DIY Cost HQ

Net metering explained

Solar panels produce at midday; homes consume most in the evening. Net metering is the accounting that bridges the gap.

The simple version

Under 1-to-1 net metering, each kWh you export earns a kWh of credit. Produce 30 kWh by day, use 30 kWh by night, and your bill nets near zero (you still pay fixed connection fees).

Why it matters more in 2026

With the federal residential credit gone, net metering policy is now the single biggest lever on payback. California's NEM 3.0 (2023) slashed export credit values and stretched paybacks there; other states still offer full retail credit. Policies change — check your utility's current tariff, not a 2022 article.

Without net metering

You only offset electricity consumed while producing — roughly 50% of a typical home's usage without a battery. That roughly halves year-1 savings and can double payback. This is the scenario the payback calculator's "self-consumption only" mode models.

Batteries and net metering

A battery stores midday surplus for evening use, effectively creating your own net metering. It works — at $8,000–$15,000+ installed, which belongs in the payback math, not beside it.

Net billing: the middle ground

Many utilities have moved from true net metering to net billing. You still export surplus power, but exports are credited at a set export rate — often the utility's avoided cost, a few cents per kWh — instead of the full retail rate you pay for imports. The gap is the whole story: importing at 16¢ while exporting at 4¢ means an exported kWh is worth a quarter of a self-consumed one. Under net billing, the winning strategy flips from "produce as much as possible" to "use as much of your own production as you can, while you produce it" — running dishwashers, laundry, and EV charging at midday instead of midnight.

A worked example

Say your system produces 900 kWh in a month and your home uses 900 kWh, but only 400 of those kWh are consumed while the sun is up. Under 1-to-1 net metering, the 500 exported kWh cancel the 500 you import at night: your usage bill is near zero either way. Under net billing at 16¢ import and 4¢ export, the same month costs 500 × 16¢ = $80 in imports, minus 500 × 4¢ = $20 in export credits — $60 for a month that net metering made free. Same panels, same house, same weather. The policy is the difference, which is why two neighbors with identical systems can have very different paybacks across a state line.

True-up and credit expiry

Read the fine print on when credits settle. Many programs true-up annually: credits banked in a sunny June offset a dark December, but any surplus left at the true-up date may be paid out at a low wholesale rate or simply expire. Monthly true-ups are harsher — summer surplus cannot rescue winter bills. Credit expiry is also why oversizing "for the future" only pays when the future load is real and near; a system built for an EV arriving in eight years donates its surplus in the meantime.

How to check your own policy

Find your utility's current interconnection or net metering tariff page — not a blog summary — and look for four things: the export credit rate, whether credits roll month to month, the true-up period, and any system size cap (many utilities limit residential systems to 100 to 120% of historical usage). Then ask any installer quoting you to state, in the proposal, which tariff they assumed. If the quote's savings depend on 1-to-1 crediting and your tariff is net billing, the payback in that proposal is fiction.