Net Metering: How It Works and What to Check
Understand net metering: how the meter runs backward, buy-all vs. sell-all, and why credit rates matter more than panel count. Rules vary by state.
Net metering is the arrangement that lets a solar array offset electricity use by spinning the meter backward when the array produces more than the building consumes. The physics is simple: the meter measures the net flow of electricity in both directions. But the value of that backward spin is set by policy, not by the hardware, and policy varies by state and by utility, and it changes. This page explains what the meter is doing, what the credit is worth, and what to look up before relying on any figure.
What the meter does when the array over-produces
A standard bidirectional meter records energy flowing in each direction. When the solar array produces more than the loads in the building are drawing, the excess flows out through the meter to the grid. The meter runs backward, reducing the accumulated consumption. At night or on cloudy days, the building draws from the grid and the meter runs forward.
Net metering means the utility bills for the net energy over a billing period: if the array exported 400 kWh and the building imported 300 kWh, the bill is for zero net energy, and the extra 100 kWh may carry over as a credit. The credit rate is the key number. Under true net metering, the credit is the full retail rate, the same rate charged for electricity. Under net billing or buy-all-sell-all, the export is compensated at a different, usually lower, rate.
Net metering vs. buy-all-sell-all
The two main compensation structures differ in how the meter and the bill treat the two directions of flow.
| Feature | Net metering | Buy-all-sell-all (net billing) |
|---|---|---|
| Meter reading | Net flow over the billing period | Separate readings for import and export |
| Export credit | Retail rate, often with monthly rollover | Wholesale or avoided-cost rate, often lower |
| Bill calculation | Charge for net consumption only | Charge for all imports, credit for all exports |
| Best for | Offsetting high retail rates, simple billing | Systems sized to match load, where export is minimal |
| Does NOT apply when | The utility has caps or grandfathering that limit new net-metered systems | The utility offers net metering but with a lower export rate (then it is effectively net billing) |
In a buy-all-sell-all arrangement, the meter or the billing system tracks each direction separately. The building pays the retail rate for every kilowatt-hour imported, and receives a credit for every kilowatt-hour exported, but the credit per kilowatt-hour is typically lower than the retail rate. The difference is the spread between what you pay for electricity and what the utility pays for generation. That spread is the reason a system that exports a lot may have a longer payback than one that offsets consumption directly.
Why the credit rate matters more than panel count
The number of panels determines how much energy the array can produce, but the financial value of that energy depends on the compensation rate. Two identical arrays can have very different economics under different net metering rules. A system that exports 40% of its production will be affected more by a low export rate than one that exports 10%. The design goal is to match production to on-site consumption as closely as possible, because the energy you use directly is worth the retail rate, while exported energy may be worth less.
This is why a proposal that shows a large array and a big export credit may not be as attractive as it looks. The credit rate is the number to ask about. It is set by the utility’s tariff, which is approved by the state public utility commission. The tariff also defines the billing period, whether credits roll over month to month, and whether there is a true-up at the end of the year.
Rules are set by state and utility - what to check
Net metering is not a federal program. Each state sets its own policy, and each utility implements it in its own tariff. The rules change. A state may have a cap on total net-metered capacity, after which new systems are treated differently. Some utilities grandfather existing net-metered customers for a number of years, then move them to a new rate. Some have time-of-use rates that change the value of exports depending on when they occur.
Before relying on any net metering figure, look up the current tariff for the specific utility. The public utility commission’s website usually has the tariff documents. Search for “net metering tariff” plus the utility name. Check the export credit rate, the billing period, any caps, and whether the rules apply to new systems. A solar installer’s proposal should state the assumed export rate and the source. If it does not, ask.
What people get wrong about net metering
A common mistake is assuming that net metering means the meter runs backward at the retail rate forever, for every system. That is true for some customers, but not for all. The rules vary, and they change. Another mistake is thinking that a larger array is always better because it exports more. If the export rate is low, a larger array may produce credits that are worth far less than the cost of the extra panels. The natural error is to focus on the meter spinning backward and forget that the value of that spin is a policy decision.
Another frequent misunderstanding is that net metering is a right. It is not. It is a tariff, and utilities have changed it for new customers. A system designed under one set of rules may be less valuable under the next. This is why the design should aim to maximize self-consumption, not export.
What to do with the numbers
The only way to know the value of net metering for a specific site is to read the tariff and run the numbers with the actual export rate. The panel count and the array size are secondary. The credit rate, the billing period, and the rollover rules are primary. If the tariff has a low export rate, the system should be sized to avoid exporting. If the export rate equals the retail rate, exporting is not a penalty, but it still may not be the best use of the roof.
Net metering is a policy tool that made solar affordable for many. But it is not a constant. The rules are set by state and utility, and they change. Always verify the current tariff before making a decision.
Further reading
- The public utility commission website for the state
- The utility’s net metering tariff document
- A solar proposal that states the assumed export rate and the source
Common questions
How does net metering work?
Net metering lets a solar array offset your electricity use by spinning the meter backward when you produce more than you use. You are billed for the net energy over the billing period, and excess credits may roll over. The exact rules and credit rates vary by state and utility.
Is net metering available in my state?
Net metering availability and rules are set by each state and utility. Some states have net metering, some have net billing, and some have neither. Check your state's public utility commission website and your utility's tariff for the current policy.
What is the difference between net metering and buy-all-sell-all?
Net metering nets your usage against your production over the billing period, crediting you at the retail rate. Buy-all-sell-all (net billing) measures imports and exports separately, charging you for all imports and crediting exports at a different, often lower, rate.
Will net metering rules change?
Yes, net metering rules can change. Utilities and state regulators periodically update tariffs, and some states have caps on net-metered capacity. Existing customers may be grandfathered, but new systems may face different rules. Always check the current tariff.
How much will I save with net metering?
The savings depend on the export credit rate, your electricity usage, and the size of your array. The credit rate is set by your utility and can be lower than the retail rate. To estimate savings, compare the export rate to the retail rate and consider how much of your production you can use on-site.
Read next
- Feed-in Tariffs and Export Payments: How They Work Understand feed-in tariffs vs export payments, how solar export compensation works, and key differences from net metering. Check local rules.
- Grid-Tied Solar: How It Works and What Happens in an Outage Understand grid-tied solar systems: how they connect to the utility, why they shut off during outages (anti-islanding), and what rules vary by state.