Energy Costs
Net metering explained: what happens to the energy you don't use
One of the first questions every new solar homeowner asks is some version of the same thing: "What happens to the extra energy my panels produce?" The answer involves a system called net metering — and understanding it can make or break the financial case for your solar investment.
Net metering is a billing arrangement between your home and your utility company.
When your solar panels produce more electricity than your home consumes at any given moment, the excess flows back into the grid. Your electricity meter tracks this outflow and gives you a credit for the energy you exported.
Later — typically in the evening or on cloudy days — when your home needs more energy than the panels are producing, you draw from the grid as usual. The credits you earned earlier offset the cost of that grid consumption.
At the end of the billing period, you pay only for your "net" consumption: the difference between what you pulled from the grid and what you sent back.
If you exported more than you consumed, some utilities carry the credit forward. Others pay it out at a reduced rate. The details vary by market, but the core concept remains the same everywhere net metering exists.
Not all credits are created equal
Here's where it gets important: the rate you receive for exported energy is not always the same as the rate you pay for imported energy.
Under traditional one-to-one net metering, every kilowatt-hour you export earns the same credit as every kilowatt-hour you import. This is the most favorable arrangement for homeowners because it means your excess production is valued at full retail price.
However, many markets are moving toward "net billing" or reduced export rates, where the credit for exported energy is set at a wholesale or avoided-cost rate — often 30% to 60% less than the retail rate you pay for grid power.
This distinction matters enormously for system design. Under one-to-one metering, overproduction has strong financial value. Under reduced export rates, the math shifts heavily toward maximizing self-consumption and adding battery storage.
Knowing which structure applies in your market is essential before sizing a system.
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Why battery storage changes the net metering equation
Under favorable net metering, exporting excess solar to the grid makes financial sense. The credits you earn are worth the same as the power you buy.
Under reduced export rates, every kilowatt-hour you send to the grid earns less than what you'd save by using it yourself.
This is exactly where battery storage transforms the equation.
Instead of exporting excess production at a discount, a battery stores that energy and releases it later when the home needs power — during evening peak hours, overnight, or during outages. The homeowner captures the full retail value of every stored kilowatt-hour instead of accepting a discounted export credit.
In markets with unfavorable export rates, battery storage can improve overall system economics by 20% to 40% compared to solar-only installations.
The battery doesn't produce any energy. It just ensures that the energy your panels do produce gets used at maximum value.
Annual versus monthly settlement
Net metering programs settle credits on different timelines depending on the utility.
Monthly settlement means any excess credits at the end of each billing cycle are either paid out or reset. If you overproduced in sunny June but need more grid power in cloudy December, those June credits may not carry forward to help.
Annual settlement carries credits across months, allowing summer overproduction to offset winter underproduction. This is significantly more valuable for homeowners because solar production is inherently seasonal.
The settlement period directly affects how aggressively a system should be sized. Under annual settlement, slight oversizing is beneficial because summer surplus carries forward. Under monthly settlement, oversizing wastes credits that expire unused.
Understanding your utility's settlement policy is a critical input for system design that many homeowners overlook.
