Net Metering, Feed-In Tariffs and Export Credits Explained

The economics of rooftop solar are dominated by how your utility values the electricity you send back to the grid. There are three broad models in use around the world, and knowing which one applies to you is essential before you sign a contract.

Net metering is the friendliest arrangement. Your meter runs both ways. Every kilowatt hour you export is credited at the same retail rate you pay when you import. At the end of the billing cycle you owe the difference. In a full net metering regime, a system sized to your annual consumption can theoretically wipe out your bill.

There are several flavours of net metering. True net metering nets everything at retail rates. Net billing separates the import and export sides and pays exports at a different, usually lower, rate. Virtual net metering allows multiple accounts to share the output of a single system, which is how community solar projects work in many jurisdictions. Ask your utility exactly which model applies to your account and get it in writing.

Feed-in tariffs are a fixed contract to buy your exported energy at a set price for a fixed number of years, often ten to twenty. Early European feed-in tariffs were extremely generous and made solar a slam-dunk investment. Modern versions are much lower, sometimes only a fraction of the retail price you pay when importing.

The gradual erosion of feed-in tariffs is a global pattern rather than an accident. As solar penetration on the grid has grown, the value of midday solar to the utility has fallen because everyone is generating at the same time. Wholesale prices at noon in sunny markets can now drop close to zero on clear spring days, and it is unreasonable to expect a utility to pay a retail rate for energy the market values at almost nothing.

Export credits are the newest and least generous option. You are paid a per-kilowatt-hour rate, usually well below retail, for every unit you send back. Some utilities update the rate quarterly, others peg it to wholesale market prices. The unpredictability makes long-term financial planning harder.

The practical implication is huge. Under net metering, you can afford to build a system slightly larger than your consumption and rely on the grid as an infinite battery. Under a low feed-in tariff or export credit, self-consumption becomes king. You want to use as much of your production as possible in real time, which nudges you toward smaller systems, timers on appliances and, eventually, a battery.

Time of use tariffs interact with all of this in interesting ways. If your utility charges different rates by hour, exporting at midday and importing in the evening can leave you paying much more per unit than the average rate. A well designed system in a time of use market often includes a battery specifically to shift solar into the expensive evening window.

Fixed charges are another quiet element to watch. Many utilities are increasing the flat monthly connection fee that every account pays regardless of consumption. Even a system that fully offsets your usage still has this fixed charge, and in some markets it can add up to hundreds of euros per year. Include it in your payback calculation so you are not surprised.

Minimum bills and demand charges are common in some commercial tariffs and increasingly appearing in residential ones. A minimum bill sets a floor on what you pay regardless of net consumption. A demand charge bills you based on the highest instantaneous power you drew during the month. Solar reduces energy consumption but does little to reduce peak demand unless combined with storage.

Before you commit to any purchase, get the exact terms in writing from your utility. Ask specifically what happens if you exceed a threshold system size, what happens when the current tariff period ends and whether unused credits roll over from month to month or reset. Salespeople frequently quote whichever version of the tariff makes the deal look best.

Regulations change. What is true this year may be different in three years. Build your payback model on the current published rates, but also run a scenario where export payments drop to zero after year five. If the deal still makes sense in that scenario, you have a robust investment. If it only works with today's generous tariff, you are taking a policy risk.

The best hedge against tariff uncertainty is right sizing. A system that is designed to produce roughly what you consume, rather than to maximise export, remains valuable regardless of what happens to feed-in payments. Even if your utility eventually pays nothing for exports, the energy you self consume is still worth full retail every day for the next twenty five years.