Net Metering Rules Explained: A Plain-English Guide

Updated September 2026. This guide was originally written when 1:1 net metering was the global default. It no longer is. Pakistan moved to net billing in February 2026, California cut export value sharply under NEM 3.0, and the Netherlands abolishes its scheme in January 2027. The mechanics below still describe how net metering works - but check which scheme your country actually uses before you rely on it.

Net metering is a billing mechanism, not a cash programme. Your panels generate power; anything you do not use flows back to the grid and earns a credit. That credit offsets units you later import, so your bill reflects the net of what you took and what you gave back.

That is the whole idea. Everything else is detail - but the detail is where the money is.

How credits work

• Export during the day builds credit.
• Import at night or in the evening draws it down.
• Leftover credit usually rolls over to the next cycle, often with an annual true-up.

Under true net metering, credits are applied in units, not currency. This matters more than it sounds: a banked unit is worth whatever electricity costs when you eventually use it, so unit credits hedge you against tariff rises. Currency credits, used in some schemes, are fixed at the moment you earn them.

The four rules that decide your economics

If you read nothing else, read these.

1. What rate is export credited at?

This is the big one, and it is the rule most likely to have changed since you last checked.

• Retail rate (1:1) - true net metering. An exported unit cancels an imported one.
• A lower, separately set rate - net billing. You buy at retail, sell at less.
• The generation component only - common in the Philippines, where you are credited for the generation slice of your tariff but not transmission or distribution.

The difference between the first and the others can be a factor of three or four on the value of every unit you export. We compare all the models in net metering vs net billing vs gross metering.

2. When do credits expire?

• Rolling forward indefinitely - the friendliest arrangement; oversizing is rewarded.
• Annual true-up, surplus bought out - usually at a low avoided-cost rate.
• Annual true-up, surplus forfeited - sizing beyond annual consumption wastes money.

A system sized to bank a large summer surplus is a good idea under the first rule and a poor one under the third. Find out which applies before you size.

3. What is the netting interval?

• Monthly or annual netting lets a sunny afternoon offset a dark evening.
• Hourly or instantaneous netting only offsets genuinely simultaneous production and consumption.

Shortening the netting interval is the quiet way a nominally intact net-metering scheme gets made less generous without anyone announcing a rate cut.

4. Are you grandfathered, and until when?

When rules change, existing customers are usually protected for a defined term. Pakistan protected agreements valid as of 9 February 2026 until their seven-year terms expire. US states commonly grandfather for 10-20 years from interconnection.

Find your date. It is the single most valuable piece of information in your connection agreement, and it tells you when your economics change.

System-size limits

Residential systems are commonly capped relative to your sanctioned load or contracted demand. Exceeding the cap usually does not mean refusal - it means being pushed onto a different, less favourable scheme, such as gross metering in several Indian states.

The general rule holds in almost every market: size to your consumption, not to the maximum permitted. Oversizing pays only where surplus is credited generously and carries forward indefinitely, and that combination is increasingly rare.

Time-of-use pricing

More utilities price peak and off-peak hours differently, so when you import and export affects value, not just how much.

Where export is credited at a flat rate but imports are billed on time-of-use, the arithmetic gets sharply asymmetric: an evening import can cost several times what a midday export earns. This is precisely why load shifting has become the main lever for owners in net-billing markets.

What it means for your investment

Net metering still meaningfully cuts bills and shortens payback. But the reason it pays has shifted in many markets, and it is worth being clear-eyed about which case applies to you:

• Under 1:1 net metering, the grid acts as a free seasonal battery. Size for annual consumption and bank the surplus.
• Under net billing or a low export rate, the value is in avoided imports, not export income. Size for daytime load, shift consumption into daylight, and evaluate storage.

In both cases the fundamentals of tracking your own numbers are identical. Put your latest readings into the calculator to see your net surplus and estimated amount, and see how to read your net meter if the registers are unclear.

Before you sign

• Confirm the current export rate with your utility, in writing - not from a guide, a sales deck, or an article like this one.
• Ask when credits expire and what happens to surplus at true-up.
• Ask what the netting interval is.
• Ask how long you are grandfathered if the rules change.
• Match system size to your actual consumption, not the maximum allowed.
• Keep every statement so you can verify credits against your own records.

Policy will keep shifting - that is now the one safe prediction. Owners who track their own numbers, and who know their grandfathering date, consistently get the most out of whatever scheme they are on.