Net metering is the single biggest determinant of residential solar economics in the United States, more important than panel cost, more important than installer choice, and now (after the December 2025 termination of the federal residential tax credit) more important than the federal tax structure. The policy varies enormously by state and even by utility within states. The same physical solar system on the same roof can produce 7-year payback in Massachusetts and 13-year payback in a low-net-metering state nearby. This guide is the honest 2026 overview of how net metering actually works, the four major compensation structures, which states use which, and where the policy direction is headed.
What net metering actually is (and is not)
Net metering at its simplest: your electric utility installs a bi-directional meter that measures both the electricity you draw from the grid and the electricity you export back to the grid from your solar system. At billing time, the utility nets the two flows and bills you on the difference.
The crucial detail is at what rate the exported electricity is credited. Under "full retail-rate net metering" (sometimes called true 1:1 net metering), every kWh you export earns a credit equal to the full retail rate you pay for grid imports. This is the most generous structure for solar owners and was the dominant US policy through about 2015.
Three things net metering is not, despite common confusion:
Net metering is not federal policy. Net metering exists because of state public utility commission rules, not federal law. Federal policy (like the Public Utility Regulatory Policies Act of 1978) creates the framework that allows states to mandate purchase of solar exports, but the specific rates and rules are set state by state.
Net metering is not a subsidy in the conventional sense. The utility isn\u2019t paying you out of pocket; you\u2019re receiving credit for electricity you supplied to the grid. The economic argument over net metering centers on whether the retail rate fairly compensates solar customers for their grid contributions or unfairly shifts grid maintenance costs to non-solar customers. Both sides have legitimate points and the debate has been continuous since the early 2010s.
Net metering is not universal. Roughly 44 states plus DC have some form of net metering or solar export compensation, but the specifics vary so much that "net metering" without state-specific context is nearly meaningless.
The four major compensation structures
Stepping past the marketing terminology, residential solar exports are compensated under one of four general structures in 2026:
1. Full retail-rate net metering (1:1)
Every exported kWh earns a credit equal to the full retail electricity rate. Credits typically roll over month to month, sometimes year to year. Annual settlement at either retail rate (best) or avoided cost (slightly worse) for unused credits. Where it exists: Massachusetts, Maryland, New York, New Jersey, Illinois, Colorado, parts of Florida (cooperative utilities), Connecticut (with caps), and approximately 15 other states for at least one major utility. This is the gold standard for solar economics.
2. Retail rate with adders or modifiers
Credit at retail rate for most exports, but with various modifications: lower credit for excess generation beyond annual usage; different rates by time of use; capacity caps that limit how many customers can participate. Where it exists: parts of Texas REPs that offer solar buyback, parts of New York under VDER, Vermont with Category I/II adjustors, Maine. Economic outcomes vary significantly by specific utility and rate plan.
3. Net billing / value of solar tariffs
Exports are credited at a separately-set rate that\u2019s typically below retail. The credit value reflects either the utility\u2019s avoided cost of generation (~3\u20138 cents/kWh) or a calculated "value of solar" that includes some grid benefits but is still typically lower than retail. Where it exists: California (NEM 3.0 / Net Billing Tariff under CPUC Decision 22-12-056), Arizona TEP and APS under the Resource Comparison Proxy, Hawaii (Customer Self-Supply program), Michigan (inflow/outflow), Rhode Island (under reform), Indiana, Mississippi (limited). The Florida 2022 step-down legislation (HB 741) was vetoed but later structures introduced gradual reductions for IOU customers only.
4. No net metering or avoided cost only
Exports earn nothing, or only the utility\u2019s avoided cost (typically $0.03\u2013$0.05/kWh) without retail adders. Where it exists: parts of South Carolina, parts of Georgia (until 2026 reform), several southeastern states for non-public utilities. Solar is still viable in these states through self-consumption, but typically requires battery storage to produce strong economics.
State-by-state overview
A high-level summary of major US states. For current details, the Database of State Incentives for Renewables & Efficiency (DSIRE), maintained by the NC Clean Energy Technology Center, is the authoritative primary source.
States with full 1:1 retail-rate net metering
- Massachusetts: Class I net metering up to 25 kW AC (raised from 10 kW in February 2025). Credits never expire, roll over indefinitely. Applies to Eversource, National Grid, Unitil. SMART program adds per-kWh incentives separately.
- Maryland: 1:1 retail-rate net metering required across BGE, Pepco, Delmarva, Potomac Edison. Net Metering Flexibility Act of 2023 strengthened credit roll-over. Stacks with active SREC market.
- New York: Value of Distributed Energy Resources (VDER) framework with retail rate as the floor for most residential systems. Some areas use Phase One net metering with full retail credit.
- New Jersey: Full retail-rate net metering with annual settlement at retail. Strong SREC successor program (Successor Solar Incentive).
- Illinois: 1:1 retail net metering for systems under 25 kW; Illinois Shines Adjustable Block program adds SREC-equivalent value.
- Colorado: 1:1 retail-rate net metering required for systems under 25 kW; Common Interest Ownership Act protects against HOA restrictions.
- Florida co-ops only: Cooperative utilities like LCEC continue full retail net metering. Investor-owned utilities (FPL, Duke Energy Florida, Tampa Electric) operate under a 2022 framework that introduced step-downs.
States with net billing or reduced credit structures
- California (PG&E, SCE, SDG&E only): NEM 3.0 / Net Billing Tariff effective April 15, 2023. Exports credited at avoided cost (~5\u20138 cents/kWh) vs retail rates of 22\u201348 cents/kWh. Battery storage essentially required for strong economics. Publicly-owned utilities (MID, SMUD, LADWP) operate independently and many retain better terms.
- Arizona: Resource Comparison Proxy (RCP) since 2018 for APS, TEP, UNS Electric. Export rate ~$0.06/kWh vs retail ~$0.13\u2013$0.15. Rate locked for 10 years from interconnection, then resets.
- Hawaii: Customer Self-Supply (CSS) since 2015; net metering closed to new customers. CGS Plus and Battery Bonus programs provide partial export compensation.
- Michigan: Inflow/outflow billing since 2018, with exports credited at avoided cost rather than retail. Existing customers grandfathered 10 years.
- Rhode Island: Renewable Energy Growth program with various non-1:1 rate structures.
- Indiana: Statewide net metering ended in 2022 for new customers; investor-owned utilities now use various avoided-cost structures.
States with no statewide net metering
- Texas: No statewide net metering law. In deregulated areas (most of urban Texas including Houston, Dallas, San Antonio, and now Lubbock), individual retail electricity providers offer solar buyback plans with widely varying terms.
- South Carolina, Tennessee, Mississippi, Alabama: Limited or no statewide mandate; individual utilities may offer voluntary programs.
States actively reviewing or modifying rules
- Florida (IOUs only): The 2022 step-down legislation continues to be implemented for FPL, Duke, and Tampa Electric customers, with export credits gradually declining toward avoided cost.
- Georgia: Georgia Power\u2019s net metering program with capacity caps; expansion debates ongoing.
- Connecticut: Renewable Residential Solar program (RRES) and netting tariff under PURA review.
- North Carolina: Duke Energy net metering modifications under continued debate.
- Virginia: Significant net metering expansion in 2020 under the Clean Economy Act; continues to be the strongest in the Southeast.
The above is a 2026 snapshot. State policies change frequently, often with new docket decisions or legislative updates each year. For the current status of any specific state or utility, DSIRE.org is the appropriate primary source.
How net metering affects your payback
The same physical 7 kW solar system on the same residential roof produces very different economics depending on what state and utility you\u2019re in. A representative comparison:
| State / Utility | NEM structure | Approx export rate | Retail rate | Typical payback (cash) |
|---|---|---|---|---|
| Massachusetts (Eversource/NGrid) | Full retail 1:1 | ~28\u00a2/kWh | ~28\u00a2/kWh | 7\u201310 years |
| Maryland (Pepco/BGE) | Full retail 1:1 + SRECs | ~16.85\u00a2/kWh | ~16.85\u00a2/kWh | 7\u201310 years |
| Florida co-op (LCEC) | Full retail 1:1 | ~14.5\u00a2/kWh | ~14.5\u00a2/kWh | 7\u201310 years |
| California IOU (PG&E/SCE) | Net billing (NEM 3.0) | ~5\u20138\u00a2/kWh | 22\u201348\u00a2/kWh peak | 9\u201312 years (with battery) |
| Arizona IOU (TEP/APS) | RCP export rate | ~6.3\u00a2/kWh | ~13\u201315\u00a2/kWh | 9\u201312 years (with battery) |
| Texas (deregulated) | REP-by-REP | Varies widely | ~13\u201315\u00a2/kWh | 8\u201311 years |
The differences are real and material. A homeowner moving from Massachusetts to Arizona keeps the same panels but takes on substantially longer payback and a near-required battery investment. Knowing your state and utility\u2019s specific policy is more important than nearly any other piece of solar due diligence.
Grandfathering: locking in current rates
Most net metering rule changes grandfather existing customers under the old policy for an extended period. Major examples:
- California: NEM 2.0 customers grandfathered 20 years from original PTO date when NEM 3.0 took effect April 2023.
- Florida (IOU): 2022 net metering step-down preserved existing rate for 20 years from interconnection.
- Michigan: Pre-2018 net metering customers grandfathered 10 years from enrollment.
- Massachusetts: 25-year grandfathering on Class I net metering once interconnected.
- Maryland, New York, others: 15\u201320 year grandfathering standard.
The grandfathering structure creates an explicit incentive to install before unfavorable policy changes take effect, and creates a meaningful risk for delaying solar in states where policy reform is actively being considered. This is one of the legitimate "act now" arguments in solar sales, though the specifics depend entirely on your state\u2019s situation.
Where net metering is headed in 2026
Three trends are reshaping the net metering landscape in 2026 and beyond:
Investor-owned utility pressure against 1:1 retail. Most major IOUs have argued against full retail-rate net metering for at least a decade, on the argument that it shifts grid maintenance costs to non-solar customers. The argument has been gaining traction with state regulators, with California\u2019s NEM 3.0 being the most consequential outcome to date. Florida, Indiana, Michigan, Rhode Island, and Hawaii have all moved toward reduced compensation structures. Expect more states to follow over the next 3\u20135 years, particularly large investor-owned utility territories.
Cooperative and municipal utilities remaining solar-friendly. Publicly-owned and member-owned utilities have generally retained better net metering terms because they\u2019re governed by their boards rather than state PUCs. Modesto Irrigation District in California (NEM 2.0 retained), Lee County Electric Cooperative in Florida (1:1 retained), SMUD in Sacramento, and similar utilities continue to operate independently. The distinction between IOU territory and publicly-owned territory matters increasingly in 2026.
Shift toward time-of-use and battery integration. Even where retail-rate net metering is preserved, utilities are increasingly moving residential customers to time-of-use rate structures that incentivize battery storage. Massachusetts\u2019 SMART 3.0 program emphasizes the storage adder; California\u2019s NEM 3.0 is essentially a forcing function for battery adoption; Arizona\u2019s TEP requires solar customers on TOU rates. The era of "install solar, don\u2019t think about it" is shifting toward "install solar plus battery and use them strategically against TOU pricing." The math is real for the homeowner who designs their system for this reality rather than against it.
How to use this information
Practical takeaways from the state-by-state picture:
Identify your specific utility, not just your state. Maryland Pepco and Maryland Potomac Edison have similar but distinct rules. California PG&E and California SMUD operate under entirely different net metering frameworks. The utility-level detail matters more than the state-level summary.
Verify current rules before signing. Net metering rules change. The dates and specifics in this guide reflect 2026 understanding; verify current policy with DSIRE.org or your utility before making the final decision.
Time your installation if your state is actively reforming. If you\u2019re in a state with active net metering reform discussions, installing before changes take effect typically locks in current rules under grandfathering. This isn\u2019t hypothetical pressure: the Florida 2022 timing, the California NEM 3.0 timing, and the upcoming changes in several other states have produced clearly identifiable winners and losers.
Design for your specific structure. The right system in a full retail-rate state oversizes slightly to maximize export credits at full value. The right system in a net-billing state right-sizes to match consumption closely and includes battery storage to capture the gap between retail and export rates. The same physical hardware, two completely different designs.
What to do next
Start by identifying your specific utility and confirming its current net metering policy. The DSIRE database is the appropriate starting point for policy specifics; your utility\u2019s website confirms the current tariff details.
Then use the right system design for your specific situation. Our solar calculator models system cost and savings for your specific roof. When you\u2019re ready, compare quotes from pre-screened local installers who understand your state and utility\u2019s specific net metering structure; an installer who designs based on national averages rather than your specific tariff will produce worse outcomes than one who knows your local rules in detail.
Frequently asked questions
What is net metering?
Net metering is a utility billing arrangement where your electric meter measures both electricity you draw from the grid and electricity you export from your solar system. At billing time, the utility nets the two flows. In a 1:1 retail-rate net metering state, every kWh you export is credited at the full retail electricity rate, the same rate you pay for grid imports. Net metering is the single biggest determinant of residential solar economics in the US.
Why does net metering matter so much for solar payback?
Most residential solar systems produce more than the home uses during the day and less than the home uses at night. Without net metering, the excess midday production would be exported at whatever the utility chose to pay (often nothing), while evening grid imports would still cost the full retail rate. Net metering effectively lets the grid act as a battery, smoothing the timing mismatch and giving the homeowner full retail value for their solar.
Which states have the best net metering?
As of 2026, the states with the strongest residential net metering policies include Massachusetts, Maryland, New York, New Jersey, Illinois, Colorado, and parts of Florida (cooperative utilities only). These states require full 1:1 retail-rate net metering with credit roll-over. The list of states scaling back net metering has grown, with California moving to NEM 3.0 in 2023 being the most consequential change.
What’s the difference between net metering and net billing?
Net metering measures inflow and outflow in kWh, with the credit value tied to the retail rate. Net billing measures imports and exports in dollars, with the credit value tied to a separate (usually lower) export rate. California’s NEM 3.0 is technically a Net Billing Tariff: exports are credited at the avoided cost rate (~5–8 cents/kWh) instead of the full retail rate (~30–40 cents/kWh peak), a roughly 75% reduction in export value.
Will I lose my net metering if my state changes the rules?
Almost certainly not, if you interconnect before the change. Most states grandfather existing net metering customers for 15–20 years from their interconnection date. California’s NEM 3.0 grandfathered NEM 2.0 customers for 20 years; Massachusetts grandfathers Class I net metering for 25 years; Florida’s 2022 step-down legislation grandfathered existing IOU customers for 20 years. Locking in current net metering before policy changes is a real consideration.
Is net metering going away?
In its strongest 1:1 retail-rate form, the trend is downward in many states. Investor-owned utility lobbying against net metering has been consistent and increasingly effective. California led the shift to net billing in 2023; Florida tried similar legislation in 2022; Michigan and Rhode Island have moved to inflow/outflow billing structures. However, net metering is not disappearing entirely. Solar continues to work in net-billing states with battery storage; the design and economics simply differ from the 1:1 retail era.