Solar Net Metering Explained: Credits, TOU Rates, and How It Affects Your Bill

Understanding Net Metering Basics

Net metering is the program that allows solar owners to earn credits for excess energy. Understanding how it works helps you maximize savings and make better solar decisions.

How Net Metering Works

The flow of electricity:

• When your panels produce more power than you use (typically 10 AM - 3 PM), excess flows back to the grid
• Your meter spins backward (net metering) or the utility records an export
• You earn a credit for that energy at the "net metering rate"
• Later (at night or cloudy times), you draw power and use those credits
• Monthly settlement: if you exported more than imported, you earn money; if you imported more, you owe

The meter's role:

• Net metering requires a special "net meter" that can spin both directions
• Your utility installs this at no cost when you interconnect
• The meter records both direction and amount of electricity flow
• Billing is based on net flow: exports minus imports

Types of Net Metering Programs

1:1 Net Metering (True Net Metering)

• Export credits valued at full retail rate: $0.15-$0.25 per kWh
• This is the most favorable to solar owners
• Only available in some states and regions
• Example: you export 10 kWh at $0.20/kWh = $2.00 credit

Net Billing (Reduced Export Rate)

• Exports credited at a lower rate than retail, often wholesale: $0.05-$0.12 per kWh
• Much less favorable than 1:1 net metering
• Increasingly common as solar penetration increases
• Example: you export 10 kWh at $0.08/kWh = $0.80 credit (very low)

Net Metering Plus (Net Metering with Tiered Benefits)

• Hybrid approach with some features of both above
• May credit at 1:1 rate but with monthly or annual caps
• Or credits at varying rates depending on time of year or demand
• Structure varies by utility

Time-of-Use (TOU) Rates and Their Impact

What are TOU rates?

Instead of paying a flat rate for electricity, TOU rates vary by time of day:

• Off-peak hours (9 PM - 6 AM, typically): Cheapest rate, maybe $0.10/kWh
• Mid-peak hours (6 AM - 3 PM, 9 PM - 9 PM, typically): Medium rate, maybe $0.18/kWh
• Peak hours (3 PM - 9 PM, typically): Most expensive rate, maybe $0.30/kWh

Why utilities use TOU rates:

• To encourage consumption during low-demand hours
• To discourage consumption during peak hours (helps them avoid building more power plants)
• The most expensive power is during peak hours when demand is highest

How TOU rates hurt solar owners (on traditional net metering):

• Solar peaks at 1-2 PM (mid-peak rate zone)
• You export power worth $0.18/kWh (mid-peak rate)
• You use most power at 6-9 PM (peak rate zone)
• You import power worth $0.30/kWh (peak rate)
• Net effect: you earn $0.18 per export kWh but pay $0.30 per import kWh
• This is worse than a flat-rate scenario

Example TOU impact:

• Export 20 kWh at mid-peak rate ($0.18) = $3.60 credit
• Import 15 kWh at peak rate ($0.30) = $4.50 cost
• Net: -$0.90 (you owe money despite producing more than consuming)
• With flat rates, you'd have earned: 20 × $0.24 - 15 × $0.24 = $1.20 credit
• TOU rates cost this solar owner $2.10 more

Solar + TOU Rate Strategies

Option 1: Shift Your Consumption

• Use major appliances during peak solar production (1-2 PM)
• Run dishwasher, laundry, and water heater during midday
• Charge batteries or electric car during the day if you have them
• This increases mid-peak usage, matching solar production
• Limitation: you can only shift so much consumption

Option 2: Add Battery Storage

• Battery stores solar from peak production hours (1-2 PM, mid-peak rate)
• Use battery power during evening peak hours instead of grid power
• Shifts exports to peak-rate hours when using battery-stored power
• This dramatically improves economics with TOU rates
• Cost: $10,000-$20,000, but ROI is strong with TOU rates

Option 3: Opt Out of TOU Rates (If Available)

• Some utilities allow customers to stay on flat rates
• Contact your utility to ask about opting out
• Not all utilities allow this; increasingly rare
• Might be worth it if you're on an unfavorable TOU plan

Option 4: Expand System Size

• A larger system produces even more during midday
• More exports at mid-peak rates
• This doesn't fix the TOU mismatch but increases overall production
• Cost-benefit depends on your specific situation

Monthly and Annual Net Metering Settlements

Monthly settlement (most common):

• Each month, utility calculates: total imports minus total exports
• If exports > imports: you have a credit (no payment, credit rolls to next month)
• If imports > exports: you owe the difference
• Fixed charges still apply (usually $10-$30/month minimum)
• Unused credits typically roll to next month (or reset annually)

Annual settlement:

• Some utilities only settle annually (end of 12-month billing period)
• You earn credits throughout the year, settle once annually
• This is usually better for solar owners (credits don't expire as easily)
• If you've overproduced, you get paid back or credited
• Ask your utility about their settlement policy

Unused credit policies:

• Some utilities: unused credits expire monthly (worst for solar owners)
• Some utilities: credits roll for 12 months, then reset
• Some utilities: carry forward indefinitely (best for solar owners)
• Check your utility's specific policy in your service agreement

Questions to Ask Your Utility

• Does my utility offer true net metering (1:1 rate) or net billing (reduced rate)?
• If net billing, what is the export credit rate?
• Am I on TOU rates? Can I see the rate schedule?
• Can I opt out of TOU rates?
• What is the net metering settlement period (monthly or annual)?
• What happens to unused credits at month/year end?
• Are there any fees associated with net metering service?
• Has the net metering policy changed recently, or are changes planned?