Solar Basics & Net Metering

Key concepts

• Net metering: A billing arrangement where the utility credits you for excess solar energy sent to the grid. When your panels produce more than you use, the meter effectively runs backward; when you use more than you produce, you draw from the grid. At the end of the period (month or year), you are billed or credited on the net difference. Terms—how much you’re credited per kWh and whether credits roll over—vary by state and utility.
• SRECs (Solar Renewable Energy Certificates): In some regions, you earn certificates for the solar energy you generate. These can be sold or traded separately from the electricity itself and can add revenue. SREC markets and rules are state-specific.
• Interconnection: The process and agreement that allow your solar system to connect to the grid. The utility reviews your system for safety and compatibility and may require specific equipment (inverters, disconnects, meters). Interconnection approval is required before you can export power.
• Payback drivers: Payback depends on what you pay for the system, how much energy you produce, the value of that energy (retail rates or alternative credit rates), incentives, and financing. Higher local electricity rates and strong sun generally improve economics; low export credits or complex rules can lengthen payback.

How net metering typically works

Under traditional net metering, each kWh you export is credited at or near the same rate you pay for each kWh you import. Newer policies in some areas credit exports at a lower rate (e.g., tied to wholesale or avoided cost). That can make on-site consumption and storage more valuable than sending everything to the grid. Check your utility’s current net metering or solar tariff and how credits are applied (per kWh, time-based, or annual true-up).

Common mistakes

• Assuming net metering terms will stay unchanged; policies evolve, so understand current rules and possible future changes.
• Oversizing the system without considering export credit caps or low value for excess generation.
• Ignoring interconnection timelines and requirements, which can delay commissioning.
• Comparing payback across regions without accounting for different rates, incentives, and sun.

Cost and economics (general)

System cost depends on size, equipment, labor, and location. Federal and state incentives can reduce net cost. Payback is sensitive to how much you pay for electricity and how much you’re credited for exports. A reputable installer can run site-specific projections; always verify incentive and net metering details with your utility and tax advisor.

Safety and permitting

Solar installations must comply with local building and electrical codes and utility interconnection requirements. Permits and inspections are standard. Fire and electrical safety depend on proper design and installation. Work with licensed contractors and ensure interconnection is approved before energizing.

FAQ