What is Net Energy Metering (NEM) and How Does It Work for US Solar Installers?
Net Energy Metering (NEM) is the billing arrangement that allows solar customers to receive credit for excess electricity they send back to the grid. For US solar installers, understanding NEM is essential – it’s how you justify the financial case for solar to every customer.
How NEM Works
When a solar system produces more electricity than the home or business uses, the excess flows to the utility grid. Under NEM, the utility credits the customer at the retail electricity rate for each kWh exported.
Monthly bills under NEM work as follows:
– The meter measures both electricity consumed from the grid and electricity exported to the grid
– Net consumption = consumption − export
– Customer pays only for net consumption
– Credits accumulate during high-production months (summer) to offset winter bills
State-by-State Variation
NEM is regulated at the state level. Key points:
| State | NEM status |
|---|---|
| California | NEM 3.0 (2023) – significantly reduced export credits |
| Texas | No statewide NEM mandate; varies by utility |
| Florida | NEM at retail rate; strong program |
| New York | Value of Distributed Energy Resources (VDER) replaces NEM |
| Most other states | Some form of NEM or equivalent credit program |
California NEM 3.0: What Solar Installers Need to Know
California’s 2023 NEM 3.0 rule reduced solar export credits by approximately 75% compared to NEM 2.0. The financial case for solar in California now relies more heavily on:
– Battery storage (to maximize self-consumption)
– Time-of-use rate optimization
– Federal ITC (still 30%)
This has shifted California solar sales toward battery + solar packages. Solar installers in California should get trained on battery storage sales and installation.
FAQs
How do I explain NEM to residential solar customers?
Use the analogy of a bank account: you deposit excess energy during the day and withdraw it at night. NEM credits are your interest. Keep it simple – most customers don’t need the technical detail, just the financial outcome.
What happens when NEM is not available?
In markets without NEM (some Texas utilities, rural electric cooperatives), solar is sized to match consumption rather than to export. Battery storage becomes more important for maximizing the value of solar generation.
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