Solar buyback refers to the process by which your utility company compensates you for excess solar electricity your system sends back to the grid. When your solar panels produce more electricity than your home uses at that moment, the surplus flows to the grid — and your utility credits or pays you for it. The rate and structure of that compensation varies significantly by state, utility, and program type.
This guide explains how solar buyback programs work, the different types of compensation structures, current buyback rates by state, and how to maximize your earnings.
How Solar Buyback Works
When your solar panels produce more electricity than your home consumes at a given moment, that surplus electricity flows through your bidirectional utility meter onto the grid. The utility company records how many kilowatt-hours you export, and credits or pays you according to the applicable buyback program.
Your monthly electricity bill reflects both what you consumed from the grid and what you exported to it. If you exported more than you consumed in a billing period, you may receive a net credit or, in some programs, a check from the utility.
The process requires a bidirectional meter (also called a net meter or smart meter) capable of measuring both import and export. Most utilities install or replace your existing meter with a bidirectional meter when you connect solar to the grid — this is part of the interconnection approval process.
Types of Solar Buyback Programs
Retail-rate net metering (traditional NEM): The most favorable buyback structure for homeowners. Every kilowatt-hour you export earns a credit equal to the full retail electricity rate — the same rate you pay when importing from the grid. If you buy electricity at 18¢/kWh and export it at 18¢/kWh, each unit you send to the grid fully offsets a unit you use from the grid.
Traditional retail-rate net metering is available in most US states. The specific rates and monthly carry-forward rules vary by state and utility. Some utilities allow excess monthly credits to roll forward for up to 12 months; others pay out annual surplus credits at a lower rate or simply forfeit them.
Avoided cost / wholesale rate buyback (NEM 3.0 model): California’s NEM 3.0, implemented April 2023, replaced retail-rate credits for exported electricity with “avoided cost” rates — what the utility saves by not having to generate that electricity. Avoided cost rates are typically 4–10¢/kWh in California, versus retail rates of 28–45¢/kWh. This dramatically reduced the value of exported solar electricity for California homeowners and strongly incentivized adding battery storage to self-consume more production rather than export it. Other states may follow similar approaches as utility commissions revisit net metering policies.
Time-of-use (TOU) net metering: Buyback rates vary by time of day. Exported electricity during peak demand hours (typically 4–9 p.m. weekdays) earns higher credits than exports during off-peak hours (midday, when solar production is highest). Under TOU structures, a west-facing panel array that produces more in the afternoon can earn more per exported kWh than a south-facing array that produces mainly at midday.
Feed-in tariffs (FiT): A fixed above-market rate for all solar electricity exported, regardless of when it’s exported. Feed-in tariffs were common for utility-scale and residential solar in the early 2010s in the US but have largely been replaced by net metering programs. Some states and utilities still offer feed-in tariffs for small systems — Hawaii’s CBRE program (Customer Self-Supply) and Vermont’s Standard Offer program are examples.
Virtual net metering / community solar: For renters or homeowners who can’t install rooftop solar, community solar programs allow subscription to a share of a remote solar array. Credits from that share appear on your electricity bill as buyback credits — functioning similarly to rooftop net metering but without panels on your roof.
Solar Buyback Rates by State
Buyback rates vary substantially by state and utility. The following represents the general policy structure in major solar states as of 2026:
| State | Buyback Structure | Export Rate (approx.) |
|---|---|---|
| California | NEM 3.0 avoided cost | 4–10¢/kWh |
| Texas (varies by utility) | Market / avoided cost | 2–8¢/kWh |
| Florida | Retail-rate NEM | 12–14¢/kWh |
| New York | Retail-rate NEM (most utilities) | 18–25¢/kWh |
| Massachusetts | Retail-rate NEM + SMART program | 19–22¢/kWh + tariff |
| New Jersey | Retail-rate NEM | 16–17¢/kWh |
| Arizona | Varies (APS: 9¢/kWh export) | 9–14¢/kWh |
| Colorado | Retail-rate NEM (Xcel) | 13–16¢/kWh |
Always check your specific utility’s current interconnection tariff — buyback rates are set by utility commissions and can change. Your installer can provide the current rate for your utility as part of the proposal process.
How to Maximize Solar Buyback Value
Under retail-rate net metering: Size your system to offset most but not all of your annual consumption. Oversizing results in excess annual credits that many utilities pay out at a lower rate or forfeit — the last kWh of exported electricity at year-end may earn significantly less than a kWh consumed from the grid. A good installer targets 90–100% of your annual consumption with the solar array rather than significantly oversizing.
Under NEM 3.0 (California) or avoided-cost buyback: Battery storage becomes economically essential. Rather than exporting midday solar at 5¢/kWh, store it in a battery and self-consume it in the evening to offset retail electricity at 30–45¢/kWh. The value of self-consumption (saving retail rate) is 4–9× higher than the value of exporting (earning avoided cost rate) under these structures. Tesla Powerwall, Enphase IQ Battery, and Franklin aGate are common battery systems in California.
Under TOU rates: If your utility has TOU pricing, examine when your peak export hours are and what rate they earn. West-facing panels or east-west split arrays can be strategically superior to south-facing arrays for maximizing TOU export value when afternoon pricing peaks are high. Some TOU programs charge higher on-peak rates in summer afternoons — a west-facing array producing more at 4–7 p.m. captures higher export credits during those hours.
Solar Renewable Energy Credits (SRECs)
In addition to net metering buyback, some states have Solar Renewable Energy Credit (SREC) markets where each MWh (1,000 kWh) of solar production earns one SREC that can be sold to utilities needing to meet renewable portfolio standards. SREC markets exist in: New Jersey, Massachusetts, Maryland, Pennsylvania, Ohio, Illinois, and Washington DC.
SREC prices vary by state and market conditions. In New Jersey (historically the most robust SREC market), SREC prices have ranged from $20 to $225 per SREC over the past decade. An 8 kW system producing 10,000 kWh/year would earn approximately 10 SRECs annually. At $100/SREC, that’s $1,000/year in additional income on top of electricity bill savings — a significant financial benefit available in SREC states.
Massachusetts replaced its legacy SREC program with SMART (Solar Massachusetts Renewable Target), a fixed-rate incentive paid per kWh of generation — simplifying the process compared to market-rate SRECs.
Frequently Asked Questions
How much do utilities pay for solar energy sent back to the grid?
Compensation ranges from 4¢/kWh (California NEM 3.0 avoided cost) to full retail rates of 18–25¢/kWh (most states with traditional net metering). The specific rate depends on your state’s net metering policy, your utility, and the rate schedule you’re on. Most US states still offer full retail-rate net metering, making the buyback rate equal to what you pay for electricity.
Does solar buyback make sense if rates are low?
Solar buyback value is proportional to your electricity rate — low retail rates mean lower buyback credit value. In markets where retail electricity is 8–10¢/kWh (some southeastern utilities), buyback credits are worth less, and the overall solar payback period is longer. Solar is still financially viable in these markets but requires larger systems to achieve the same savings. Your solar installer should model the economics at your specific utility rate rather than national averages.
What happens to excess solar credits at year-end?
This depends on your utility’s net metering policy. Most utilities roll excess credits forward month-to-month for 12 months. At the annual “true-up” date: some utilities pay out remaining credits at the retail rate; others pay at a reduced rate (avoided cost); a few forfeit unused credits. This policy matters for system sizing — if year-end surplus earns less than retail, it reduces the value of oversizing your system.
Can I sell solar power back to the grid without net metering?
It’s more difficult without formal net metering. Some states allow direct power purchase agreements (PPAs) with utilities at wholesale rates, but these are typically structured for commercial or utility-scale systems rather than residential rooftop solar. In deregulated electricity markets (Texas, Ohio, Illinois), some retail electricity providers offer “solar buyback” plans that credit exported electricity — search for solar buyback rates from Texas retail electricity providers for example options in deregulated markets.
Is solar buyback going away?
Some states are moving away from full retail-rate net metering toward avoided-cost models (following California’s NEM 3.0 lead), which reduce the export value. However, the underlying case for solar — self-consuming solar electricity to offset retail-rate grid electricity — remains strong regardless of buyback rate changes. Battery storage becomes more important as export rates decline. Most state utility commissions are gradually reducing rather than eliminating export compensation, and grandfathering provisions protect existing customers for periods of 10–20 years in most states.
Summing Up
Solar buyback programs compensate you for excess solar electricity exported to the grid, with rates ranging from 4¢/kWh (California NEM 3.0 avoided cost) to full retail rates of 18–25¢/kWh in states with traditional net metering. The value of buyback credits is a key factor in solar economics — in high-retail-rate states with full net metering, every exported kWh fully offsets a grid kWh. In lower-rate markets or states moving toward avoided-cost compensation, battery storage becomes more important to maximize self-consumption. SREC markets in states like New Jersey and Massachusetts add additional income on top of net metering credits.
To understand exactly which buyback program and rate applies in your area — call (855) 427-0058 for a free consultation. Local installers can model your exact economics under your utility’s current net metering or buyback tariff.
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