Resources > Net metering: what you need to know

Net metering: what you need to know

• Factsheet

April 18, 2024

What is net metering?

Most solar systems are connected to the electric grid, or “grid-tied.” The electricity generated by your system can flow to and from the grid.

⬅️ Utility electricity flows into your home if you need more electricity than your panels are producing. This ensures that you have a continuous supply of electricity, even at night and on particularly cloudy days.

➡️ Solar electricity flows out of your home in moments of overproduction, when your solar system is producing more energy than your home is using. Your excess electricity is then used by the house next door or the neighborhood library.

So how do you get credit for the extra electricity you produce? And how does that affect your electric bill? The answer: net metering.

How net metering works

In the old days of analog meters, your utility meter would spin forward when you consumed electricity from the grid, and backward when you produced electricity from your solar array.

The meter would then “net out” the difference at the end of each month. The resulting bill would reflect the “net amount” that the meter reader saw on the dial.

Solar electricity your system produced – Utility electricity you consumed

The same concept holds true today — only with digital meters, not analog. If your monthly solar electricity production actually surpassed your utility electricity consumption, you’d end up with a negative bill credit. That credit may be carried over to the next month’s bill like rollover minutes on an old cell phone plan.

This arrangement is called net metering. Net metering is the policy that enables you to be compensated for your solar electricity production, allowing you to offset your electric bill with that production.

Each state has its own net metering policies. States’ rules vary in how and when they calculate the net metering credit, see below for state-specific information.

In most states, net metering allows for a one-to-one credit for your solar electricity. In other words, the electricity you produce is equal in value to the electricity you receive from your utility.

So, if your solar array produces one kWh of electricity, you can directly reduce your electric bill by one kWh. If that kWh of solar electricity is generated when you don’t need it, you’ll receive a credit for the full retail value of that kWh, which you can then use to offset your electricity consumption at a later time.

Interconnection: a key element to net metering

Interconnection is the process through which your utility connects your solar array into their grid, allowing for the flow of power between the two.

Before you can install your system, your utility must first approve it. Your installer will submit the preliminary interconnection paperwork with your utility on your behalf, making sure the size and location of the solar array is approved by the utility.

Once your system is installed, your local jurisdiction will inspect it, and your installer will submit a request for interconnection to your utility.

Once approved, your utility will visit the installation and install a two-way meter, which allows for more accurate reading and reporting of your solar electricity production. Once the two-way meter is installed and your utility gives you formal “permission to operate,” you can flip the switch on your solar array.

Smooth, timely, and cost effective interconnection is a key element of net metering.

Net metering in your state

Net metering is a state-level policy — passed by state legislatures and varying from state to state. In 2020, monopoly utilities petitioned the Federal Energy Regulatory Commission (FERC) to propose a national ruling on net metering. This would have undone state net metering laws. SUN partnered with Vote Solar, Earthjustice, and others to protect net metering on behalf of solar owners. We generated 20,000+ comments in opposition and FERC dismissed the petition.

We continuously monitor net metering policy changes across the country. Some states are expanding net metering while others are attempting to roll it back.

• Our members filed complaints with the D.C. Public Service Commission to force PEPCO to ensure interconnection within 30 days.
• In Gainesville, Florida, we’re fighting to keep net metering in GRU territory.
• We helped pass the Virginia Clean Economy Act of 2020. This helped to raise net metering caps and scored other wins for current and future solar owners.

Understanding your state’s policies is key to making sure your solar investment is valued properly and compensated fairly. When looking at net metering in your state, consider these key issues:

System capacity limit

Utilities or public commissions often limit the total system capacity (system size) you may install. These policies usually cap a system’s production at a certain percentage of your yearly electricity consumption, often between 100% and 150%.

Excess generation credit rate

When your system produces more electricity than you need, it’s called “excess generation” or “excess production.” And thanks to net metering, your utility has to compensate you for it.

Typically, utilities will compensate you for any excess electricity you produce on a 12-month cycle. Where this is the case, you can use your excess production credits for up to a year.

The rate of compensation for this excess solar production varies greatly between utilities. Many utilities credit excess generation at the full retail rate, enabling the “one-to-one” crediting discussed above.

However, some utilities are moving towards crediting excess generation at a lower rate. Where this is the case, you’ll want to install a system that will enable you to consume as much of your solar electricity on site as possible.

Statewide net metering cap

In many states, policies limit the total amount of energy that can be net metered. These rules harm states by hamstringing solar deployment. In many cases, legislators enacted net metering policies with a very low statewide cap (often less than 3% or 4% of total utility electricity sales). Many states are looking into raising this net metering cap in order to support the continued growth of solar.

Applicable utilities

Net metering laws and regulations can vary between utility territories. Municipal utilities, rural electric cooperatives, and investor-owned utilities may have different net metering policies and enforcement mechanisms.

For example, many state net metering programs are only enforced by state regulators for larger investor-owned utilities. Oftentimes, rural electric cooperatives and municipal electric authorities are exempted.

Policies expanding net metering

There are several types of net metering (see next section). Some states have passed laws that allow for virtual or aggregate net metering in order to broaden access to solar energy for residents and businesses.

Additional barriers

Within net metering, utilities and public service commissions (i.e. the utility regulators) may deploy additional barriers to make it harder for residents to go solar. These may include additional fees when interconnecting to the grid, lengthy approval processes, and confusing tariffs.

Read more about your state’s net metering

• Arizona
• Colorado
• D.C.
• Florida
• Indiana
• Maryland
• Minnesota
• Ohio
• Pennsylvania
• Texas
• Virginia
• West Virginia

Additional types of net metering

The most common net metering arrangements for homes or businesses involve a single meter on a single property with energy credited to one bill or account. Think residential solar panels: they’re installed on a single property, they feed into a single electric meter, and that meter is associated with the single utility account of the homeowner.

But that’s not the only kind of net metering. Aggregate and virtual net metering are two other types.

Aggregate net metering

This common policy allows a solar owner with more than one electric meter on their property to credit their surplus solar electricity from one meter to another meter (on the same property).

Aggregate net metering is most common on farms, and is commonly referred to as “Agricultural Net Metering.” A farm may have multiple buildings (each with its own electric meter), of which only one roof is good for solar. Oftentimes, that good-for-solar building may have very little electric demand (e.g. a barn).

With aggregate net metering, the surplus electricity produced at that building’s meter can be credited to one of the other buildings on-site that has higher demand (like a house). In many states, aggregate net metering is limited to farms.

Tenant aggregation allows multiple occupants of a single building to share electricity or receive proportional credit from an on-site, shared installation. Seventeen states have meter aggregation policies.

Virtual net metering

Virtual net metering allows for compensation to community solar subscribers. Multiple utility customers (or “subscribers”) sign up to receive credit for the electrical output of a single solar project somewhere in their community.

With community solar, virtual net metering provides subscribers with a credit on their electric bill. The size of your share determines how much credit you receive.

Fewer than 20 states have virtual net metering policies.

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