Net Metering + Solar Billing Reference

Overview

Net metering is how grid-tied solar customers get credit for excess production. Understanding the math + variations is essential to explaining solar economics to customers.

How net metering works

Basic concept:

1. Solar produces during day, often more than home uses
2. Excess flows to grid
3. Utility credits customer for excess
4. At night / cloudy days, home draws from grid
5. Customer "nets" production vs consumption

Result: Customer's electricity bill = consumption − production (credits used)

Net metering types

1:1 Net metering (best for customers)

• Every kWh exported = 1 kWh imported credited
• Customer's solar is worth full retail rate
• Best economics
• Some states: Massachusetts, New York, parts of New Jersey

Wholesale rate compensation

• Exported kWh credited at wholesale rate (typically 30-50% of retail)
• Customer's solar still worth something but less
• More common in states with utility lobbying
• Example: Arizona (after 2017 changes)

Time-of-use (TOU) net metering

• Credits vary by time of day
• Peak hours credited highest
• Customer's solar production timing matters
• California: now standard

Net billing

• Customer billed for full grid use; credited for solar exports at predetermined rate
• Less favorable than net metering
• Some states moving this direction

No net metering / value-of-solar

• Direct compensation at "value of solar" calculation (often less than retail)
• Variable; depends on utility
• Some states transitioning to this

Reading a net-metered bill

Customer bills typically show:

• kWh consumed (from grid)
• kWh produced (sent to grid)
• Net kWh = consumed - produced
• Bill amount based on net kWh × rate

Examples:

Month 1 (low production, winter):

• Consumed: 800 kWh
• Produced: 200 kWh
• Net: +600 kWh

Month 2 (high production, summer):

• Consumed: 400 kWh
• Produced: 700 kWh
• Net: -300 kWh

Annual reconciliation (typically Oct-Mar settlement):

• Banked credits from summer offset winter draw
• Cumulative net positive = bill
• Cumulative net negative = either rolled over OR paid out at wholesale

True-up

Each utility has a "true-up" period:

• 12-month accounting cycle
• Net credits accumulated reset to zero
• Sometimes paid out (at wholesale rate, usually unfavorable)
• Sometimes simply expire

Implications:

• Over-produce, you lose excess at year-end
• Under-produce, you owe at retail
• Optimal: production = consumption annually

Production estimating

Annual production:

For typical 6kW system in different climates:

Use PVWatts (NREL free tool) to estimate for specific address.

Customer payback calculation

Inputs:

• System cost (after federal + state incentives): $X
• Annual production: Y kWh
• Electricity rate: Z per kWh
• Annual savings: Y × Z

Payback:

X ÷ (Y × Z) = years to break even

Example:

• 8,000 kWh annual production
• Payback: system cost divided by annual savings, roughly 10 years

Plus appreciation:

• System adds 4-7% to home value
• Selling within payback period may still profit

Return on investment (ROI)

20-year analysis:

• Annual savings compounds with rate increases
• 20-year total savings often substantial
• ROI: 15 - 25% IRR (better than most investments)

Customer's monthly bill scenarios

Scenario A: Customer's solar produces 100% of usage annually

• Some months credit (summer)
• Some months bill (winter)
• Net: minimum-bill only (a small flat connection fee)

Scenario B: Customer's solar produces 70% annually

• Bill is 30% of pre-solar
• Most months: roughly a third of the prior bill

Scenario C: Customer's solar produces 30% annually

• Bill is 70% of pre-solar
• Limited offset

Sizing recommendation: aim for 80-100% offset for best economics.

Solar incentives (2025)

Federal (Solar Investment Tax Credit):

• 30% of total system cost
• Tax credit (reduces tax owed; not refundable)
• Must have tax liability to use
• Extended through 2032

State incentives:

• Varies dramatically
• Rebates (meaningful in some states)
• Tax credits
• Net metering rules (above)
• SRECs (Solar Renewable Energy Certificates): NJ, MD, MA, DC, PA, OH, DE, NC

Utility incentives:

• Some utilities offer rebates
• Some have higher net metering rates
• Time-of-use bonuses

Property tax exemption:

• Many states exempt solar from property tax assessment
• House value goes up, but property tax doesn't

SRECs explained

Available in: NJ, MD, MA, DC, PA, OH, DE, NC, others

• 1 SREC = 1 MWh (1,000 kWh) produced
• Sold separately from electricity savings
• Brokers facilitate sale
• Pricing varies widely state-to-state per SREC

For a typical 6kW system producing 8 MWh annually:

• 8 SRECs per year
• Value: modest but real additional income each year
• Over 15-year SREC eligibility: roughly 15x the annual value, adding up to a meaningful sum

Net metering policy trends (2025)

Many states reducing benefits:

• California: NEM 3.0 reduces compensation
• Arizona: more complex tariffs
• Hawaii: high adoption created grid constraints
• New York: maintained 1:1 (best in country)

Customer should be aware that net metering policies can change; existing systems usually grandfathered.

When to consider battery storage

If net metering is unfavorable:

• Battery makes "self-consumption" valuable
• Store excess solar; use later
• Less reliant on net metering
• Combined system: better economics in unfavorable regions

Battery storage:

• Tesla Powerwall: a premium price point, varies by installer
• Enphase IQ Battery: roughly half to two-thirds of Powerwall pricing
• LG RESU: similar range to Enphase
• Generac PWRcell: among the priciest options, close to Powerwall

Customer questions you'll hear

"Why is my bill higher this month?"

• Cloudy weather; less production
• Increased consumption
• Rate changes
• True-up reconciliation

"Can I just turn off the meter?"

• No; net metering requires bidirectional metering
• Utility owns the meter

"What if I produce way more than I use?"

• Depends on net metering rules
• May get credited (good) or excess wasted (bad)
• Size system for ~100% offset

"Will solar lower my taxes?"

• Federal: yes (30% credit)
• Property tax: usually exempted (state-specific)
• Income from SRECs: taxable

Calculator tools

For accurate estimates:

• NREL PVWatts: production estimate by address
• Utility's solar calculator: bill impact for specific rate
• Solar installer's proprietary tools: ROI analysis

Always use real customer rate + address; generic numbers don't apply.

References

• DSIRE database (state incentives)
• IRS Form 5695 (residential energy credit)
• NREL PVWatts solar production calculator
• Manuall internal: Residential Solar PV Installation SOP, Solar Panel Types + Technology Reference