Net Metering vs. Net Billing: What's the Difference and Why It Matters

If a solar quote mentions "you'll get full retail credit for excess energy," that's a net metering claim — and whether it's true depends entirely on your specific state and utility, because a growing number of utilities have shifted to net billing instead, which compensates very differently.

The core structural difference

Net metering: excess solar energy sent to the grid is credited at (or close to) the same retail rate you'd pay to buy electricity — effectively, your meter "runs backward," and you're only billed for your net usage over the billing period.

Net billing: excess solar energy is credited at a separate, usually lower, "export rate" — often tied to the utility's wholesale or avoided-cost rate rather than the retail rate you pay. You still get paid for excess generation, just at a lower rate per kWh than net metering would provide.

| | Net metering | Net billing | |---|---|---| | Credit rate for excess solar | Retail rate (or close to it) | Separate, usually lower export rate | | Financial effect | Generally more favorable to solar owners | Generally less favorable, longer payback | | Battery storage value | Less critical, since grid export is well-compensated | Often more valuable, since self-consuming or storing power beats a low export rate |

Why this matters more than it sounds like it should

A solar system's payback period calculation depends heavily on how excess generation is valued — a system generating meaningfully more than a household consumes at certain times of day gets very different credit depending on which policy applies. Some states have transitioned from net metering to net billing over recent years, meaning older articles (and even some installer materials) can describe outdated compensation structures for your specific utility.

What to actually ask an installer

• Is my utility currently on net metering or net billing, specifically — not just "does the state allow solar"?
• What is the actual export rate, in $/kWh, if it's net billing?
• Does a proposed system size assume I'll be exporting meaningfully, and if so, how does that assumption change under net billing versus net metering?

FAQ

Can my utility switch from net metering to net billing after I install solar? This depends on state policy — some states "grandfather" existing solar customers under the rules in effect when they installed, for a defined period; others apply new rules to all customers going forward. Confirm your specific state's grandfathering policy before assuming your compensation structure is locked in indefinitely.

Does net billing make solar not worth it? Not necessarily — it usually means the payback period is longer and that pairing solar with a battery (to store and self-consume rather than export at a low rate) becomes relatively more valuable than under net metering.

How do I find out which policy applies to me? Your utility can confirm directly, and your state's public utility commission website typically documents current net metering/net billing policy — the DSIRE database (referenced in our state incentives guide) also tracks this.

Fact-checked by Priya Nadar, P.E. Found an error? See our Corrections Policy.