Net Metering Explained 2026: How to Master Your Utility Bill

The Concept of the “Virtual Battery”

Before batteries became affordable, the solar industry relied on a billing policy called Net Energy Metering (NEM). It is the accounting mechanism that makes solar financially viable for grid-tied homes.

Conceptually, it turns the electric grid into a giant, 100% efficient, free battery for your home. When you push power in, you build up a “bank” of credits. When you pull power out, you spend those credits.

However, as solar adoption has surged, utilities have begun altering these rules. Understanding your specific utility’s metering policy is actually more important than the brand of panels you choose.

Net Metering 1.0 & 2.0 (The Gold Standard)

In “True Net Metering” states (currently roughly 30 states), the math is simple: 1 kWh = 1 kWh.

Export: You send 1 kWh to the grid at noon. The utility credits you the full retail rate (e.g., $0.15).
Import: You use 1 kWh from the grid at midnight. The utility charges you the full retail rate ($0.15).
Result: The charges cancel out perfectly. You pay zero.

In this scenario, you do not need a battery. You can “store” your summer excess on the grid and use it in the winter.

The Shift to Net Billing (Avoided Cost)

Many states (like California, Hawaii, Arizona) have moved to Net Billing. This destroys the 1:1 ratio.

Import Price (Retail): What you pay to buy power triggers all the costs of the grid: generation, transmission, distribution, maintenance, and profit. Price: $0.20/kWh.
Export Price (Wholesale): When you send solar power to the grid, the utility argues you are only providing “generation.” You aren’t maintaining the wires. So they pay you the “Avoided Cost” (what they saved by not running a gas plant). Price: $0.04/kWh.

The Consequence: Under Net Billing, solar without a battery is largely ineffective. You are selling low and buying high. If your state uses Net Billing, you must install a battery to prevent exports.

Advanced Strategy: Time-of-Use (TOU) Arbitrage

Most utilities have moved solar customers to Time-of-Use rate plans.

Off-Peak (Midnight - 4 PM): Cheap power ($0.15).
On-Peak (4 PM - 9 PM): Expensive power ($0.45).

This creates a danger and an opportunity.

The Danger: If your solar panels face East, they produce power in the morning (Off-Peak). You sell that power for peanuts ($0.15). Then you come home at 6 PM and run the AC (On-Peak), buying power for gold ($0.45). You lose money.

The Opportunity (Load Shifting): Smart solar owners use TOU to their advantage.

West-Facing Panels: Point panels West to capture the late afternoon sun. Even if they produce slightly less total energy than South-facing panels, the energy they produce is more valuable because it overlaps with Peak Pricing.
Pre-Cooling: Run your AC hard at 2 PM (when solar is free). Cool the house down to 68°F. At 4 PM (when rates hike), turn the AC off. The house coasts through the peak hours without drawing grid power.

The “True-Up” Bill

Solar customers usually receive two bills:

Monthly Statement: Shows minimum connection fees (usually $10-$15). You pay this every month.
Annual True-Up: Once a year, the utility reconciles all your credits and debits.

The Goal: You want your True-Up to be near zero or negative. The Warning: If you undersized your system, you might be hit with a $1,000 bill at the end of the year. Always design your system to cover 110% of your historical usage to account for hot summers, panel degradation, and future electric vehicle (EV) charging.

Summary of Key Terms

Term	Meaning	Good or Bad?
1:1 Net Metering	You get full retail credit for exports.	Excellent
Avoided Cost	You get wholesale (cheap) credit for exports.	Bad (Requires Battery)
Non-Bypassable Charges (NBCs)	Fees you pay heavily on every kWh imported, even if you export later.	Annoying
True-Up	The annual settlement bill.	Neutral

Conclusion: Net Metering is a policy construct, not a law of physics. It can be changed by politicians and utility lobbyists. If your state currently offers 1:1 Net Metering, go solar immediately. Most policy changes “grandfather” existing systems for 15-20 years, locking in your favorable rates while your neighbors deal with the new, worse rules.