Net metering is the mechanism by which your utility credits the solar production you export to the grid against the electricity you consume from the grid. When your panels produce more than your home is using, the surplus flows out through a bidirectional meter, and the utility records the kWh exported. At month-end, your bill shows consumed kWh minus exported kWh, multiplied by the relevant rate. The cleaner the credit, the faster the payback.
35+ states require utilities to offer some form of net metering. The structure varies enormously — and with the federal residential solar credit expired since 12/31/2025, the state's net-metering regime is now the single largest variable in residential solar economics.
How net metering actually works
The bidirectional meter at your service entrance records kWh in both directions — what flows from the grid into the home, and what flows from the array back to the grid. Through the day, those two numbers oscillate. Mid-morning the array produces more than the home consumes, and net flow is outbound. Late afternoon the home consumes more than the array produces, and net flow is inbound. The meter tracks both.
At billing cycle close, the utility computes consumed minus exported. If consumed exceeds exported, the homeowner pays for the net consumption at retail rate. If exported exceeds consumed, the homeowner accrues a credit — and the credit's value depends on which net-metering regime the state runs.
The three regimes
Full retail. The utility credits exported kWh at the same retail rate the homeowner pays for consumption. A kWh exported at noon is worth exactly what a kWh consumed at 7 PM costs. This is the most favorable structure for the homeowner — and the least favorable for the utility, which absorbs the cost of generation, transmission, and distribution capacity it pays for but no longer fully recovers from solar customers. Full retail still exists in Florida, Massachusetts, Illinois, New Jersey, Connecticut, Rhode Island, and Vermont.
Partial / avoided-cost / time-of-export. The utility credits exported kWh at a lower-than-retail rate. The rate is typically the avoided cost of generation — what the utility would have paid a wholesale generator for the same kWh — or a time-of-export schedule that pays more for evening exports than for midday exports. California's NEM 3.0 falls into this category. So does Hawaii's current structure and Arizona's APS schedule.
None / wholesale-only / buy-all-sell-all. The utility either does not credit exports at all, or operates a buy-all/sell-all tariff where every kWh produced is sold to the utility at one rate (often $0.03-0.05/kWh) and every kWh consumed is bought at the retail rate (often $0.12-0.18/kWh). The two are not netted. This structure, common in parts of the South and increasingly in newer state proceedings, makes residential solar payback economically marginal at best.
The California NEM 3.0 shock
In April 2023, California's three investor-owned utilities transitioned from NEM 2.0 (full retail crediting with minor adjustments) to NEM 3.0 (time-of-export wholesale crediting). Export rates fell roughly 75%. A kWh that earned $0.18 in March 2023 earned roughly $0.04 in May 2023 if exported at midday, and somewhat more if exported during evening peak.
The shock taught the residential solar industry one durable lesson: storage is now mandatory for California payback. Without batteries, a NEM 3.0 customer's array exports its surplus midday at low rates and forces the homeowner to consume from the grid at peak retail rates in the evening. With batteries, the surplus charges the battery midday and discharges during evening peak — capturing the rate spread instead of giving it to the utility. NEM 3.0 paybacks: 9-12 years without batteries, 7-10 years with batteries. Pre-NEM-3.0 customers are grandfathered for 20 years from their interconnection date.
Other states are watching. Net-metering reform proceedings are active in 8-10 states as of 2026-04. Arizona, Nevada, and North Carolina have all filed cases that could shift their regimes within 24 months. Verify current status through your specific utility — the map is volatile.
State-by-state snapshot
The following are 2026-04 status — net-metering policy is one of the most actively contested utility regulatory issues in the country. Verify before assuming.
California — partial (NEM 3.0). Time-of-export crediting at avoided cost. Storage required for clean payback.
Florida — full retail (preserved by 2022 legislation despite utility-led reform attempts).
Hawaii — partial. Customer Self-Supply tariff dominates new installs; storage effectively required.
Massachusetts — active full-retail combined with the SMART tariff for incremental compensation.
New Jersey — active. Successor Solar Incentive (SuSI) layered on top of net metering produces strong post-ITC math.
Texas — varies by utility. Most major utilities (Oncor, CenterPoint) operate buy-all/sell-all structures. Austin Energy is the exception.
Arizona — partial. APS and SRP moved to avoided-cost crediting; export rates run $0.07-0.09/kWh.
North Carolina — active reform proceeding. Current structure is full retail; Duke Energy filings could shift this within 18 months.
Why this matters in 2026
With the federal 30% residential solar credit expired 12/31/2025, net metering is the lever. A state with full-retail crediting and $0.18/kWh produces a fundamentally different payback than the same state with avoided-cost crediting at $0.04/kWh — even if install cost, panel quality, and sun exposure are identical. The state matters more in 2026 than the system itself.
This is reference, not a quote. Run your specific numbers through the Solar Reality Check tool. For the broader post-ITC framing, see the solar hub.