Understanding Net Metering: How Solar Panels Can Earn You Money

One of the most powerful financial incentives for going solar is a policy called "net metering." While the term might sound technical, the concept is simple and revolutionary: it allows you to use the utility grid as a giant, shared battery, effectively earning you credit for the excess electricity your solar panels produce. Let's break down how it works and why it's a game-changer for homeowners.

What is Net Metering?

At its core, net metering (or Net Energy Metering, NEM) is a billing arrangement between you and your utility company. When your solar panels are producing more electricity than your home is consuming at that moment—typically during sunny midday hours—the excess power doesn't go to waste. Instead, it is sent back to the electrical grid.

Your utility meter, which is often replaced with a special bi-directional meter during installation, tracks this outflow. The utility company gives you a credit for every kilowatt-hour (kWh) of electricity you contribute. Later, when your panels aren't producing enough power to meet your needs (like at night or on a cloudy day), you draw electricity from the grid as you normally would. The credits you earned are then used to offset the cost of the electricity you draw.

Think of it like rollover minutes for your energy. You "bank" your excess production as credits and "withdraw" from that bank when you need to.

A Day in the Life with Net Metering

• Morning: As the sun rises, your panels start producing power. Your home's usage might be low, so you start sending some excess power to the grid, building up credits.
• Midday: The sun is at its peak. Your panels are generating a large amount of electricity, far more than your home is using. You are sending significant power back to the grid and accumulating a lot of credit.
• Evening: The sun sets, and your panels stop producing. You start cooking dinner, turning on lights, and watching TV. You are now drawing power from the grid, but you are using the credits you banked earlier in the day to pay for it.

At the end of the month, the utility "nets out" your consumption against your production. If you produced more electricity than you used, the credits roll over to the next month. If you used more than you produced, you only pay for the net difference. In many cases, this can lead to bills that are close to zero, or even a net credit over the course of a year.

The State of Net Metering in 2024

It's important to note that net metering policies vary significantly by state and even by utility company. Some utilities offer a one-to-one credit for every kWh sent to the grid, which is the most favorable arrangement. Others have implemented "NEM 2.0" or "NEM 3.0" policies, which may offer slightly less than the full retail rate for exported energy or add fixed monthly charges. Despite these changes, net metering remains one of the most important policies making solar a financially viable investment for millions of homeowners. Before going solar, it's crucial to check your local utility's specific net metering rules.