Net metering explained: how you get paid for extra solar

By the Simple.solar editorial team. Reviewed October 2026. 6-minute read. How we research.

Your solar panels make the most power at midday, when you may not be home. That extra power has to go somewhere. In most homes, it flows back through your meter to the grid. The big question is what your utility gives you for it.

The answer depends on your state and utility, and it can change your savings by thousands of dollars over the life of a system. This guide explains the main ways utilities credit solar exports, with simple math for each.

What is net metering?

Net metering is a billing rule. When your panels make more than you use, the extra power flows to the grid and your meter tracks it. When you need more than your panels make, such as at night, you pull power from the grid. At the end of the billing period, the utility charges you only for the net amount.

Picture your meter spinning backward during the day and forward at night. Modern smart meters record both directions separately, but the idea is the same.

Here is a simple month:

• You pull 700 kWh from the grid.
• You send 500 kWh back to the grid.
• Net use: 700 − 500 = 200 kWh.
• At $0.18 per kWh, your energy charge is 200 × $0.18 = $36.

Without that credit, you would pay 700 × $0.18 = $126. The 500 exported kWh saved you $90.

What is the difference between net metering, net billing and buy-all/sell-all?

Utilities use three main approaches. The names vary, so ask your installer and utility which one applies to you.

1:1 net metering

Each kWh you export earns a credit equal to the retail price you pay for a kWh. Your exports are worth full value. This is the best deal for solar owners. Many states started with this rule. Some still use it, and others have moved away from it.

Net billing

You still use your own solar power first, which saves you the full retail rate. But the utility pays a lower rate for anything you export. That export rate is often based on the utility's "avoided cost," meaning what it would have paid to make or buy that power elsewhere.

California's current rules, often called NEM 3.0, are the best-known example. Export credits there are based on avoided costs and change by hour and season. For much of the year they average a fraction of the retail rate, though they can spike on some summer evenings. Rules like these change over time, so check your utility's current tariff.

Buy-all/sell-all

Under this setup, all of your solar output goes to the grid, and you buy all of your power back at retail. The utility pays you a set rate for every kWh your panels make. It is less common for homes today. Whether it is a good deal depends entirely on the sell rate.

How does time-of-use pricing change things?

Many utilities now charge different prices at different times of day. This is called time-of-use, or TOU. Power is cheaper when demand is low and pricier during peak hours, often late afternoon and evening, such as 4 to 9 p.m.

Solar makes most of its power at midday, when TOU prices are often lowest. Then the sun sets just as prices peak. That timing gap matters.

Under 1:1 net metering with TOU, exports are often credited at the price for that hour. A kWh exported at noon at $0.25 can offset only part of a kWh bought at 7 p.m. at $0.45. Under net billing, the gap is usually even wider.

What is a true-up?

Many net metering plans settle up once a year instead of every month. This annual settlement is called a true-up.

Here is how it works. In sunny months, you may build up extra credits. In winter, when your panels make less, you use those credits. At your true-up date, the utility adds up the whole year.

• If you used more than you earned in credits, you pay the balance.
• If you earned more than you used, the utility may pay you for the extra, often at a low wholesale rate, or the credits may simply expire.

This is why oversizing a system rarely pays. Power you export beyond your yearly use is often worth very little. Size your system to match your yearly use. Our system size calculator can help you find that number.

Ask your utility when your true-up month falls. Some let you choose it. A true-up just after the sunny season can help you use up summer credits in winter.

Worked example: the same home under three rules

Here is one home with an 8 kW system that makes 11,000 kWh a year. The family uses 11,000 kWh a year. They use 40% of their solar directly (4,400 kWh) and export the other 60% (6,600 kWh). Their retail rate is $0.30 per kWh.

Under 1:1 net metering

• Direct use saves: 4,400 × $0.30 = $1,320.
• Exports earn: 6,600 × $0.30 = $1,980.
• Total yearly value: $3,300.

Under net billing with an average export rate of $0.08

• Direct use saves: 4,400 × $0.30 = $1,320.
• Exports earn: 6,600 × $0.08 = $528.
• Total yearly value: $1,848.

Under buy-all/sell-all at $0.12

• All output earns: 11,000 × $0.12 = $1,320.
• Total yearly value: $1,320.

Same panels, same roof, same family. The yearly value ranges from $1,320 to $3,300 just because of the billing rule. That is why you should never trust a savings estimate until you know which rule your utility uses. Run your own numbers in our savings calculator.

How does net metering change the value of a battery?

A battery stores your extra midday solar so you can use it in the evening instead of exporting it.

Under 1:1 net metering, the grid already acts like a free battery. Exporting a kWh and buying it back later costs you nothing. A battery adds backup power during outages, but it saves little extra money.

Under net billing, the math flips. Go back to the example above. If a battery shifts 3,000 kWh a year from export to evening use, each of those kWh goes from earning $0.08 to saving $0.30. That gain is 3,000 × ($0.30 − $0.08) = $660 a year. If evening TOU rates are higher, the gain is bigger.

Batteries also lose some energy in storage, usually about 10%. Factor that in. To see what size battery fits your home, try our battery sizer. For incentives that may apply to batteries, check current incentives in our incentives guide.

How do you find out which rule applies to you?

• Search your utility's website for "net metering," "net billing" or "solar export."
• Look for the tariff or rate schedule name and the export credit rate.
• Ask whether credits roll over monthly and when the true-up happens.
• Ask about fixed monthly charges, which solar cannot offset.
• Check whether rules for new customers differ from those for existing ones.

You can also browse our state guides for a starting point, then confirm with your utility.

Frequently asked questions

Watch: a short explainer

Keep reading

• How much do solar panels cost in 2026?See 2026 solar prices per watt, total costs for 4 to 12 kW systems, where your money goes, battery prices and what pushes a quote up or down.5 min
• Solar incentives in 2026: what's left and whereThe US 30% homeowner credit is gone, but state credits, rebates, lease rules and programs in Canada, the UK, Australia and India still help.7 min
• Buy, loan, lease or PPA: how to pay for solarCompare paying cash, taking a loan, leasing or signing a PPA for home solar, with a worked 25-year example and the fine print that changes the math.7 min