title: Net Metering Explained description: How net metering works, which states offer it, and why it's the most important policy for solar homeowners. summary: How net metering works, which states offer it, and why it's the most important policy for solar homeowners. category: policy difficulty: Intro updated: 2026-02-09 tags: ["net metering", "policy", "solar", "billing", "grid"] relatedTools: ["/tools/solar-roi", "/tools/rate-plan-optimizer"] faqs:
- question: What is net metering? answer: Net metering is a billing arrangement where your utility gives you credit for excess solar electricity you send to the grid. Your meter effectively "spins backward" when your panels produce more than you use, and those credits offset electricity you draw at night or on cloudy days.
- question: Do all states have net metering? answer: No. As of 2026, about 38 states plus D.C. have some form of mandatory net metering. However, the details vary widely — some states credit at the full retail rate, others at a reduced "avoided cost" rate, and a few states have replaced net metering with different programs entirely.
- question: Is net metering going away? answer: Several states are transitioning away from traditional net metering. California moved to NEM 3.0 in 2023, which significantly reduced export credits. Other states are considering similar changes. If you're thinking about solar, the current net metering rules in your state typically get "grandfathered" for 15-20 years once you install.
- question: Can I sell excess solar electricity back to the utility? answer: Not exactly "sell," but net metering credits your account for excess generation. Most utilities apply credits monthly and do an annual true-up. Any remaining excess credits at year-end may be paid out at a lower wholesale rate or forfeited, depending on your state's rules.
- question: Does net metering work with battery storage? answer: Yes, though the interaction matters. With a battery, you can store excess solar and use it yourself at night instead of exporting to the grid. In states with strong net metering, exporting may be just as valuable. In states with reduced export rates (like California NEM 3.0), batteries become much more valuable since self-consumption avoids the low export credit.
Net Metering Explained
Net metering is the single most important policy determining how much money solar panels save you. It governs what happens when your panels produce more electricity than your home is using.
How Net Metering Works
During the day, your solar panels often produce more electricity than your home consumes. Without net metering, that excess energy would be wasted (or given to the utility for free).
With net metering:
- Excess power flows to the grid — your meter registers the export
- You receive a bill credit — typically at the full retail rate (e.g., 16¢/kWh)
- At night, you draw from the grid as usual
- Your bill reflects the net — you only pay for the difference between what you consumed and what you exported
This is why it's called "net" metering — you're billed on the net difference.
Monthly vs. Annual True-Up
Most utilities track your credits on a rolling monthly basis:
- January: You use 800 kWh, produce 400 kWh → billed for 400 kWh
- July: You use 1,000 kWh, produce 1,200 kWh → bank 200 kWh in credits
- End of year: Any leftover credits may be paid out at wholesale rate or reset
Some states do an annual true-up, where credits accumulate all year and settle once.
The Economics Impact
Net metering can make or break solar economics. Consider a homeowner paying 16¢/kWh:
| Scenario | Value of Each kWh Exported | |----------|---------------------------| | Full retail net metering | 16¢ | | Reduced rate (e.g., NEM 3.0) | 5–8¢ | | No net metering | 0¢ |
With full retail net metering, the payback period on a solar system might be 7 years. Without it, the same system might take 12+ years — making a battery almost essential to capture value from excess production.
State-by-State Variation
Net metering rules fall into several categories:
Full Retail Rate
States like New Jersey, Massachusetts, and Maryland credit solar exports at the full retail electricity rate. This is the most favorable arrangement for homeowners.
Reduced or Avoided Cost Rate
Some states credit exports at a lower "avoided cost" or wholesale rate, which can be 30–60% less than retail. California's NEM 3.0 is the most notable example.
No Mandatory Net Metering
A handful of states (Idaho, South Dakota, Tennessee) don't mandate net metering, though some utilities within those states offer voluntary programs.
Successor Programs
Several states are designing or have implemented successor tariffs that move beyond simple kWh credits. These may include:
- Time-varying export rates — credits worth more during peak hours
- Fixed monthly charges for grid-connected solar
- Capacity-based credits in addition to energy credits
Grandfathering: Why It Matters Now
When states change net metering rules, existing solar customers are typically grandfathered under the old rules for 15–20 years. This means:
- Installing solar before a policy change locks in the better rate
- The "net metering countdown" is a legitimate reason to act sooner rather than later
- Your installer should be able to tell you your state's current status and any pending changes
Net Metering + Batteries
The rise of reduced export credits is making battery storage increasingly important:
- Strong net metering states: A battery provides backup but doesn't necessarily save more money (exports are already well-compensated)
- Weak net metering states: A battery lets you self-consume your solar instead of exporting at a low rate, dramatically improving economics
- TOU rate states: A battery lets you store solar from midday and use it during expensive peak hours (4–9 PM)