What Is Net Metering and How Does It Work?

Quick Answer

Net metering lets you send excess solar electricity to the grid and receive credits on your utility bill. When your panels produce more than you use, your meter effectively "spins backward."

How It Works (Simple Version)

1. Sunny afternoon: Your panels produce 8 kW, but you're only using 2 kW

2. Excess 6 kW goes to the grid → You earn credits

3. That night: You need 3 kW but panels produce 0

4. You use your credits instead of paying full price

5. End of month: You're billed for "net" usage (what you used minus what you produced)

Types of Net Metering

1:1 Full Retail Net Metering (Best)

- You get full retail credit for every kWh you send to the grid

- Credits roll over month to month

- You can potentially zero out your bill

- Where it exists: Colorado, some other states (becoming rare)

Monthly Net Metering

- Same as above, BUT credits reset at the end of each month

- No rollover — use it or lose it

- You need to size your system more conservatively

Reduced Buyback / Partial Net Metering

- You're credited at a reduced rate

- Example: You pay 15¢/kWh but only get credited 8–10¢/kWh

- Still valuable, but not as good as 1:1

No Net Metering

- No credit for excess power sent to grid

- You give away any power you don't use instantly

- Batteries become much more important here

Texas Net Metering Reality

Texas is a deregulated electricity market — there's no statewide net metering policy. Each Retail Electric Provider (REP) sets their own rules.

What you'll typically find in Texas:

- Some REPs offer 1:1 buyback

- BUT many charge a $30/month solar fee

- You may lose distribution fees (4.5–5¢/kWh) on credits

- Net result: You're producing at 15¢/kWh but only credited 10¢/kWh

The Takeaway for Texas

Shop around. Different REPs have dramatically different solar plans. Some are great, some are terrible.

Before installing solar, call potential REPs and ask:

- Do you offer a solar buyback plan?

- What's the credit rate for excess production?

- Are there monthly fees for solar customers?

- Do credits roll over or expire monthly?

Why Net Metering Is Changing

Utilities argue that net metering customers:

- Don't pay their "fair share" of grid maintenance

- Shift costs to non-solar customers

- Get too good of a deal

The trend: Net metering is getting worse almost everywhere. Utilities are:

- Adding solar-specific fees

- Reducing buyback rates

- Implementing monthly credit expirations

- Moving to time-of-use rates

What this means for you: The sooner you install solar, the more likely you are to be "grandfathered" into better rates.

How Net Metering Affects System Sizing

Don't automatically default to 100% offset.

Depending on your net metering situation, you might actually save more money at 75%, 80%, or 90% offset.

Example:

- Your utility charges a $30/month fee for solar customers

- They only credit you at 60% of retail rate for excess

- At 100% offset, you're overproducing some months → Giving power away at bad rates

- At 85% offset, you use everything you produce → Maximum value

Always ask your utility or REP: "What system size gives me the best economics?"

A good solar company will know your utility's policies and help you size appropriately. A bad one will just say "let's do 100%!" without checking.

The Future: Batteries + Bad Net Metering

As net metering gets worse, batteries become more attractive.

Instead of sending excess power to the grid at 5¢/kWh, you can:

- Store it in your battery

- Use it at night

- Keep 100% of the value

This is already reality in California and parts of the Northeast. Texas may follow eventually.