Net Metering

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What is net metering

Net metering is a billing mechanism under which a utility credits a rooftop solar customer for electricity exported to the grid. A single bidirectional meter, installed at the service connection, records two numbers in every billing cycle: energy imported from the grid and energy exported to the grid. The customer pays for the net, the import minus the export.

The arrangement turns the utility grid into a virtual battery. Solar generated during the day in excess of on-site load flows back to the grid and is credited. At night, when the panels are idle, the customer draws from the grid against those credits. Over a month or a year, the bill drops by the value of the credited solar.

Net metering is the default Indian rooftop solar billing mechanism for residential and small commercial customers. It is mandated by the Electricity Act 2003 and operationalised by state electricity regulatory commissions. As of 2026, all 28 states and most union territories have notified net metering regulations, with PM Surya Ghar layered on top for residential subsidies. See Net Metering in India, Complete 2026 Guide for the full mechanics and state-by-state rules.

Net metering explained simply

Picture your house with two electricity flows. One brings power in from the utility, the other sends solar power out. A normal meter only counts inflow. A net meter counts both flows.

When the sun is up and the panels produce more than the house uses, the surplus flows out through the meter and the meter records it as export. When the sun is down or the family turns on a heavy load, power flows back in and the meter records it as import.

At the end of the month, the DISCOM does the arithmetic. You pay for the difference between what you took and what you gave. Often the difference is small or negative.

Why net metering matters

Economic viability of rooftop solar. Without net metering, surplus midday solar is wasted. With it, every solar kWh has a financial value.

Customer acquisition. Indian rooftop solar grew from less than 1 GW installed in 2015 to over 17 GW by 2025 largely because net metering made the economics work for retail customers.

Grid value. Distributed solar reduces peak demand, lowers distribution losses on the feeder, and defers investment in distribution capacity.

Policy alignment. PM Surya Ghar Muft Bijli Yojana, the largest subsidy programme for Indian rooftop solar, assumes net metering. The subsidy is meaningful only if generated power is credited.

Empowerment. Net metering turns a passive electricity consumer into a prosumer with a direct relationship with the energy economy.

How net metering works

The mechanical steps from rooftop panels to monthly bill follow a defined sequence.

1. The solar PV system generates DC. The inverter converts it to AC.
2. The AC first flows to the household load. Lights, fans, fridge and other appliances consume it.
3. Surplus AC, when generation exceeds load, flows out through the home distribution board to the service drop.
4. The bidirectional meter records both directions. Modern smart meters log import and export separately, with timestamps.
5. The DISCOM reads the meter monthly, by physical visit or by AMI remote read.
6. The bill is calculated as net = import minus export. Surplus credits carry forward.
7. At financial year-end, residual credits are either cashed out or lapsed, per state rules.

Anti-islanding protection in the on grid inverter ensures that during a grid outage, the export contactor opens and no power flows back into a dead grid. The bidirectional meter does not record export during outages because the inverter is off.

Technical deep dive

Meter requirements

A net metering installation needs:

• A four-quadrant or bidirectional energy meter with import and export registers.
• AMI capability for remote reading, mandatory under the CEA Smart Meter Regulations 2023.
• Accuracy class 0.5S for tariff-grade metering at residential and small commercial levels, class 0.2S at HT.
• Tamper detection, time-stamped logs and the DISCOM’s authorised seals.

State regulatory variations

Single-phase vs three-phase

Residential systems up to 5 to 10 kW are typically single-phase. Larger residential, commercial and industrial connections are three-phase. The meter must match the service configuration. Most modern smart meters support both with appropriate sensing.

Net energy formula

Net energy in any billing cycle = (E_import − E_export). If positive, the customer pays for it. If negative, the absolute value is credited as carry-forward kWh.

Bill amount = (Net energy in slab) × applicable retail tariff + fixed charges.

Reactive power and power factor

DISCOMs may charge customers with poor power factor a reactive power penalty. Modern solar inverters can be configured to inject or absorb reactive power, improving site power factor and avoiding penalties.

Real-world applications

Residential rooftops. The largest user category. 1 to 10 kW systems on independent houses across India, typically installed through turnkey EPCs such as Heaven Green Energy’s residential solar service.

Schools and colleges. 5 to 100 kW systems with net metering eligible under state caps. Some states offer enhanced credit for educational institutions.

Hospitals and clinics. Same range, often paired with a hybrid inverter for backup.

Group housing societies. Common-area solar with net metering under the society’s bulk connection, increasingly via virtual or group net metering frameworks.

Commercial buildings. 50 to 500 kW systems for offices, malls and small factories. Eligibility caps vary by state.

Government buildings. PM Surya Ghar parallel programmes for government buildings under state nodal agencies.

Advantages of net metering

Lowest cost mechanism for monetising rooftop solar. No battery required.

Simple billing. One meter, one bill, one arithmetic operation.

Aligned with PM Surya Ghar subsidy. Eligible installations get both upfront subsidy and ongoing net metering credits.

Lowest break-even period. Typical Indian residential payback under net metering is 4 to 6 years. Without it, payback can stretch to 10 years or never.

Grid services. Distributed solar with net metering supports daytime feeder peaks.

Limitations

Caps on system size. Larger commercial customers often hit the state cap and have to switch to gross metering above that limit.

Variable credit value. Some states pay below retail tariff, reducing the value of exports.

Time-of-day mismatch. Solar peaks at noon, retail tariffs are flat. Customers do not capture peak hour value unless time-of-day tariffs are introduced.

DISCOM resistance in some states. Where solar adoption is high, DISCOMs lobby for caps and switches to gross metering to protect retail revenue.

Application bottlenecks. Technical feasibility studies and meter installation can take 30 to 90 days even after subsidy approval.

Common problems

Bidirectional meter delivered late. DISCOMs do not stock enough smart meters in some districts. The system runs in “old meter mode” and credits are not recorded.

Net export reading recorded as zero by mistake. The meter is installed correctly but the export register is not configured. Audit the first bill.

Old meter not removed. The customer is being billed on the old meter while the new one runs in parallel. Demand removal in writing.

Credit calculation wrong. The DISCOM bills at gross consumption instead of net. Raise a CGRF complaint with copies of meter reads.

Year-end credit not paid out. State rules say carry forward to next year, the DISCOM lapses it instead. CGRF escalation required.

Inverter exceeding sanctioned load. The customer installed 10 kW on a 5 kW sanctioned load. DISCOM rejects the application or requires load enhancement.

Power factor penalty appearing on bill. The inverter is not configured for reactive power injection. Recalibrate at site visit.

Best practices for net metering

Apply for net metering before installing the system. Some DISCOMs require pre-approval.

Match the inverter capacity to the sanctioned load. Going above the sanctioned load triggers load enhancement, additional fees and delays.

Get the technical feasibility study in writing. The TFS defines the maximum size the feeder can absorb.

Audit the first three bills carefully. Most DISCOM billing errors show up in the first three months.

Read the state regulation, not just the brochure. Net metering rules vary materially across states.

Register the system on the PM Surya Ghar portal if applicable. Subsidy disbursement and meter installation are coordinated through the portal. For the exact state-by-state application steps, see How to Apply for Net Metering in India, State by State (2026).

Comparison: net vs gross vs feed-in tariff

Choosing between the two mechanisms depends mainly on daytime self-consumption share; see Gross Metering vs Net Metering, Which Should You Choose? for a worked decision framework.

Indian market context

PM Surya Ghar Muft Bijli Yojana was launched in February 2024 to subsidise rooftop solar for 10 million residential customers by 2027. Net metering is the assumed billing mechanism under the scheme. Subsidy disbursement requires DISCOM commissioning, which requires bidirectional meter installation.

State-level net metering regulations are notified by State Electricity Regulatory Commissions. Maharashtra, Gujarat, Karnataka, Delhi, Kerala, Rajasthan and Telangana have generally consumer-favourable regulations. Tamil Nadu, Andhra Pradesh and some northeast states have introduced gross metering thresholds for larger systems.

CEA Smart Meter Regulations 2023 require smart bidirectional meters for all net-metered connections, with AMI integration to the DISCOM head end. Rollout is uneven, with some districts still on conventional meters as of 2025.

Virtual net metering and group net metering frameworks exist in Delhi, Kerala, Karnataka, Maharashtra and a few other states, enabling shared rooftop solar for group housing and multi-occupancy buildings.

Standards and certifications

Common mistakes

Installing first, applying for net metering later. The DISCOM may reject post-installation requests.

Installing more PV than the sanctioned load allows. Application rejected or load enhancement forced.

Ignoring the DISCOM technical feasibility study. The feeder cannot absorb the requested capacity, and the application is downsized or rejected.

Skipping the bidirectional meter procurement step. The system runs without recording export.

Forgetting to record the seal numbers from the DISCOM at meter installation. Disputes later become hard to resolve.

Not auditing monthly bills. Errors compound over a year.

Assuming uniform rules across states. The neighbouring state’s regulation does not apply.

Key takeaways

Net metering is the billing mechanism that makes Indian rooftop solar economics work. It credits customer-exported solar against grid consumption, usually at retail tariff. State rules vary, so the regulation must be read before designing the system. PM Surya Ghar subsidy depends on net metering being operational. Common pitfalls are size limits, meter installation delays and DISCOM billing errors.

Further reading

For how Net Metering plays out in real projects, these guides go deeper:

• Gross Metering vs Net Metering: Which to Choose?
• Net Metering in India, Complete 2026 Guide
• Solar Subsidy in Delhi 2026, BSES + TPDDL
• Solar Subsidy in Telangana 2026, TSSPDCL + TSNPDCL

Sources

• Electricity Act 2003, Government of India.
• CEA Smart Meter Regulations 2023, Central Electricity Authority of India.
• IS 16444, Indian Standard for AC static direct connected smart meters.
• MNRE Grid-Connected Rooftop Solar Programme guidelines and PM Surya Ghar Muft Bijli Yojana scheme document.
• State Electricity Regulatory Commission net metering regulations for Maharashtra, Gujarat, Karnataka, Delhi, Kerala, Rajasthan, Tamil Nadu and other states.
• CEA Technical Standards for Connectivity to the Grid (Amendment) Regulations 2019.
• Forum of Regulators publications on rooftop solar metering, regulatory commissions of India.
• NREL Technical Report TP-6A20-72472, Net Metering and Distributed Generation Tariff Design.
• IEA PVPS Task 17 Report, PV in Rooftop Programmes and Distributed Generation Tariffs.