Going solar offers homeowners many great benefits. One of the best—for those who can take advantage of it—is net metering (also called net energy metering). With net metering, homeowners get credited for the extra energy their solar system produces that is sent back to the electric grid.

Usually, you are credited monthly until the credits are summed up annually. Net metering means that homeowners can use their solar system to offset their home electricity consumption over the course of the year—high-producing months help to offset lower-producing times when more power must be drawn from the utility grid. In most cases, net metering programs place limits on the size of a solar system to ensure the power generated from your solar system is approximately what your annual electricity consumption is. 

Most homeowners rely on the grid to power their homes some of the time—at night and when production is lower. At those times, the utility charges a regular retail rate for the electricity consumed. With net metering, that process goes in reverse. A system producing extra electricity through solar sends it back to the grid. The electric meter runs backward.

Under an ideal net metering program, you would receive a credit for your grid-bound energy at the same retail rate that the utility charges for any in-bound energy used. At the end of the billing period, the utility provides a credit on your electricity bill for the net amount of energy they send back to the grid, which gives us the name “net energy metering.”

However, it is not that simple. Net-metering programs are determined by state officials and regulators. The value of the credits that homeowners receive for the energy they send to the grid varies by state and utility. Most net metering programs do not credit people with the full retail rate on their electricity bill for the energy they generate from solar that goes back to the grid.

Plus, not all solar systems are large enough to produce enough energy to meet the annual electricity consumption of the homeowner. For homes that have small solar systems that offset only a portion of the annual energy usage, net metering is not as beneficial.

Homes with large solar systems can take advantage of net metering to save owners hundreds of dollars a year. And while net metering does not typically “pay” homeowners money directly, it cuts the cost of their energy bills, helping them afford the cost of their solar systems.