Net metering is the policy that lets solar homeowners sell excess electricity back to the grid, effectively running their meter backward. The terms — and therefore the financial value of solar — vary dramatically by state. In states with full retail net metering, excess solar is worth 15–33 cents/kWh; in California under NEM 3.0, it’s worth only 5–8 cents/kWh. Understanding your state’s policy is one of the most important factors in evaluating whether solar makes financial sense for your home.
How Net Metering Works
When your solar panels produce more electricity than your home is consuming at that moment, the excess flows back to the grid through your utility’s bidirectional meter. Your meter records this export. At billing time, the utility offsets the kWh you exported against the kWh you imported, and you pay only for net consumption.
Example: Your 9 kW system produces 1,200 kWh in June. Your home consumes 900 kWh. You export 300 kWh to the grid. Under full retail net metering, those 300 kWh are valued at your retail rate — say, 22 cents/kWh — giving you a $66 credit that rolls forward to reduce future bills.
The “value” of net metering is the rate at which your exports are credited. Full retail rate net metering (common in most states) is the gold standard. Reduced-rate net metering (like California’s NEM 3.0, which credits at 5–8 cents/kWh “avoided cost”) significantly changes the economics.
Annual true-up: Many utilities accumulate net metering credits throughout the year and do a single “true-up” calculation once per year. If you have excess credits at true-up (produced more than you consumed annually), most utilities either pay you a reduced rate for the excess (often 3–5 cents/kWh) or forfeit the balance. Properly sized solar systems are designed to generate approximately equal to annual consumption, minimizing excess credits that receive this lower true-up rate.
Net Metering by State — Key Markets (2026)
California — NEM 3.0
Policy: “Avoided cost” rates (not retail). Export credits: 5–8 cents/kWh (varies by time of day and season, replacing the previous retail-rate NEM 2.0 which paid 30–33 cents/kWh). NEM 2.0 grandfathering: Customers on NEM 2.0 (interconnected before April 2023) keep retail-rate credits through April 2028. New solar in California needs battery storage to capture peak rates (30–50 cents/kWh in the 4–9 PM peak window).
Texas
Policy: No statewide net metering mandate. Individual utilities set their own buyback rates. Most Texas utilities offer “avoided cost” credits (8–12 cents/kWh) rather than retail rates. Austin Energy offers full retail net metering for its customers. ERCOT’s deregulated market means policies vary significantly by utility. This is one reason Texas’s solar economics are weaker than its excellent sunshine would suggest.
Florida
Policy: Full retail net metering (as of 2026). Monthly net metering — excess credits from month to month but expire at the end of the annual period. Florida’s Public Service Commission has considered reducing net metering but maintained it as of 2026. High sunshine combined with retail net metering makes Florida one of the better southern solar markets.
New York
Policy: Full retail net metering (Value of Distributed Energy Resources, or VDER, applies to larger systems). Residential systems receive retail rate credits monthly and annual rollover at the retail rate (not reduced). New York’s 21–26 cents/kWh electricity rates combined with retail net metering produce strong solar economics despite less sunshine than the South.
New Jersey
Policy: Full retail net metering with annual true-up. Excess credits roll forward at retail rate for 12 months; surplus at year-end is compensated at the “avoided cost” rate. Combined with the SuSI SREC program, New Jersey has among the best solar economics in the US.
Massachusetts
Policy: Full retail net metering. Credits roll forward monthly. Annual true-up pays any remaining excess at the utility’s wholesale rate. Massachusetts’s 29–33 cents/kWh electricity rates make its retail net metering extremely valuable — one of the top solar ROI states.
Maryland
Policy: Full retail net metering with annual true-up at retail rate. Credits from one billing period roll to the next at full retail value. Strong net metering combined with state incentives makes Maryland an excellent solar market.
Arizona
Policy: Reduced net metering — Arizona switched from retail rate to “resource comparison proxy” (RCP) rates around 2017. Arizona utilities credit exports at approximately 9–11 cents/kWh rather than the 13–15 cents/kWh retail rate. Arizona has excellent sunshine, but the net metering policy reduces annual savings relative to what retail-rate states offer.
Georgia
Policy: Net metering is available but terms are unfavorable. Georgia Power’s net metering pays approximately 3–4 cents/kWh for exports — far below the 13–15 cents/kWh retail rate. Georgia’s combination of modest sunshine, low utility rates, and poor buyback rates makes it one of the more challenging economics in major southern states.
Nevada
Policy: Nevada revised its net metering policy in 2022 to provide full retail rate credits for most residential systems. Nevada’s NEM program has had a complex history of being reduced and restored — check current NV Energy policy for the most up-to-date terms.
Colorado
Policy: Full retail net metering with annual true-up. Xcel Energy (serving Denver, Boulder, and the Front Range) provides retail net metering credits plus the Solar*Rewards production incentive. Other Colorado utilities may have different policies.
Illinois
Policy: Full retail net metering with annual true-up at the wholesale rate for any accumulated excess. Illinois Shines adjustable block program provides additional production incentives on top of net metering. Illinois’s net metering combined with the Shines program makes it one of the better Midwest solar markets.
States Without Net Metering Mandates
Some states have no statewide net metering requirement, leaving terms entirely to individual utilities:
Texas (ERCOT deregulated market), Idaho, Indiana, Tennessee, Mississippi, Alabama, South Carolina, and several others either have no net metering mandate or have policies that are utility-optional. In these states, solar economics depend entirely on your specific utility’s buyback terms — which can range from reasonable to essentially nothing for exported power.
In states without favorable net metering, battery storage becomes more important to capture the value of solar production by consuming it on-site rather than exporting at poor rates.
Net Metering Trends and Risks
The biggest risk to existing solar economics is net metering policy change. California’s NEM 3.0 reduction is the most prominent example, but other states have seen similar debates:
Hawaii eliminated retail-rate net metering years ago and has some of the most complex solar compensation structures in the country. Several Southeast utilities have petitioned for reduced net metering, with mixed results from state regulators. The Edison Electric Institute (utility trade group) has consistently advocated for moving away from retail-rate net metering nationally.
Most states with retail net metering have grandfathering provisions that protect existing solar customers for 10–20 years if policy changes. This means installing solar now locks in your current net metering terms for a significant period even if the policy changes for future customers — an often-overlooked argument for installing sooner rather than later.
Frequently Asked Questions
Which states have the best net metering for solar?
Massachusetts, New York, New Jersey, Maryland, Connecticut, and Rhode Island consistently offer the best combination of retail-rate net metering and high electricity rates. Florida and Colorado offer good policies with moderate rates. California, despite its sunshine, has weakened net metering for new installations (NEM 3.0), reducing its ranking. Texas and several Southeast states have poor net metering that limits solar ROI despite good sunshine.
Is net metering going away?
Net metering policy is evolving — California’s NEM 3.0 is the most significant recent reduction, and other states are watching. However, full elimination is unlikely in states with strong solar markets and supportive legislatures (Massachusetts, New York, New Jersey, Colorado, etc.). For homeowners in states with robust net metering, grandfathering provisions typically protect existing solar owners for 10–20 years if policy changes. The risk of future reductions is one argument for installing solar now rather than waiting.
How does net metering affect solar payback period?
Net metering policy is one of the two biggest determinants of solar payback (along with electricity rates). In states with retail-rate net metering at 25+ cents/kWh (Massachusetts, Connecticut), payback periods of 7–10 years are common. In states with reduced net metering at 8–10 cents/kWh (California NEM 3.0 without battery, some Southeast states), payback periods can stretch to 14–20 years for the same size system. The dollar-per-kWh value of your net metering credit is directly proportional to the value of your solar investment.
Summing Up
Net metering policy may be the single most important state-level factor in solar ROI. Before installing solar, confirm your utility’s current net metering rate, whether it’s full retail or reduced “avoided cost,” how credits roll over month-to-month, and what the annual true-up terms are. Strong retail net metering plus high electricity rates creates payback periods of 7–11 years; poor buyback rates at low utility prices can push payback to 15+ years. For a free assessment of how your state’s net metering affects your specific solar investment, call (855) 427-0058 or visit us.solarpanelsnetwork.com.
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