Net metering
Also known as: net energy metering, NEM
Net metering is a billing arrangement that credits homes and businesses with solar panels for the extra electricity they send to the grid, usually at the same rate they pay to buy power.
On a sunny day the meter effectively runs backward, and the customer pays only for their 'net' use. While net metering helped rooftop solar take off, many utilities and regulators now argue it shifts grid costs onto customers without solar, and are cutting the credits.
Net metering, explained at three levels
At home
Think of net metering like a bank account for electricity. When your solar panels make more than your home uses, the extra flows out to the grid and gets deposited as a credit. At night or on cloudy days, when you draw power from the grid, you withdraw from that account. At billing time, you pay only for the difference, your net use, rather than everything you bought.
At work
Net metering is a billing arrangement that credits customers with solar panels or other small generators for the electricity they export to the grid, usually at the same rate they pay to buy power. Because exports offset purchases one for one, it shortens the payback period on solar. The rules in each province or state strongly shape whether a solar investment makes sense.
At home
A net-metered home uses a bidirectional meter that counts electricity flowing in both directions. Each month the utility subtracts exports from imports. If you exported more, the surplus carries forward as a credit. In many programs, including Ontario's, leftover credits expire after twelve months without a cash payout, so systems are sized to cover a year's use rather than to make a profit. Your summer surplus covers part of your darker winter months.
At work
Utilities have developed alternatives. Net billing credits exports at a lower rate than retail, often near the wholesale or avoided-cost price. Value-of-solar tariffs price exports by their measured grid value. Time-varying export rates pay more for power sent during evening peaks than at sunny middays. Each design changes the economics: as export credits fall, self-consumption matters more, which is why newer programs encourage batteries that store midday solar for evening use.
At home
A solar home still leans on the grid at night and as backup, but under classic net metering most grid costs are bundled into the per-kilowatt-hour price. When a home offsets its kilowatt-hours, it also avoids paying much toward poles, wires, and staff, and other customers cover the gap. In my view, that fairness argument is real, though utilities sometimes overstate it to protect their own business models.
At work
Rate design is the lever regulators use. Fixed monthly charges, demand charges, time-of-use rates, and export compensation each shift who pays for grid infrastructure. Regulators weigh solar's benefits, such as reduced peak load, lower line losses, and avoided generation, against its costs, often through a value-of-distributed-energy study. California's NEM 3.0 tied export credits to hourly avoided costs. Grandfathering existing customers maintains trust while new rules apply only to new installations.
Real-world examples
At home
Aisha installed solar panels on her home in Ontario. In summer, her net-metering credits built up, and they covered part of her winter bills when the panels produced much less power.
At work
Jerome is an energy consultant for small businesses in British Columbia. When advising a winery on solar, he modelled the payback under current net-metering rules and also under a possible future rate change, so the owners weren't caught off guard.
How it compares
| feature | Net metering | Net billing |
|---|---|---|
| Export credit | Usually full retail rate | Lower, often wholesale or avoided cost |
| Solar payback | Faster | Slower |
| Battery incentive | Weak | Stronger |
| Cost shift concern | Higher | Lower |
Net metering values exports like retail power. Net billing pays less for them.
For analysts
Solar sales pitches often assume today's net metering rules last forever. I'd ask for a payback calculation under less generous export rates, since that's the direction many regulators are moving.
History & origin
Minnesota passed one of the first US net metering laws in 1983, and many states followed in the 1990s and 2000s as rooftop solar emerged. Canadian provinces, including Ontario, British Columbia, and Nova Scotia, introduced their own net metering programs. As solar became cheaper and more common, utilities pushed back. California's 'NEM 3.0' policy, which took effect in April 2023, sharply reduced export credits and steered new customers toward adding batteries. In 2022, Nova Scotia Power proposed a monthly charge on solar customers but dropped it after public opposition and provincial legislation blocking it. In my opinion, net metering was the right subsidy to launch an industry, but compensation should eventually reflect when the power is actually valuable to the grid.