Solar true up is the annual process where a homeowner's solar energy production is compared to their electricity consumption, and any remaining credits or charges are settled with the utility provider. It occurs after the utility recalculates net metering balances, typically at the end of a 12-month billing cycle.
Homeowners with grid-tied solar systems generate electricity during daylight hours. When production exceeds usage, the surplus flows back into the grid, earning credits on the utility bill. These credits offset future consumption. At the end of the year, the utility performs a solar true up to close the books on those credits and determine whether the customer owes money or receives a payment.
True up is not a monthly event. It happens once per year, usually aligned with the customer's annual billing cycle. For example, if a household's solar system produced 12,000 kWh and consumed 10,500 kWh over 12 months, they'd have 1,500 kWh in credits. If the utility pays $0.10 per kWh for surplus energy, the homeowner receives $150. If they used more than they produced, they pay the difference at the retail rate.
Utilities track solar generation and consumption through bi-directional meters. These meters record both electricity drawn from the grid and excess power sent back. Monthly statements show net usage, but the true up happens annually.
At year-end, the utility calculates the net balance. If the customer generated more than they used, the excess is settled based on the utility's true-up policy. Some utilities pay cash for unused credits. Others roll them forward or apply them to future bills. A few cap the amount of credit that can be paid out annually.
For example, a homeowner in California with a 6 kW solar system produces an average of 8,000 kWh per year. Their home uses 7,200 kWh. The 800 kWh surplus earns a credit. If the utility pays $0.08/kWh for true-up credits, the homeowner receives $64. This is not a refund but a settlement of earned value.
Utility policies vary widely. The most common models are cash payout, rollover, and net-billing. Not all states allow cash payments, and some utilities limit payouts to a maximum amount.
| Policy Type | How It Works | Best For |
|---|---|---|
| Cash Payout | Unused credits are paid out at wholesale or retail rates. | Homeowners who want immediate returns on surplus energy. |
| Rollover | Credits carry forward to the next year, reducing future bills. | Those with consistent solar production and stable usage. |
| Net-Billing | Excess energy is valued at a lower rate (e.g., wholesale), and customers pay for net usage. | High-production homes that don't expect large payouts. |
California's NEM 3.0 program, effective January 2023, replaced net metering with a true-up model where surplus energy is valued at a lower rate. Customers receive $0.03/kWh for excess generation, less than the retail rate of $0.30/kWh. This change reduced the financial return on solar for many homeowners.
A lesser-known fact: some utilities apply true-up settlements retroactively. If a customer's system was underperforming due to shading or inverter issues, the utility may adjust past bills upon verification. This is rare but documented in reports from the National Renewable Energy Laboratory (NREL).
Many assume solar true up means "you get paid for everything you produce." That's incorrect. Only surplus energy beyond personal use qualifies. If a household uses 100% of its solar output, no true-up occurs.
Another myth is that true-up happens monthly. It does not. Monthly statements reflect net usage, but the final reconciliation occurs annually. Missing this timing can lead to surprise bills if usage spikes in the final quarter.
Some confuse true up with solar buyback programs. Buyback programs pay for all solar production, regardless of usage. True up only applies to net excess. For example, a utility offering $0.15/kWh for all solar energy is a buyback program. One paying $0.05/kWh only for surplus energy is a true-up model.
Consider a family in Arizona with a 5 kW solar system. Over 12 months:
The utility sends a statement showing a $63 credit applied to the account. No additional payment is issued unless the policy allows cash disbursement. If the family had used 8,000 kWh, they'd owe $200 at $0.25/kWh for the deficit.
I installed a solar system in 2021 and experienced my first true-up in December 2022. My system produced 11,200 kWh, and our home used 9,800 kWh. The utility credited us $140 at $0.10/kWh. The amount was small but meaningful-enough to cover two months of electric vehicle charging.
Solar true up affects long-term ROI. A system that generates more than it consumes can yield savings, but only if the utility compensates fairly. Low true-up rates reduce financial benefit.
According to the U.S. Department of Energy, households in states with favorable true-up policies see a 15-20% faster payback period on solar installations. In contrast, states with low compensation rates extend payback by 3-5 years.
When evaluating solar contracts, review the true-up clause carefully. Ask your utility: What is the true-up rate? Is there a cap? Can credits be carried forward? These details impact whether solar remains financially viable over time.