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Incentives & Policy·5 min read · Updated April 2026

How Net Metering Works in 2026

Net metering lets your solar panels earn bill credits when you produce more power than you use. Over 40 states require it — but the rules vary enormously. Here is what you need to know before going solar.

40+
States with net metering
Required by law or utility policy
Retail rate
Credit in best states
12–30¢/kWh by state
5–8¢
CA NEM 3.0 export rate
~80% less than NEM 2.0
$1,400/yr
Avg bill reduction
8 kW, strong NEM state

How Net Metering Works Step by Step

Your solar panels produce electricity throughout the day. During midday hours, production typically exceeds your home's real-time consumption. The surplus flows back to the grid through your bidirectional utility meter.

Your utility tracks what you send to the grid and issues a bill credit. At night or on cloudy days, you draw from the grid and those credits offset consumption. On a well-sized system in a strong net metering state, your annual bill can drop 70–100%.

Most utilities do a monthly or annual "true-up." Any credits remaining at year-end are rolled over, paid out at a lower rate, or expired — depending on your state and utility tariff. The DSIRE databasetracks every state's current net metering rules.

Net Metering by State: Best and Worst Policies

StatePolicyExport RateRolloverRating
New YorkFull NEMRetail (~22¢/kWh)Monthly + annual true-up⭐⭐⭐⭐⭐
New JerseyFull NEMRetail (~18¢/kWh)Monthly rollover⭐⭐⭐⭐⭐
MassachusettsFull NEMRetail (~25¢/kWh)Monthly rollover⭐⭐⭐⭐⭐
MarylandFull NEMRetail (~16¢/kWh)Monthly rollover⭐⭐⭐⭐
ArizonaFull NEMRetail (~13¢/kWh)Monthly rollover⭐⭐⭐⭐
ColoradoFull NEMRetail (~14¢/kWh)Monthly rollover⭐⭐⭐⭐
FloridaFull NEMRetail (~14¢/kWh)Annual true-up⭐⭐⭐
NevadaReduced~75% of retailMonthly rollover⭐⭐⭐
CaliforniaNEM 3.0Avoided cost (~5–8¢)Monthly; low value⭐⭐
TexasNo mandateUtility-specific (4–11¢)Varies⭐⭐

Source: DSIRE database; EIA state electricity rates 2025.

California NEM 3.0: What Changed

California's NEM 3.0 policy (effective April 2023) dramatically reduced the value of exporting solar to the grid. Under NEM 2.0, homeowners received retail rate credits (~29¢/kWh). Under NEM 3.0, export compensation dropped to avoided cost — roughly 5–8¢/kWh — an 80% reduction.

The solution is battery storage. Storing midday surplus and using it in the evening avoids exporting at low rates. California's Self-Generation Incentive Program (SGIP) offers rebates up to $1,000 toward battery installation for qualifying households.

Annual Savings: Strong NEM vs. Weak NEM vs. No NEM

ScenarioAnnual OutputAnnual SavingsPayback (8 kW)
Full retail NEM (NY, NJ, MA)10,400 kWh$1,800–$2,6008–10 yrs
Partial NEM (75% retail, NV)10,400 kWh$1,350–$1,95010–13 yrs
NEM 3.0 + self-consume (CA)10,400 kWh$900–$1,40014–18 yrs
No NEM, self-consume only10,400 kWh$600–$90020–25 yrs

Assumes 8 kW at $22,400, 50% self-consumption rate. EIA state avg rates 2025.

Frequently Asked Questions

What is net metering?
Net metering is a utility billing policy that credits solar panel owners for excess electricity they export to the grid. When your panels produce more than you use, the surplus flows to the grid and credits accumulate on your bill.
How much do I get paid for excess solar energy?
In states with full net metering, you receive credits at the retail electricity rate — typically 12–30¢/kWh. In states with net billing or avoided-cost compensation like California NEM 3.0, credits are significantly lower, around 5–8¢/kWh.
Which states have the best net metering?
New York, New Jersey, Massachusetts, Maryland, and Arizona offer strong net metering with full retail rate credits. Texas has no statewide net metering law — policies vary by utility. Florida requires net metering but compensation rates have been debated.
What is NEM 3.0 in California?
California's NEM 3.0 (effective April 2023) replaced full retail-rate credits with avoided cost rates averaging 5–8¢/kWh for exported power — an 80% reduction from NEM 2.0. This significantly reduces the financial benefit of exporting excess solar and makes battery storage much more valuable.
Do excess solar credits roll over month to month?
Most states allow credits to roll over month to month, with annual true-up or settlement. In some states, unused credits expire annually or are purchased by the utility at a lower avoided-cost rate. Check your specific utility tariff.

Key sources:

• DSIRE — Database of State Incentives for Renewables & Efficiency

• EIA — State Electricity Profiles 2025

• CPUC — California NEM 3.0 Policy Details

See Net Metering for Your State

Our state pages include net metering policy details and real savings calculations based on your local electricity rate.

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