A solar system doesn’t produce power on your schedule. It floods the grid with electricity on a clear April afternoon while you’re at work, then produces almost nothing on a December evening when your house needs it most. Net metering is the accounting system that bridges that mismatch — and if your system produces more than you consume over a whole year, the accounting details determine whether that surplus is worth real money or almost nothing.
The short answer: surplus within the year is usually worth full retail value, and surplus left over at the end of the year is usually worth very little. Here’s the math that shows why, month by month.
The Three-Layer System: Instant, Monthly, Annual
Net metering happens on three timescales, and confusing them is where most misunderstandings start.
Instantaneous: power you consume the moment your panels make it never touches the billing system at all. It’s simply electricity you didn’t buy. This is always worth full retail rate, under every policy, everywhere.
Monthly netting: at the end of each billing cycle, the utility compares what you exported against what you imported. Export more than you imported? The surplus becomes a credit — under traditional (retail-rate) net metering, a kWh credit that fully offsets a future kWh of grid power. Import more than you exported? You draw down banked credits first, and pay for whatever’s left.
Annual true-up: once a year, the utility settles the account. If you still have banked credits after twelve months, they don’t keep rolling forever — depending on your utility, the leftover is paid out at a wholesale-ish rate, rolled forward in limited form, or simply zeroed out.
A Worked Example: 6 kW System, Full Year
Take an example home with a 6 kW system producing about 9,000 kWh/year, and annual consumption of 8,400 kWh — so the system overproduces by 600 kWh on the year. Consumption peaks in summer (air conditioning) and winter (heating); production peaks in late spring. Assume retail-rate net metering with monthly carryover and a January-to-December true-up.
| Month | Production (kWh) | Consumption (kWh) | Monthly net | Credit bank after month |
|---|---|---|---|---|
| Jan | 540 | 750 | −210 | 0 (billed 210 kWh) |
| Feb | 600 | 700 | −100 | 0 (billed 100 kWh) |
| Mar | 750 | 650 | +100 | 100 |
| Apr | 840 | 600 | +240 | 340 |
| May | 900 | 650 | +250 | 590 |
| Jun | 930 | 750 | +180 | 770 |
| Jul | 930 | 800 | +130 | 900 |
| Aug | 900 | 800 | +100 | 1,000 |
| Sep | 810 | 700 | +110 | 1,110 |
| Oct | 720 | 600 | +120 | 1,230 |
| Nov | 570 | 650 | −80 | 1,150 |
| Dec | 510 | 750 | −240 | 910 |
Walk through what happened. In January and February the bank was empty, so the deficit months were billed at retail — 310 kWh of purchased power. From March through October the system banked surplus every month, peaking at 1,230 kWh. November and December’s deficits were covered entirely from the bank, costing nothing. At true-up, 910 kWh of credits remain.
The True-Up Sting: What Leftover Credits Are Worth
Here’s where policy details bite. That 910 kWh surplus at true-up is almost never paid at retail. Most utilities compensate year-end surplus at an avoided-cost rate — roughly what it would have cost them to generate or buy the power wholesale — commonly in the $0.02–$0.04/kWh range. Some pay nothing at all.
The arithmetic in our example, assuming $0.17/kWh retail and a $0.03/kWh true-up rate:
- 910 kWh × $0.03 = $27.30 paid out at true-up
- The same 910 kWh, had it offset retail purchases instead, would have been worth 910 × $0.17 = $154.70
That gap is the single most important number in this article. Every kWh your system produces beyond your annual consumption is worth pennies, while every kWh up to your consumption is worth full retail. This is why sizing a system to roughly 100% of annual usage — not 120% “to be safe” — is almost always the right economic call, and why a reputable installer won’t push you far past full offset unless you have a specific plan for the extra load.
The True-Up Date Quietly Matters
Look at the table again and notice something subtle: the January–December true-up year forced this homeowner to buy 310 kWh in Jan–Feb, then give away 910 kWh in December — even though production and consumption were nearly matched.
If the same utility ran its true-up year April-to-March instead, the big spring/summer bank would carry into winter and cover January and February’s deficits with credits to spare. Same house, same panels, same weather — meaningfully better outcome purely from accounting dates. Some utilities let you choose your true-up month when you enroll; if yours does, pick a month at the end of your low-production season (typically early spring), so your credit bank is never forced to zero right before you need it.
Not All Net Metering Is Retail-Rate Anymore
Everything above assumes traditional 1-for-1 net metering, and that’s genuinely still what most US states with net metering offer. But the landscape is shifting, and you need to know which regime you’re under:
- Retail-rate net metering: exported kWh = imported kWh, full credit. The math in the table above applies directly.
- Net billing / reduced export rates: exports are credited below retail — sometimes at time-varying rates. California’s current “NEM 3.0” net billing is the highest-profile example, with export values that average far below retail. Under these rules, the instantaneous layer becomes everything: power you self-consume is still worth retail, so batteries and load-shifting change from nice-to-have to central to the economics.
- Buy-all / sell-all and other structures: a handful of utilities meter production and consumption entirely separately at different rates.
Check your specific utility’s tariff — not a national article, including this one — before signing anything. The DSIRE database (run by NC State, free) catalogs every state and utility policy and is the standard reference.
How to Track This Yourself
You don’t need to trust the utility’s arithmetic blindly. Your monthly statement should show imports, exports, and your running credit bank — read it, because billing errors on solar accounts are not rare, especially in the first few cycles after interconnection.
For the production side, your inverter app gives you daily and monthly totals. On our own 40-panel system, the pattern in the table above plays out every year — the spring surplus quietly builds the bank that carries us through the dim winter months, and watching the bank’s rise and fall in the utility statements is the clearest picture of whether the system is sized right. If you want import/export data at higher resolution than monthly bills, a home energy monitor like a Sense or an Emporia Vue clamps onto your main panel and shows grid flow in real time.
A simple spreadsheet with four columns — production, consumption, monthly net, running bank — reproduces the table above for your own house and takes five minutes a month to maintain.
If You’re Consistently Overproducing
Ending every year with a big surplus means you’re donating power at wholesale prices. Better options, roughly in order of cost-effectiveness:
- Shift or add load: an EV is the classic answer — 2,500–3,500 kWh/year of new consumption that soaks up surplus at retail value.
- Electrify something: replacing a gas water heater with a heat pump water heater converts surplus solar into an offset gas bill.
- Add storage: a battery (Tesla Powerwall 3, Enphase’s battery line, and others) doesn’t create value under retail-rate net metering — the grid is already your free battery — but under net billing or time-of-use rates it converts low-value exports into high-value self-consumption.
- Accept it: a modest surplus is fine insurance against panel degradation (~0.5%/year) and future usage growth. It’s only worth engineering away when it’s chronic and large.
Net metering rewards systems sized honestly against real consumption. Do the month-by-month math for your own bills before you size, pick your true-up date deliberately if you can, and the credits take care of themselves.