For many homeowners, the biggest question about going solar is not whether panels work. It is whether the numbers make sense. Net metering is often the missing piece that turns solar from a long-term environmental goal into a practical financial decision.
At its core, net metering allows you to earn credit for the excess electricity your system sends back to the grid. Instead of losing that surplus power, you bank it with your utility and draw on it later when your system is not producing at full capacity. The result is a more balanced bill, a shorter payback period, and a clearer path to lowering your lifetime energy costs.
Understanding how net metering works, and how it differs from programs like net billing, feed-in tariffs, and buy-all arrangements, is critical before you sign a solar contract. Compensation structures vary by state and even by utility, and those details directly impact your return on investment.
This guide will:
- Help you understand what net metering is, and why it’s valuable to solar system owners
- It will show you where net-metering programs are available
- Differentiate between net-metering, all-in programs, net-billing, feed-in tariffs, and explain time-of-use schemes developed by states and utilities
What Is Net-Metering?
If you’re interested in going solar, you’ve probably heard of the term net metering or net energy metering (NEM). Under NEM programs, a utility must reimburse a homeowner or business for any electricity their renewable energy system sends back to the grid. This happens when a solar system produces more energy than the home or business it’s installed on can use.
By sending excess solar power back onto the electric grid, residential solar and wind systems can help utilities balance the local electric load and reduce the need for them to run more expensive “peaker” plants, like old coal or gas-powered plants. For this, utilities must reimburse the small power producers for that energy.
They do this by using a bi-directional electric meter, which is installed when a homeowner goes solar. Like a WiFi router that both sends and receives information, these meters measure the flow of electricity from the grid to the home as well as back onto the electric grid.
How Net Metering Programs Help Homeowners Save Money
When the home or business puts energy back on the grid, they’re credited for that energy, and when they use energy from the electric grid at night, in winter, or when it’s cloudy, those credits are used.
Basically, they use the utility as an energy bank. Under true net-metering programs, electric customers with solar are fully credited for each kilowatt-hour (kWh) they send onto the electric grid. This makes it a powerful incentive for investing in solar power.
If, over a predetermined period, generally a year (but sometimes on a monthly or shorter basis), the system produces more overall energy than the building uses, then the system owners are reimbursed for that excess generation at a predetermined rate.
This way, NEM programs help further speed up the return on investment for going solar and help keep energy bills as low as possible. The Solar Energy Information Administration estimates that most home solar systems will only generate up to 40% more energy than is used in the home at any given time.
Since the first NEM programs were launched in the late 70s and early 80s, they’ve both grown and changed a lot and have evolved into other schemes, including net-billing, feed-in tariffs (FiTs), and so-called all-in programs.
There is no federal NEM program, but thankfully, the majority of states offer NEM or similar programs for reimbursing solar system owners for the power they generate.
Texas, Idaho, and Tennessee are the only states without statewide mandates for NEM-type programs, but some utilities in these states offer NEM or similar programs as of 2026. That’s according to DSIRE, a database of renewable energy incentives across the US.
Looking Deeper Into Net Metering and Related Programs
Rates and reimbursement programs for net-metering programs continue to change as utilities push back against reimbursement rates they claim cost-shift the price of solar to those who don’t have it.
This has spawned newer programs like net-billing and FiTs. It also makes it a little more complex to know what any state or utility is offering currently. Indeed, in the NC Clean Energy Technology Center’s (NCCETC’s) annual “The 50 States of Solar” report for 2025 (released Jan. 22, 2026), it observed that 49 states changed their distributed solar programs in 2025.
The DSIRE site, an NCCETC project, does a good job tracking all of these changes, but your credible local solar installers should have the most up-to-date information on local programs and reimbursement strategies.
As we mentioned, under true NEM programs, utilities credit homeowners 1 kWh of electricity for each 1 kWh their system puts on the electric grid. When their overall production exceeds their usage in the specified period, the utility must reimburse them for that excess generation.
In slightly more than half the states from Florida to Alaska, NEM is still reimbursed at a retail rate, according to DSIRE.
Net Billing
Net billing programs are similar to NEM programs but are a little more complex. Rather than being compensated at an equal rate for power sent onto the electric grid at a retail rate, solar system owners are compensated at a lower rate. This is usually what the utility claims is its wholesale rate or avoided-cost rate for the power put on the grid.
Under such a scheme, a homeowner may pay $0.20 per kWh from the electric grid. However, their utility may say that their wholesale rate for electricity is $0.05 per kWh.
Under a net billing program, the customer would be compensated at that $0.05 kWh rate for each kWh they put on the electric grid. Other utilities may offer a rate between wholesale and retail rates for energy put on the grid.
Time of Use
Still other states may incorporate a time-of-use (TOU) rate into their net metering compensation structures. This includes North and South Carolina, as well as some places in California and other states.
In these states, people may receive a higher rate for energy put on the grid during peak usage hours, such as early evening, when people use the most energy at home.
Under such a program, the homeowner may receive a credit of $0.10 per kWh between 4 and 8 p.m., for instance. That same solar owner may only receive a $0.05 kWh credit for power put back on the grid between 7 a.m. and 4 p.m.
Feed-in Tariffs
Another NEM-like scheme is the FiT. The FiT credits solar home and business owners at a higher than retail rate for installing solar power. They were developed to accelerate the deployment of solar power and renewable energy, and are largely being phased out as more solar is added to the electric grid.
A less popular option, particularly for homeowners, is the buy-all-sell-all scheme. Under these arrangements, a homeowner with solar will sell all the power produced by the solar system to the utility at a predetermined price. They will also purchase all of their electricity from the electric utility at retail rates.
How to Sign up for NEM programs
Generally, when homeowners work with a solar installer, the installer will coordinate the installation of the solar system and the bi-directional meter with the utility. After the meter is installed, the homeowner should be enrolled in the NEM program. However, they should make sure this is the case by asking their solar installer who is responsible for what.
In deregulated markets where homeowners can choose to purchase power from different utilities, they should also ask prospective solar installers which power providers offer the best NEM programs for their solar system.
Conclusion
Net metering remains one of the most powerful financial drivers behind residential solar adoption. No matter how your state structures its program, whether that is full retail credit, net billing, time-of-use rates, or something else, the rate your utility assigns to the extra power you send back to the grid plays a major role in how much you actually save over time.
Because these programs evolve frequently, relying on outdated information can cost you thousands over the life of your system. Rates, eligibility requirements, insurance thresholds, and compensation formulas all matter. Solar is not a one-size-fits-all investment. It requires careful evaluation of your roof, your utility structure, and your local policy landscape.
If you are considering solar, the smartest next step is to run the numbers based on your actual usage and your local utility rules. The team at EcoGen America specializes in designing systems that align with current net metering policies and maximize available incentives.
Connect with EcoGen America today to receive a personalized solar assessment and see how net metering can reduce your cost of going solar.
