What net metering savings actually measure
Your solar savings are a bill difference, not a production number. A 9,000 kWh array does not save you 9,000 kWh worth of electricity unless every one of those kilowatt-hours displaces a kilowatt-hour you would otherwise have bought at the full retail price. That only happens under one-for-one net metering, where the meter runs backwards and an exported kWh is credited at exactly the rate an imported kWh costs.
Most tariffs written since about 2020 no longer work that way. Under net billing — the structure California's NEM 3.0 made famous, and which several other states have adopted in some form — imports are billed at retail and exports are credited at an avoided-cost or export-compensation rate that is typically a fraction of retail. The moment those two rates diverge, the value of your array depends on when you use the energy, not just how much of it you make.
That is why this calculator asks for a self-consumption ratio. It is the single input that separates a good solar economic model from a bad one, and it is the one most quick estimates omit entirely. Pair the result with the annual production estimate and the system size you are actually contemplating, then feed the savings figure into a payback calculation.
The formula, term by term
Start by splitting production. Self-consumed energy S is production times the self-consumption ratio, capped at the load, because you cannot consume more than you use: S = min(G·f, L). Everything else goes to the grid, so exports are X = G − S. What remains of the load after self-consumption must be bought, so imports are I = L − S.
Now price the three streams. Imports cost the retail volumetric rate plus any non-bypassable charge, I·(r + n). Exports earn X·e. Fixed charges are 12F and are indifferent to whether you have solar at all, which is why they appear identically in both bills and cancel out of the savings figure — but they are still the reason a bill never reaches zero.
Two structural points fall straight out of this. First, the value of a self-consumed kWh is r + n, the full amount you avoid paying, while the value of an exported kWh is only e. The gap (r + n) − e is the economic premium on self-consumption, and it is exactly what a battery or a shifted load is buying you. Second, non-bypassable charges are attached to imports and cannot be offset by credits, so they set a floor on the volumetric part of the bill that no amount of export credit will break through.
The blended value per kWh generated closes the loop: divide the annual saving by annual production and you get the average revenue your array earns per kilowatt-hour. That is the number to compare directly against the levelized cost of energy of the system. If the blended value is below the LCOE, the project does not pay for itself from bill savings alone.
Worked example: 10,800 kWh load, 9,000 kWh array, $0.08 export credit
A household uses 10,800 kWh a year. The proposed array produces 9,000 kWh in year one. Metering data suggests 40% of that generation is consumed on site. The tariff charges $0.24/kWh for imported energy plus a $0.02/kWh non-bypassable charge, pays $0.08/kWh for exports, and carries a $12 monthly customer charge.
- Split the generation. Self-consumed S = min(9,000 × 0.40, 10,800) = 3,600 kWh.
- Exports. X = 9,000 − 3,600 = 5,400 kWh.
- Imports. I = 10,800 − 3,600 = 7,200 kWh.
- Cost of imports. 7,200 × ($0.24 + $0.02) = 7,200 × $0.26 = $1,872.
- Export credit. 5,400 × $0.08 = $432.
- Fixed charges. $12 × 12 = $144.
- Bill with solar. $1,872 − $432 + $144 = $1,584.
- Bill without solar. 10,800 × $0.26 + $144 = $2,808 + $144 = $2,952.
- Annual saving. $2,952 − $1,584 = $1,368, a 46.3% bill reduction.
- Blended value. $1,368 ÷ 9,000 kWh = $0.152/kWh.
Note what that last line means. The array produces energy worth an average of 15.2 cents, not the 26 cents the household pays to import. The 40% of generation used on site earns 26 cents; the 60% exported earns 8 cents. Weighted: 0.40 × $0.26 + 0.60 × $0.08 = $0.104 + $0.048 = $0.152. The two routes agree, which is a useful arithmetic check on any savings estimate you are handed.
How to read the result
Look at the blended value first, not the savings total. A savings total scales with how much electricity the household happens to use; the blended value tells you how well the tariff treats the array, independent of size. Algebraically the blended value is e + f·[(r + n) − e], where f is the share of generation consumed on site. Two things follow. When the export credit equals the all-in import rate the two terms collapse and the blended value is that rate regardless of the self-consumption ratio, which is why load shifting changes nothing under true one-for-one metering with no non-bypassable charge. When the two rates differ, the blended value sits between them and its position in that band is set entirely by the self-consumption ratio.
Second, check whether the bill with solar has gone negative. An annual net credit is not free money on most tariffs: surplus is commonly settled at an annual true-up at a lower net-surplus-compensation rate, and some tariffs zero the balance instead. A design that banks a large annual credit is usually a design that should have been smaller, or one that should have added storage or a controllable load.
Third, treat the self-consumption ratio as the design variable it is. The sensitivity table under the calculator sweeps it from 0% to 100% at fixed production, and the spread between the two ends is the entire prize available from batteries, timed water heating, pool pumps or daytime EV charging. If that spread is small, storage will not pay on this tariff; if it is large, run the numbers on a battery before committing to a design.
Finally, remember that this is a year-one figure. Retail rates generally escalate while most export-credit schedules are fixed for a defined term, and panels degrade. Both effects push the blended value around over a 25-year life, which is why the payback and LCOE tools exist rather than a single savings number.
How the export rate changes what a kWh is worth
| Export rate ($/kWh) | Export credit ($) | Annual bill ($) | Annual saving ($) | Blended value ($/kWh) |
|---|---|---|---|---|
| 0.24 (full net metering) | 1,152 | 480 | 1,920 | 0.240 |
| 0.16 | 768 | 864 | 1,536 | 0.192 |
| 0.08 | 384 | 1,248 | 1,152 | 0.144 |
| 0.04 | 192 | 1,440 | 960 | 0.120 |
| 0.02 | 96 | 1,536 | 864 | 0.108 |
| 0.00 (no export credit) | 0 | 1,632 | 768 | 0.096 |
Every row is the same arithmetic as the worked example. The bill without solar is 10,000 × $0.24 = $2,400. Dropping the export rate from full retail to zero costs this household $1,152 a year on identical hardware.
Mistakes that make a savings estimate wrong
- Using production as if it were savings. Multiplying annual kWh by the retail rate is only valid under one-for-one net metering with no non-bypassable charges. On a net-billing tariff it can overstate the saving substantially, and the gap widens as the export credit falls.
- Guessing the self-consumption ratio. It is measurable: most utilities publish interval data, and any array with a production meter gives you the other half. A household with a daytime-empty house and no storage sits well below one with a heat pump and a home office.
- Forgetting non-bypassable charges. They are billed per imported kWh and export credits do not touch them, so they reduce the value of an offset kilowatt-hour only in the sense that they were never offsettable in the first place — but they are frequently left out of the without-solar baseline too, which distorts the comparison.
- Netting a negative annual bill as cash. Check the tariff's net surplus compensation rule before assuming an annual credit is paid out at the export rate.
- Ignoring the fixed charge. It survives solar entirely. A $30 monthly customer charge is $360 a year that no array can remove, and it is why bill reduction never reaches 100% on most tariffs.
- Applying a single average export rate to a time-varying schedule. Export compensation under net billing is usually hourly and seasonal. A single blended rate is a reasonable planning approximation, but it is an approximation, and it is least accurate for arrays with unusual orientation.
Tariff terms are jurisdictional and they change
Net metering rules are set by state utility commissions and, in many places, by individual utility tariffs filed underneath them. Export rates, non-bypassable charges, true-up rules, grandfathering periods and system-size caps all differ by utility and are revised periodically. Take your rates from the tariff sheet your utility has on file with the commission, not from a national average, and note the date of the version you used. This calculator does the arithmetic of whatever tariff you enter; it does not know which tariff applies to you.
Where this sits among the other solar economics tools
Bill savings is the revenue line of a solar project. It is not the project. To get from here to a decision you need three more things: the installed cost after incentives, the cost of capital, and the trajectory of both rates over the analysis period.
Take the annual saving from this page and combine it with the net cost from the tax credit calculator to get a simple payback, or discount both streams properly to get a net present value. If you are comparing the array against other uses of the money, the levelized cost of energy is the cleaner comparison: it converts the system into a cents-per-kWh price you can hold against the blended value this page reports.
Two adjacent structures are worth knowing about. Feed-in tariffs pay a fixed rate for all generation, self-consumed or not, which makes the self-consumption ratio irrelevant — set the export rate equal to the retail rate in this model to reproduce that behaviour only if the tariff genuinely credits gross generation. Virtual net metering and community solar allocate credits from a remote array to a subscriber's bill, usually at a defined percentage of retail; enter that percentage of your retail rate as the export rate and set self-consumption to zero.
For commercial customers, one further caveat dominates everything on this page: demand charges. A tariff with a significant $/kW component is not well modelled by energy arithmetic alone, because solar reduces peak demand unreliably. Use the demand charge calculator alongside this one.
Key terms
- Net energy metering (NEM)
- A billing arrangement in which exported energy is credited against imported energy, historically at a one-for-one kWh basis so that only net consumption is billed.
- Net billing
- A billing arrangement in which imports and exports are priced separately: imports at the retail rate, exports at a defined export-compensation or avoided-cost rate that is usually lower.
- Self-consumption ratio
- The fraction of generated energy consumed on site in the same interval it is produced. It depends on load shape, array orientation and storage, and is measured from interval data rather than assumed.
- Non-bypassable charge
- A per-kWh charge applied to energy imported from the grid that funds public-purpose programmes and cannot be offset by export credits.
- True-up
- The periodic settlement — usually annual — at which accumulated credits and charges are reconciled and any surplus is paid out, carried forward or forfeited according to the tariff.