How Solar Net Metering Works (State-by-State, 2026)
Net metering is how your utility pays you for the excess solar power you send to the grid, and after your electricity rate it is the single biggest factor in your solar payback. In 2026, the best states still offer full-retail 1:1 credit, while many have shifted to lower-value 'net billing.' This guide explains every model, how credits and true-ups work, and what it means for system sizing and batteries.
What is net metering?
Net metering is the billing arrangement that credits you for the solar electricity you generate but do not use the instant it is produced. When your panels make more than your home needs — a sunny afternoon while you are at work — the surplus flows back onto the grid and your meter effectively runs backward, banking a credit. At night or on cloudy days you draw from the grid and spend those credits down.
At its best, net metering turns the grid into a free, lossless battery: you store summer surpluses and spend them in winter, paying only for your net consumption over the year. How generously your utility credits that exported power is what separates a great solar state from a mediocre one, and it is the policy most likely to change during your system's life.
It matters because it sets the value of every kilowatt-hour your system exports. Combined with your retail rate, it largely determines your payback period and your lifetime return on investment.
The three main types of net metering
Not all ‘net metering’ is equal. In 2026, three models dominate the US, and the difference between them can swing your payback by years:
| Model | How exports are valued | Homeowner value |
|---|---|---|
| Full retail (1:1) | Exports credited at the full retail rate you pay | Best |
| Net billing | Exports credited below retail (often wholesale/avoided-cost) | Moderate |
| Buy-all, sell-all | You sell 100% of output at one rate, buy 100% at retail | Varies |
Full-retail net metering is the gold standard and still exists in states like Florida. Net billing — where exports are worth less than the power you buy — is increasingly common and makes self-consumption and battery storage far more valuable. Buy-all, sell-all is rarer and only beneficial when the sell rate is attractive relative to retail.
How export credits actually work
Under a typical full-retail arrangement, credits roll over month to month. You build a surplus in sunny months and draw it down in darker ones. The mechanics that trip people up are the monthly netting and the annual true-up:
- Monthly netting: each billing cycle, your production is netted against your consumption. If you produced more than you used, you carry a credit forward.
- Annual true-up: once a year your utility settles the account. Any leftover credit is typically paid out at a low ‘avoided cost’ rate or, in some states, expires. This is precisely why oversizing your system is wasteful — surplus you can't use is barely compensated.
Under net billing the math is different again: your export credit is worth less than retail, so self-consuming your solar (using it as it is produced, or storing it in a battery) is far more valuable than exporting. Households in net-billing states shift large loads — EV charging, laundry, pool pumps, pre-cooling — into daylight hours to capture more value. See how many panels you need to size correctly.
Net metering by state in 2026
Policies change frequently, often by utility within a state, but here is how a sample of states treated residential solar exports in 2026:
| State | 2026 approach | Effect on solar |
|---|---|---|
| Florida | Full-retail 1:1 net metering | Strong |
| New Jersey | Full-retail + SuSI SRECs | Excellent |
| Illinois | Net metering transitioning by utility | Good |
| North Carolina | Net billing ‘bridge’ rate | Moderate |
| Nevada | Net billing (~75% of retail) | Moderate |
| Louisiana | Net billing at avoided-cost rate | Weaker |
Browse all 26 states on our Solar Incentives by State hub for local detail, and pair it with our best states for solar ranking.
California's NEM 3.0 and the national trend
The most consequential recent change is California's NEM 3.0 (the Net Billing Tariff), which cut export compensation by roughly 75% compared with the old 1:1 system. Crucially, it did not end solar in California — it triggered a pivot to solar-plus-storage. With low export credit, the smart move became storing cheap midday solar in a battery and using it during the expensive evening peak, when grid power costs the most, rather than exporting it for pennies.
This is the national direction of travel. As more rooftop solar comes online, utilities argue that full-retail net metering shifts grid-maintenance costs onto non-solar customers, and regulators respond by moving toward net billing. The practical takeaways for a 2026 buyer:
- In a full-retail state: size your system to offset your annual usage and let the grid bank your surplus. A battery is optional.
- In a net-billing state: design around self-consumption, shift loads to daylight, and seriously evaluate storage — see our battery worth-it guide.
Grandfathering: locking in your rate
One of the most valuable but least-discussed features of net metering is grandfathering. When a state changes its policy, homeowners who installed under the old, more generous rules are usually allowed to keep them for a set period — often 10, 15 or 20 years.
This creates a real incentive to install before a pending policy change: you can lock in full-retail net metering for years even as new customers are moved to net billing. If your state is debating a net-metering rollback, that is a strong reason to act sooner rather than later. Always ask your installer, in writing, which tariff your system will be enrolled under and how long that enrollment is guaranteed.
How net metering shapes system sizing
Net metering rules should directly influence how big a system you build:
- Full retail: size to roughly 90–100% of annual usage. The grid stores your surplus efficiently, so a system matched to your yearly consumption maximizes value.
- Net billing: consider sizing slightly under your usage, or pairing a moderately sized system with a battery, because exported surplus is worth less than the retail power you offset by self-consuming.
- Annual true-up that expires credits: avoid building far beyond usage — you would be giving the utility free power.
Our panel-count guide and the Payback Calculator let you test sizes against your bill before you commit.
Net metering meets time-of-use rates
A growing number of utilities pair net metering with time-of-use (TOU) rates, where the price of electricity changes by hour. Power is cheap overnight and midday, and expensive during the late-afternoon-to-evening peak when demand is highest. This interacts powerfully with solar.
Under TOU with net metering, the credit you earn for exporting and the charge you pay for importing both depend on the hour. Solar naturally produces most at midday — which, on many TOU schedules, is no longer the highest-priced window. That means exported midday solar may be credited at a mid-tier rate while the power you import during the evening peak costs the most.
The strategic response is to shift consumption into your production hours and, increasingly, to add a battery that stores cheap midday solar for discharge during the expensive evening peak. This ‘peak shaving’ can be worth more than the export credit itself. If your utility has steep TOU peaks, model storage with the Solar Battery Calculator — it is often where the strongest savings now live.
How to read net metering on your bill
Once your system is running, your utility bill changes shape. Knowing what to look for confirms you are being credited correctly:
- kWh delivered — energy you pulled from the grid.
- kWh received — energy your panels exported to the grid.
- Net kWh — the difference, which is what you are billed on (or credited for) under full-retail net metering.
- Credit balance — banked credits carried into the next cycle.
- Non-bypassable charges — small per-kWh fees (for grid programs) that net metering does not offset; these are why even a net-zero solar home still has a small bill.
If your numbers look wrong — for example, exports credited at a lower rate than expected — check which tariff you were enrolled under and whether a meter swap to a bi-directional meter was completed. Errors at enrollment are common and worth catching early, because they compound over years.
Net metering, EVs and electrification
Net metering becomes even more valuable as your home electrifies. Adding an electric vehicle, a heat pump, or an induction range raises your electricity use — and a correctly sized solar system can offset that new load, turning rising consumption into rising savings rather than rising bills.
The interaction with net metering rules is important. In a full-retail state, you can size up to cover EV charging and heat-pump heating, banking summer surplus to cover winter heating and year-round driving. In a net-billing state, the play is to charge the EV and run the heat pump during daylight when your panels are producing, maximizing self-consumption rather than exporting cheaply. Smart EV chargers and heat-pump thermostats can automate this, scheduling big loads for your solar window.
Before electrifying, re-run your numbers: a home that adds an EV may need a noticeably larger array. Our panel-count guide includes EV and heat-pump scenarios, and the Payback Calculator lets you test the larger system against your projected usage.
Is net metering going away?
Full-retail net metering is gradually being replaced in many states, but net metering as a concept is not disappearing — it is evolving toward net billing with time-of-use rates and storage incentives. For homeowners, the headline is simple: the value of exporting is declining, while the value of using or storing your own solar is rising.