Net Metering
Net metering is a utility billing mechanism that allows solar system owners to earn credits for excess electricity exported to the grid. When a residential, commercial, or utility-scale solar system generates more energy than it consumes, the surplus electricity flows to the grid and is credited against future electricity usage.
In modern solar designing workflows, net metering acts as a core financial driver. It directly influences system sizing, payback period, and return on investment, and it plays a central role in how production versus consumption is modeled using Solar Layout Optimization, Stringing & Electrical Design, and long-term generation forecasting.
Strong net metering policies significantly improve project economics, while weaker or capped programs often require designers to rethink panel orientation, array sizing, and battery integration using tools such as Battery Size Calculator.
Key Takeaways
- Net metering credits exported solar energy against future consumption
- Policies vary widely by utility and region
- Strongly impacts system size, ROI, and payback
- Requires bi-directional metering and interconnection approval
- TOU-based programs are becoming more common
- Designers must align production with policy incentives
What It Is
Net metering is a regulatory and billing framework, defined at the utility, regional, or national level, that determines how exported solar electricity is compensated. Depending on local policy, exported energy may be credited as:
- 1:1 retail electricity credit
- Partial retail credit (e.g., 60–90%)
- Fixed feed-in tariff
- Time-of-Use (TOU)–based export rates
Solar designers and EPC teams rely on these rules when creating systems inside solar designing software. A system that looks profitable under favorable net metering may become uneconomical when export credits are reduced—forcing a shift toward self-consumption optimization and storage-first designs.
Net metering assumptions also flow directly into Shadow Analysis studies, Solar Proposals, and long-term financial projections generated for customers and investors.
How It Works
Net metering operates through a bi-directional electricity meter that tracks both imported and exported energy.
Step-by-Step Process
- Solar panels generate electricity
- Production is estimated during solar layout design using Solar Layout Optimization, factoring in tilt, azimuth, and solar shading analysis.
- On-site loads are supplied first
- Generated energy serves building demand before any export occurs.
- Excess energy is exported to the grid
- Surplus electricity flows outward once on-site consumption is met.
- Bi-directional metering records flows
- Smart meters capture both import and export data in real time.
- Credits are applied
- Exported kWh are credited based on the applicable net metering or net billing rules.
- Credits offset future usage
- During nights or low-production periods, imported power is offset by earned credits.
- Monthly or annual reconciliation
- Utilities calculate the net balance at the end of the billing cycle.
This export-credit mechanism is foundational to projections created using the Solar ROI Calculator and Solar Loan Calculator.
Types / Variants
1. Retail Net Metering (1:1 Credit)
Each exported kWh offsets one imported kWh at the full retail rate.
Most favorable for solar owners.
2. Net Billing
Exports are credited below the retail rate, often based on avoided utility costs.
3. Feed-in Tariff (FIT)
All exported electricity is compensated at a fixed rate under long-term contracts.
4. Time-of-Use (TOU) Net Metering
Export value varies by time window, encouraging peak-hour generation.
5. Annual Netting
Credits roll over for a year and settle annually, often at a reduced payout rate.
How It’s Measured
Net metering performance depends on precise energy measurement and billing logic.
Key Metrics
- Imported Energy (kWh) — Grid electricity consumed
- Exported Energy (kWh) — Solar electricity sent to the grid
- Net Energy Consumption (kWh)
\text{Net Energy} = \text{Imported Energy} - \text{Exported Energy}
These values directly affect calculations for Performance Ratio and long-term savings.
Metering & Billing Inputs
- Retail electricity rate
- Export credit rate (retail, discounted, or TOU-based)
- Utility system size caps and interconnection rules
Practical Guidance
For Solar Designers
- Avoid oversizing systems in low-credit regions.
- Align array orientation with TOU export windows.
- Validate shading losses using Shadow Analysis.
- Apply Solar Layout Optimization best practices.
For Installers
- Set realistic expectations around bill savings.
- Ensure correct bi-directional meter installation and utility approval.
For Sales Teams
- Model export credits accurately in Solar Proposals.
- Show ROI scenarios using the Solar ROI Calculator.
- Explain how batteries increase self-consumption when net metering is weak.
For Developers & EPCs
- Target regions with favorable net metering to improve IRR.
- Use planning frameworks from the Solar Project Planning & Analysis Hub.
- Support long-term strategy through the Solar Business Growth & ROI Hub.
Real-World Examples
Residential Rooftop
A 6 kW system exports afternoon surplus under TOU net metering, offsetting nighttime imports and reducing annual electricity bills.
Commercial Facility
A 250 kW rooftop system exports mid-day energy. Net billing credits reduce operating costs when paired with accurate solar designing and load analysis.
Utility-Scale Project
A 5 MW plant operates under a feed-in tariff, exporting all generation at a fixed rate—providing predictable long-term revenue.
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