Avoided Cost
The cost a utility would have incurred to generate or purchase electricity that was instead provided by a distributed resource like rooftop solar.
Why It Matters
Avoided cost is increasingly used as the basis for solar export compensation, replacing retail-rate net metering. Understanding it helps predict future incentive changes.
Related Tools
Related Terms
Net Metering
A billing mechanism that credits solar energy system owners for the electricity they add to the grid. The excess power generated during the day offsets power consumed at night.
NEM 3.0 (Net Billing)
California's successor to traditional net metering, which compensates solar exports at a lower "avoided cost" rate rather than the full retail rate. Took effect April 2023.
Feed-in Tariff
A policy mechanism that guarantees a fixed payment rate for renewable energy fed into the grid, typically for a set period.