Understanding Net Metering

How net metering works and why it’s critical to your solar savings

Quick Take

Net metering (also called “net billing” in many states) is the accounting system that values your solar exports and offsets the grid power you buy later. Under newer rules like California’s NEM 3.0, timing is everything: midday exports are worth less, evening grid power costs more. You win by using your own solar, shifting loads, picking the right rate plan, and sometimes adding battery storage.

How the Flow Works (Plain English)

  • Daytime: Your home uses solar first. Any extra electricity goes to the grid as exports.
  • Night/evening: You draw power from the grid. Your monthly charge equals fixed fees plus (imports minus export credits).
  • Annual true-up: Your utility reconciles any running balance once a year, settling what you owe or what they owe you.

Net Metering vs. Net Billing: What’s the Difference?

Legacy Net Metering

Where: Many states, older California NEM 1.0/2.0

How it works: Exports are often credited near the full retail electricity rate. What you send out is roughly worth what you buy back.

Result: More favorable economics for solar owners

Net Billing (NEM 3.0)

Where: California NEM 3.0, similar programs in other states

How it works: Exports are paid at time-based “avoided cost” values that can be much lower than retail rates, especially during peak solar production hours.

Result: Self-consumption becomes critical

Key takeaway: Under net billing, a kilowatt-hour you export at noon might earn you 8 cents in credits, but importing that same kilowatt-hour at 7 PM could cost you 50+ cents. The math no longer balances in your favor unless you optimize.

California Snapshot (Helpful Even If You’re Not in CA)

California’s NEM 3.0 represents where many states are heading. Understanding it helps you prepare for similar changes:

  • Time-based export values: Calculated hourly/seasonally using an Avoided Cost Calculator (ACC). Midday solar production hours = lowest value. Late afternoon can be higher, but imports still cost more.
  • TOU plans required: All residential solar customers must be on time-of-use rate plans.
  • Non-bypassable charges: Small fees (a few cents per kWh) on all imported energy that export credits can’t erase.
  • Bottom line: Self-consumption is now king. Export credits alone won’t zero out your bill.

Why Bills Stay High Under Newer Net Billing Rules

The timing mismatch problem: Your solar produces most during midday (when exports are worth less), but you use most electricity in the evening (when imports cost more).

Common reasons your bill stays high despite having solar:

  • Evening energy use: Cooking, air conditioning, lighting, EV charging—all happening after sunset when you’re buying expensive grid power.
  • Undersized system: Designed for your old usage patterns, then you added an EV, pool, heat pump, or your family grew.
  • Panel performance issues: Dirty panels, new shading from trees/construction, or equipment degradation robbing you of production.
  • Wrong rate plan: Time-of-use windows misaligned with your actual usage habits.
  • High fixed charges: Monthly connection fees that solar can’t eliminate.

Example: The Same kWh, Different Values

  • Noon: System exports 8 kWh when export values are 8¢/kWh = 64¢ in credits
  • 7-9 PM: Home imports 8 kWh during peak pricing at 48¢/kWh = $3.84 charge
  • Net result: Same number of kWh in and out, but you still owe $3.20 for that day
  • Monthly impact: This pattern repeated daily = $96/month even with “net zero” energy

How to Win Under Modern Net Billing (Priority Order)

  1. Use what you make: Run dishwasher, laundry, pool pump, and other flexible loads during peak solar production (10 AM – 3 PM). This is free energy you’re already producing.
  2. EV smart charging: Charge during off-peak hours overnight OR during midday solar production. Avoid 4-9 PM peak rates at all costs. A single evening charge session can cost $15-20 vs. $3-5 off-peak.
  3. Pick the right TOU plan: Don’t assume your default rate plan is optimal. Compare your utility’s TOU options and align peak hours with your actual usage patterns. This alone can save 20-40% on bills.
  4. Optimize thermostat & water heating: Pre-cool your home during low-cost solar hours. Pre-heat water in late morning. Use programmable thermostats to avoid running HVAC during peak evening hours.
  5. Consider battery storage strategically: Only after optimizing steps 1-4. Batteries let you store midday solar for evening use, but they’re expensive. Make sure load shifting alone won’t solve your problem first.
  6. Maintain system performance: Keep panels clean, trim shade-causing vegetation, monitor for equipment issues. A 20% production drop means 20% less free daytime energy.

Pro tip: Many homeowners can cut their bills by 30-50% just by implementing steps 1-4, without spending a dollar on new equipment. Battery storage should be your last resort, not your first move.

Glossary (Fast Reference)

Export: Solar electricity you send to the grid when producing more than you’re using.

Import: Grid electricity you buy when your solar isn’t producing enough (nights, cloudy days, high usage).

True-up: Annual reconciliation where your utility settles the year’s running balance of credits and charges. This is often when homeowners get a shock bill.

Non-bypassable charges (NBCs): Small per-kWh fees (typically 2-4¢) you pay on every kilowatt-hour you import, even if you have export credits. These fund public programs and can’t be offset by solar.

Avoided-cost value: What the utility saves by not generating that electricity themselves. Under net billing programs, this time-based value determines what your exports are worth—usually much less than retail rates.

Time-of-Use (TOU): Rate structure where electricity costs different amounts at different times of day. Peak hours (typically 4-9 PM) cost the most; off-peak (late night/early morning) costs the least.

Self-consumption: Using your solar electricity in real-time rather than exporting it to the grid. Under modern net billing, this is your most valuable solar power.

Bottom Line

Under modern net billing rules, self-consumption beats export every time. Shift your loads to daylight hours, choose the right rate plan, keep your system performing well, and only consider battery storage after you’ve optimized everything else. The game has changed—winning means using your solar when you make it, not sending it away and buying it back later.

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