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February 2, 2023

Basics of Net Energy Metering

  • Solar Savings

Net energy metering is a key aspect in making solar power systems a smart financial choice for home and business owners. However, it has been a subject of much contention in recent years, pitting solar providers and environmental advocacy groups against traditional energy companies, leaving consumers caught in the middle without a clear path forward.

What is Net Energy Metering (NEM)?

Put simply, net energy metering is the contracted billing arrangement that allows consumers with solar power systems to sell the surplus energy they generate back to their local grid. When you install a solar power system in your home or business, an additional energy meter is installed to measure the electricity generated by your solar panels. This gauge is separate from what’s offered by your local energy provider and is used to measure your property or business’s energy consumption.

Throughout the month, both meters record energy flow, and in the final days of that billing period, your utility provider calculates the net energy consumed by subtracting the solar power your system generated from the overall energy used, leaving you to  pay the difference. This arrangement often allows solar-equipped homeowners to significantly reduce their electricity bills, and sometimes even eliminate them completely!

How NEM Works

An efficient household with a large solar panel array can generate more electricity than it consumes during a sunny month with clear skies. So, what happens to the excess energy that is created? This is where NEM comes into play. 

NEM enables energy users to “sell back” the surplus power generated in exchange for a credit that’s applied to future electricity bills. Consequently, even during seasonal periods with less sun or higher electricity consumption, utility expenses will still remain lower when using a solar power system—with some homeowners paying less than $200 per year on electricity.

Annual True-Up

NEM offers a unique billing arrangement for those looking to avoid regular payments. Instead of receiving a monthly charge, some electricity providers issue a single annual fee and at the end of the year, all your credits and expenses are tallied up in what is known as the “Annual True-Up” statement.

This approach can be beneficial for budgeting, especially considering the significant reduction in electricity costs that most solar customers experience. With a solar power system installed, the annual bill could be even lower than your current monthly expenditures without solar.

Why is NEM Controversial?

Controversy surrounding NEM arose when it was first introduced. Utility companies opposed compensating solar customers at full retail rates, which were the prices charged to non-solar customers. These companies petitioned lawmakers to add fees for solar users, claiming that they had an unfair advantage. Some industry experts speculated this response was an attempt to discourage customers from going solar and to mitigate the potential income loss faced by big utility.

The opposition sparked significant debate nationwide, leading to intense political battles in states like California, among others. That said, the tide is slowly turning, and utility companies are working to find compromise with solar providers and energy users to pave the way for affordable, environmentally friendly power for all Americans.


Net energy metering plays a crucial role in making solar power systems a financially wise choice for homeowners and businesses. Despite past controversy among all participants in the solar supply chain, creating incentivizing, cost-effective opportunities for solar users continues to make headway. 

There are differences in net metering across state legislation and regulatory policies, so to learn more about your net metering state laws, contact a Solcius representative today to see if going solar is right for you.

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