Quick definition
Under traditional net metering, a kWh of solar power you export to the grid typically earns a credit worth roughly the same as a kWh you'd otherwise buy from the utility, a one-to-one exchange. Net billing breaks that equivalence: exported power still earns a credit, but at a lower rate than what you pay to buy power back, often set closer to the utility's own wholesale or avoided cost.
Consumption is still typically billed at standard retail rates either way; it's specifically the export credit rate that differs between the two structures.
At a glance: several states and utilities have shifted from traditional net metering toward net billing or similar reduced-export-rate structures in recent years, though the specific policy varies significantly by jurisdiction.
Why it matters
The gap between what you're credited for exported power and what you pay to buy power back is exactly what net billing changes, and that gap has real financial consequences. Under generous net metering, it often doesn't matter much whether your solar power gets used directly in the home or exported, since both are worth roughly the same. Under net billing, using your own solar power directly, rather than exporting it for a lower credit, becomes meaningfully more valuable.
This shift changes the calculus around system design and battery storage. A homeowner under net billing has a stronger financial incentive to maximize self-consumption, timing usage to line up with solar production, or storing surplus power in a battery for later use rather than exporting it for a reduced credit. The same system design decisions that mattered less under generous net metering can meaningfully affect savings under net billing.
It's worth checking which billing structure actually applies before assuming either way. Some regions still offer traditional net metering, some use net billing, and some use structures that blend elements of both or vary by utility within the same state or province. California's shift to its Net Billing Tariff in 2023, commonly called NEM 3.0, is a widely cited real-world example: export credits for new solar customers there dropped by roughly 75% to 80% compared to the prior net metering structure, which meaningfully changed how solar and battery systems get designed and sized for California homes going forward. This is exactly the kind of detail that belongs in an interconnection agreement or a utility's published rate schedule, not something to assume based on general impressions. DSIRE's database of state incentives and policies lists the net billing rules that apply in each state, since they vary widely.
Where you'll see this
The net billing vs net metering comparison tool shows the real bill difference between the two structures using your actual production and usage numbers.
For a commercial system, the commercial net metering vs net billing comparison tool runs the same analysis at commercial scale.
This term comes up in utility rate schedules, in interconnection agreements, and any conversation about how solar exports actually get credited in a specific service territory. California's solar consumer guide explains how net billing works there, including the true-up that settles the balance.
Related terms
Frequently asked
Regulators and utilities sometimes argue that full retail-rate net metering overcompensates solar owners relative to the actual value their exported power provides to the grid, and shift to net billing as a way to pay closer to that calculated value instead.
It generally reduces the value of exported power compared to net metering, which can extend payback periods somewhat. It doesn't necessarily make solar a bad investment, but it does shift the economics to favor using more of your own production directly rather than counting on a generous export credit.
Generally yes. Since exported power is worth less under net billing, storing surplus solar production in a battery for your own later use, rather than exporting it for a lower credit, often becomes more financially attractive than it would be under generous full-retail net metering.
Not always immediately obvious from the bill layout alone. The clearest way to confirm is checking your interconnection agreement or your utility's published rate schedule, which will specify whether exports are credited under net metering, net billing, or another structure entirely.