directly affect ROI
Newer NEM versions favor self-consumption and storage
Accurate export modeling is critical for realistic projections
Battery systems gain importance under value-based export regimes

‍

What It Is

Net Energy Metering is essentially a solar billing structure that tracks two directions of electricity flow:

Energy exported to the grid when solar production exceeds on-site consumption
Energy imported from the grid when consumption is higher than solar generation

A bi-directional meter records both values and calculates net usage over a billing period. Depending on the local NEM policy, exported energy may earn:

Full retail-rate credits
Reduced export compensation
Time-of-Use (TOU)–based credits
Value-based or wholesale-rate credits

NEM directly impacts solar design decisions such as PV sizing, inverter loading, and Stringing & Electrical Design. It also affects cost planning tied to the Bill of Materials (BOM) and layout decisions made using Solar Layout Optimization.

How It Works

Although policy details differ by utility and country, the NEM workflow generally follows the same process:

1. Solar panels generate electricity

During daylight hours, PV modules produce electricity that first supplies on-site loads. Accurate production forecasting depends on factors like orientation, tilt, and shading analyzed using Shading Analysis.

2. Excess energy flows to the grid

When generation exceeds consumption, surplus energy is exported automatically through the utility’s bi-directional meter.

3. Export credits are earned

Exported energy earns credits based on the applicable NEM structure:

Retail rate
TOU rate
Value-based or wholesale rate

4. Grid energy is imported

At night or during low-production periods, electricity is imported from the grid as usual.

5. Credits offset the bill

Export credits are subtracted from imported energy charges, reducing or eliminating the customer’s net electricity bill.

This entire process feeds into solar planning workflows supported by SurgePV hubs such as Solar Project Planning & Analysis and Solar Business Growth & ROI.

Types / Variants

1. NEM 1.0 (Full Retail Net Metering)

Exported energy earns 100% of the retail rate
Produces the shortest payback periods
Highly favorable for system ROI

2. NEM 2.0 (Retail Net Metering with Fees)

Adds:
- Non-bypassable charges
- Grid access fees
- TOU rate structures
Export credits still close to retail value

3. NEM 3.0 / Net Billing

Export compensation based on grid value
Export rates often much lower than retail
Strongly favors battery storage and load shifting

4. Virtual Net Metering (VNEM)

Enables credit sharing across multiple units or meters
Common in apartment buildings and community solar projects

5. Aggregate Net Metering

One solar system offsets multiple meters on the same property
Frequently used in agricultural and campus-style installations

How It’s Measured

NEM is measured in kilowatt-hours (kWh) using a bi-directional meter.

Key Measurement Components

Energy Produced (kWh)
Energy Consumed (kWh)
Energy Exported (kWh)
Energy Imported (kWh)

Net Usage = Imported kWh – Exported kWh

Export Credit Formula

Export Credit = Exported kWh × Export Rate

Adjusted Utility Bill

Net Bill = (Imported kWh × Retail Rate) – Export Credits – Applicable Fees

Export values may vary based on time-of-day, season, and grid demand, making accurate modeling essential in Auto-Design and proposal simulations.

Practical Guidance

For Solar Designers

Always design systems based on local NEM policy—oversizing under low export rates can reduce ROI.
Use tools like Roof Pitch Calculator, Sun Angle Calculator, and Solar Panel Sizer for accurate production modeling.
Align system output with TOU peak export windows where applicable.

For Installers & EPCs

Set expectations early around export value vs self-consumption.
Explain why battery storage may improve economics under newer NEM versions.
Ensure designs meet AHJ Compliance requirements.

For Sales Teams

Build proposals using Solar Proposals with real NEM billing logic applied.
Focus on bill offset, savings stability, and long-term ROI.
Support projections using Solar ROI Calculator and Solar Loan Calculator.

For Project Developers

Model future NEM changes—many regions are shifting from retail NEM to net billing.
Forecast long-term export value reductions in financial models.

Real-World Examples

Residential Example

A 6 kW rooftop system exports 300 kWh and imports 250 kWh in a month.

Under NEM 2.0, export credits fully offset imported energy charges, leaving only fixed utility fees.

Commercial Example

A supermarket with a 250 kW system self-consumes most daytime generation, improving savings.

Weekend exports earn TOU credits, strengthening the project’s financial case.

Community Solar Example

A shared solar project uses Virtual NEM, allocating export credits across hundreds of subscribers—reducing bills without on-site installations.

‍

Releated Terms

‍