How Net Metering Works — and Why It Matters More Than Your Offset Percentage

Your rep says the new system will "cover 105% of your usage." That number is almost meaningless on its own. Whether 105% translates to $50 a month in savings or $500 a month depends on one variable: what your utility actually pays for the kWh your system sends back to the grid. That payment is called the net metering credit, and the rate can range from $0.30/kWh down to $0.05/kWh depending on your state and policy era. Same panels, same roof, same kWh. The dollar result splits in half.

How net metering treats the grid as a kWh checking account

Net metering is the policy that lets a grid-tied solar system work without batteries. During daylight hours your panels produce more kWh than the house consumes. The extra flows back through your meter onto the utility grid, and the utility records a credit. At night you pull kWh back from the grid and pay for what you draw.

At month-end or year-end, depending on the rules, the utility nets your imports against your exports. If you exported more kWh than you imported, you carry a credit forward. If you imported more, you owe the difference at the retail rate.

The catch is that utilities almost never credit exports at the same rate they charge for imports. If your retail rate is $0.14/kWh and your export credit is also $0.14/kWh, you have strong net metering. If your retail rate is $0.30/kWh but your export credit is $0.05/kWh, you have weak net metering. That single number, the export credit rate, drives more of your savings than panel count, panel brand, or roof tilt.

Why annual true-up billing breaks the "100% offset" claim

Utilities settle net metering bills one of two ways. Monthly netting closes your account every 30 days. Produce more kWh than you use that month and you get a small dollar credit; use more and you pay the difference. Annual true-up rolls credits forward all year and settles on a single date, usually in December.

Annual true-up sounds friendly, but it hides a problem. Producing the same kWh you consume over a year does not produce a $0 bill. The reason is time-of-use rate structures. Most modern utility tariffs charge $0.25–$0.40/kWh during evening peak hours and $0.10–$0.15/kWh during off-peak daytime. Your panels do the opposite. Peak production at noon, zero output at 7 p.m.

A California household that produces 12,000 kWh and consumes 12,000 kWh over a year can still owe several hundred dollars at true-up. They exported cheap midday kWh and imported expensive evening kWh. The math runs against them.

This is why "105% offset" tells you very little. The number ignores when kWh flows. Two households with identical 105% offset systems can land at wildly different bills based on whether their consumption is daytime or evening. The honest question is: at my utility's specific rates, what is my actual dollar bill after one full year of production?

How NEM 3.0 cut California export credits by roughly 75%

California's net metering rules changed on April 14, 2023, when NEM 3.0 replaced NEM 2.0 for new solar installations. Under NEM 2.0 the utility credited exported kWh at the retail rate, roughly $0.25–$0.30/kWh depending on season and utility. Under NEM 3.0 the credit drops to the wholesale "avoided cost" rate, roughly $0.05–$0.08/kWh.

The mechanics did not change. The dollar value of an exported kWh fell about 75%. A system that paid for itself in 7 years under NEM 2.0 now takes 12 to 15 years under NEM 3.0. Twenty-five-year savings dropped close to half.

The shift made batteries financially rational for the first time. Under NEM 2.0, exporting to the grid was nearly as good as using your own kWh, so storage was optional. Under NEM 3.0, the gap between what you save by using your own kWh at peak (above $0.30) and what you receive for exporting it (around $0.05) is wide enough to pay back a $12,000–$15,000 battery in 6 to 8 years.

NEM 3.0 also added a non-bypassable grid-access charge, which further compresses solar-only economics. If you are quoted a solar-only system in California in 2026, ask your installer to model the same address with storage. The dollar result almost always swings toward solar-plus-battery now.

How net metering rules vary across the country

Net metering is set at the state level, so the rules change at every border. New York, New Jersey, Massachusetts, Illinois, Maryland, Minnesota, and Vermont still offer retail-rate net metering or close to it. Solar economics in those states look similar to California pre-2023, with 7- to 9-year paybacks common.

Arizona and Nevada use partial-credit structures where exports are credited at a discount to retail. The discount varies by utility and has been adjusted multiple times in the last decade. Florida offers net metering with caps on credit rollover; unused credits can be forfeited at year-end.

Texas and other deregulated states have no statewide net metering rule. Individual retail electric providers choose whether to offer it. Some do; some pay zero for exports. The same system can have a 9-year payback or none at all depending on which provider you sign with.

A handful of rural electric cooperatives offer no net metering at all. In those service territories, a solar system without battery storage is not financially viable, because the kWh you export at noon is simply lost.

Before you sign a solar contract, confirm three things in writing: that your utility offers net metering, the specific $/kWh export rate, and whether the policy has a scheduled review or sunset date. Your installer should provide the interconnection agreement language, not just a marketing brochure.

What to ask your installer before signing

A serious net metering review takes about ten minutes if your installer is doing the work. Six questions cover most of it.

First, what is the specific export credit rate, in $/kWh, that my utility pays? "Retail rate" is not an answer. Ask for the number.

Second, is the bill settled monthly or on an annual true-up, and on what date? An annual true-up against 100% of your kWh still leaves a real bill if peak consumption sits outside production hours.

Third, does my utility apply time-of-use rates, and what are the peak windows? Late-afternoon and evening peak windows are common, and they push the math toward storage.

Fourth, is the state reviewing or scheduled to change its net metering policy? California's NEM 3.0 shift was telegraphed years in advance. Anyone designing a system for a policy that may change should know it.

Fifth, would storage change the payback at my address? If the export credit is below $0.10/kWh and peak retail is above $0.25/kWh, a battery often pays for itself faster than additional panels would.

Sixth, can I see the savings figure in dollars, not as a percentage? Solrova builds proposals around kWh produced and dollars saved at your actual utility rate. An offset percentage alone is not a savings figure.