Net Metering Explained: How Homeowners Get Paid for Excess Solar Power

What Is Net Metering?

Net metering is a billing arrangement where your utility credits you for excess electricity your solar panels send to the grid. When your panels produce more than you use, the surplus flows to the grid and your meter runs backward.

At the end of each billing period, you only pay for your net consumption — the difference between what you used and what you generated.

How the Credits Work

Most states credit excess solar at the full retail rate — the same price you'd pay to buy electricity. If your utility charges $0.19/kWh and you send 500 kWh to the grid, you get a $95 credit.

Some states use avoided cost or wholesale rate crediting, which is significantly less valuable (typically $0.03–$0.07/kWh).

State Net Metering Rankings (2026)

Excellent (full retail rate):

New Jersey, New York, Massachusetts, Connecticut, Maryland, Pennsylvania

Good (retail rate with some limitations):

Ohio, Virginia, North Carolina, Colorado

Poor (reduced rates or eliminated):

California (NEM 3.0 — 75% reduction since 2023), Nevada, Hawaii, Arizona

The California Warning

California's NEM 3.0, implemented in April 2023, slashed export credits by ~75%. The average export rate dropped from ~$0.30/kWh to ~$0.08/kWh. Batteries are now essentially required to make solar financially viable in CA — you store midday production and use it during expensive evening peak hours instead of exporting it at low rates.

Annual True-Up vs. Monthly Billing

Most utilities do an annual true-up — you accumulate credits all year and settle up once. This is ideal because you overproduce in summer and underproduce in winter.

What's Changing in 2026

Net metering is under pressure from utilities nationwide. Several states are reviewing their programs. If you're considering solar, locking in current net metering rates now is a significant financial advantage — most states grandfather existing customers under the rules at the time of installation.

With the federal ITC now expired, net metering value is even more critical to the financial case for solar in 2026.