Net Metering Explained: What Happens to Your Extra Solar Power

On a sunny afternoon your panels may produce more electricity than your home is using. What happens to that surplus — and what you are paid or credited for it — depends on the rules your electricity utility applies, and those rules vary widely from place to place. This guide explains the common arrangements, the terms you will meet, and the questions to ask before you sign anything.

The basic idea: the grid as a two-way street

When your panels produce more than your home uses, the extra power flows out through your meter and into the grid, where a neighbour can use it. When your home needs more than the panels produce — at night, or on a cloudy day — power flows the other way, from the grid into your home. Your meter records both directions, and the billing arrangement decides how the two flows are valued.

That valuation is the heart of the matter. In some places, exported power is credited at the same rate you pay for imported power, so a kilowatt-hour sent out cancels a kilowatt-hour taken in. In other places, exported power is paid at a lower wholesale rate, or credited only against part of the bill. The difference can change the economics of a system by a large amount, which is why the export rule belongs in every sizing and cost conversation.

Net metering, in its common forms

Net metering is the most widely known arrangement. Under a typical net metering scheme, your bill is based on the net amount — the electricity you imported minus the electricity you exported — over a billing period, often a month. If you exported more than you imported in that period, the surplus is usually carried forward as a credit to the next period rather than paid out in cash, and there may be a periodic true-up, where accumulated credits are settled, sometimes at a lower rate.

Other places use different schemes. Some pay a fixed feed-in rate for every kilowatt-hour exported, regardless of what you import. Some apply time-of-use rates, where electricity is worth more at busy evening hours than at midday, which changes when it pays to export and when it pays to store energy in a battery. And some places offer no export payment at all, in which case a battery or a smaller system that matches your daytime use becomes more attractive.

Why the rules keep changing

Export rules change because the economics of the grid change. When few homes had solar, crediting exports at the full retail rate was simple and generous. As solar has grown, many utilities have argued that exported midday power is worth less than evening power, and that grid costs still need paying even when a household's net use is near zero. That argument has led to lower export rates and new fixed charges in many places.

For a homeowner, the practical lesson is that today's export rule may not be tomorrow's. Ask the installer what happens to the system's value if the export rate falls, and check whether your current arrangement is locked in for a period or can change with a tariff review. A system sized to cover your own use, rather than to export as much as possible, is less exposed to those changes.

What to check with your utility

Before installation, confirm four things with your utility in writing. First, which export arrangement applies to your address, and at what rate exported power is credited or paid. Second, whether there is a cap on system size for that arrangement, and whether your proposed system sits under it. Third, what the billing period and true-up rules are, including what happens to surplus credits at the end of the year. Fourth, whether any application, fee or meter change is needed before the system can export.

Also confirm the process for permission to operate — the utility's formal approval to switch the system on. Installers usually handle this, but timelines vary, and a system that is installed but waiting for permission is a system producing nothing. Get the expected timeline in writing, and keep a copy of every approval.