What Is Net Metering?
Net metering is a billing arrangement where your utility credits you for excess solar electricity you send to the grid. When your panels produce more than your home uses (typically midday), the surplus flows to the grid and your meter effectively spins backward. At night or on cloudy days, you draw from the grid as usual. At the end of the billing period, you pay only for your net consumption — the difference between what you used and what you exported.
Net metering is the single most important policy factor in determining your solar ROI after the federal ITC. The difference between full retail net metering and reduced export rates can change your payback period by 3–5 years.
Types of Net Metering
Full Retail Net Metering (1:1)
Your exports are credited at the same rate you pay for electricity. If you pay $0.20/kWh, each exported kWh earns $0.20 in credit. This is the gold standard for solar economics and is available in states like Massachusetts, New Jersey, and New York.
Reduced Export Rate
Your exports are credited at a rate lower than retail — often the utility's avoided cost or a fixed rate. California's NEM 3.0 is the most notable example, with export credits averaging just $0.04–$0.08/kWh compared to retail rates of $0.30+/kWh.
Net Billing
Similar to reduced export rates, but credits are calculated based on the time of export rather than a flat rate. Energy exported during peak demand hours earns more than energy exported during off-peak periods.
Net Metering Policy by State
| State | Policy Type | Export Credit Rate | Solar Impact |
|---|---|---|---|
| California | Net Billing (NEM 3.0) | $0.04–$0.08/kWh | Battery storage essential |
| Massachusetts | Full retail NM | $0.28/kWh | Excellent solar economics |
| New York | Full retail NM | $0.20–$0.24/kWh | Strong value for exports |
| New Jersey | Full retail NM | $0.17–$0.19/kWh | Strong with SRECs |
| Texas | Varies by utility | $0.04–$0.12/kWh | Depends on retailer |
| Arizona | Reduced export | $0.03–$0.10/kWh | Self-consumption key |
| Florida | Full retail NM | $0.13–$0.15/kWh | Good for solar |
| Colorado | Full retail NM | $0.14–$0.16/kWh | Solid value |
How Net Metering Affects System Design
With Full Retail Net Metering
Size your system to produce 100–110% of annual consumption. Every excess kWh exported earns full credit, so overproducing slightly is beneficial to cover consumption spikes. Battery storage is optional since the grid acts as a free virtual battery.
With Reduced Export Rates
Size your system for maximum self-consumption — typically 70–80% of annual usage. Pair with battery storage to shift surplus daytime production to evening use rather than exporting at low rates. In California under NEM 3.0, battery storage can improve ROI by 40–60%.
The National Trend: Away from Full Retail
Utilities across the country are pushing to reduce net metering credits, arguing that solar customers shift grid maintenance costs to non-solar ratepayers. California led this shift with NEM 3.0 in 2023. Other states considering similar changes include Nevada, Arizona, and Hawaii. If you are in a state with full retail net metering, going solar sooner rather than later locks in current favorable rates for your system's life in many jurisdictions.
Check Your State's Policy
Net metering rules change frequently. Visit your state's solar page on SunPowerPeek for the latest policy details, or use our solar calculator to model savings under your state's current net metering framework.