Avoided Cost of Energy
The cost a utility avoids by not having to generate or purchase electricity because a customer-sited resource (like rooftop solar) provides it instead. Used to set export rates in net billing tariffs.
Why It Matters
Avoided cost is typically 30-60% of retail rate. States using avoided cost for solar credits offer less favorable economics than traditional net metering.
Related Terms
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.
Net Billing
An export compensation mechanism where excess solar electricity sent to the grid is credited at a rate lower than the retail rate — typically wholesale, avoided cost, or a set export rate.
Export Rate
The per-kWh credit received for electricity exported from a home solar system to the grid. May equal retail rate (net metering), avoided cost (net billing), or a time-varying amount.