Net Metering vs Net Billing What Solar Owners Must

I got an email last month from a woman in California. She had installed solar panels in 2021. Her system was producing plenty of power. Her electric bill was almost zero. Then something changed. She noticed her bill creeping up. Not a lot, but enough to make her wonder. She called her utility. They told her she had been switched to a new rate schedule called NEM 3.0. Her old net metering agreement had expired. She was now on net billing. Her credits for exported solar power dropped from $0.30 per kilowatt‑hour to $0.08. She was furious. And scared. She asked me if she should add batteries. Or move. I told her to calm down and let me explain.

Net metering and net billing sound similar, but they are completely different. Under net metering, your utility credits you for the electricity you export at the full retail rate. If you send one kilowatt‑hour to the grid at noon, you can use that credit to offset one kilowatt‑hour you pull from the grid at night. It’s a one‑to‑one swap. Under net billing, your utility pays you a much lower rate for your exports, often the wholesale rate or a time‑varying rate. You still buy electricity at the retail rate. So you end up paying the difference.

The difference is huge. In California under NEM 2.0, homeowners got full retail credit. Under NEM 3.0, the export rate is based on the “Avoided Cost Calculator,” which averages around $0.08 per kWh. Meanwhile, the retail rate is about $0.30 per kWh. So a solar system that used to save you $0.30 per exported kWh now saves you only $0.08. That’s a 73% drop in value.

This is why you see so many California homeowners adding batteries. With a battery, you can store your solar power during the day and use it at night instead of exporting it. The battery allows you to avoid the low export rate. You become more self‑consuming. The economics of batteries used to be terrible. Now, in NEM 3.0 territories, they make sense.

Let me give you a real example. I have a client named Karen in the Bay Area. She has a 6 kilowatt solar system. Under NEM 2.0, her annual electricity bill was about $200 in fixed fees. Under NEM 3.0, without a battery, her bill jumped to $1,200. That’s $1,000 more per year. She installed a Tesla Powerwall for about $10,000 after incentives. Now she charges the battery during the day and runs her house off the battery in the evening. Her bill dropped back to $300 per year. The battery saved her about $900 per year. Payback about 11 years. Not amazing, but better than paying the utility.

If she had stayed on NEM 2.0, she wouldn’t need a battery. But she had no choice. The utility switched her. New solar customers in California are automatically on NEM 3.0. Only existing customers who were grandfathered get to keep the old rules for 20 years.

Other states are watching California closely. Hawaii already has similar rules. Massachusetts, New York, and Arizona are considering changes. Colorado, where I live, still has 1:1 net metering for most utilities, but that could change. The utilities argue that net metering shifts costs to non‑solar customers. Solar advocates argue that solar provides grid benefits. The truth is somewhere in the middle.

So what should you do if you’re thinking about solar? First, find out your utility’s net metering policy. Call them. Ask specifically: Is it 1:1 net metering? If not, what is the export rate? Are there caps on system size? Can you be switched to a different rate schedule later? Some utilities have “ladder” net metering, where the credit decreases as more solar is added to the grid. Others have “time‑of‑use” net metering, where the credit depends on when you export.

Second, run the numbers for your specific situation. If you have 1:1 net metering, you likely don’t need batteries. Your grid is your battery. If you have net billing with a low export rate, you need to calculate the value of self‑consumption. That’s where a battery comes in.

Third, consider load shifting. Even without a battery, you can shift your usage to times when your solar is producing. Run your dishwasher and laundry during the day. Pre‑cool your house. Charge your EV while the sun is shining. That reduces exports and increases self‑consumption. Karen does this. She runs her pool pump from 10 AM to 2 PM. That alone saved her about $300 per year.

The utility industry is changing fast. Net metering is not guaranteed forever. If you install solar today in a state with generous net metering, you might get grandfathered for 15‑20 years. But some utilities are trying to retroactively change rules for existing customers. That’s happening in California with the transition from NEM 2.0 to NEM 3.0. Some customers have sued. It’s a mess.

My advice is to assume that net metering will get worse. Don’t size your solar system based on the current rules only. Size it so that you can eventually add a battery if needed. That means installing a hybrid inverter that’s battery‑ready. It costs a little more upfront, but it saves you from having to replace the inverter later.

Also, monitor your utility’s public utility commission meetings. These rule changes are proposed and debated publicly. You can comment. You can organize with neighbors. Utilities have a lot of power, but they also have to listen to voters.

I have a tool that helps you compare net metering vs. net billing for your specific utility.

The Time‑of‑Use Rate Optimizer can also help if your net billing is time‑varying.