TL;DR:
- Net metering credits you for excess solar power sent to the grid — but credit rates vary enormously by state and utility
- California’s NEM 3.0 cut export rates by ~75%, making battery storage near-essential for new solar installations there
- States like New Jersey, Massachusetts, and Minnesota still offer near-retail net metering — maximising solar ROI
Net metering is the policy that makes rooftop solar financially viable for most US homeowners. Without it, excess solar power you produce but don’t immediately use would go to the grid with no compensation. With net metering, that excess earns bill credits you draw on when the sun isn’t shining — at night, on cloudy days, or during winter.
If you’re a UK reader, the equivalent is the Smart Export Guarantee (SEG) — Ofgem requires licensed suppliers with 150,000+ customers to offer an export tariff, though the rate is set by the supplier rather than mandated by regulators. SEG rates in 2026 range from around 5p/kWh to 15p/kWh depending on supplier. This article focuses on the US net metering framework, but the principles of managing export value apply equally on both sides of the Atlantic.
How Net Metering Works
When your solar system produces more electricity than your home is consuming at any given moment, the excess flows to the grid and your meter records the export. Your utility credits your account at the agreed rate — typically the retail electricity rate under full net metering.
At night, you draw from the grid normally. At billing time, you pay only the net difference between what you consumed and what you exported. If you exported more than you consumed in a given month, most utilities carry the credit forward.
Example: Your system produces 900 kWh in June. Your home consumes 700 kWh. You export 200 kWh at $0.15/kWh = $30 credit. In December, when production drops to 400 kWh but consumption stays at 700 kWh, you draw on that credit to offset the difference.
At true 1:1 retail rate net metering, solar essentially uses the grid as a free battery — the most economically favourable arrangement for solar owners.
NEM 3.0: What Happened in California
California was once the gold standard for net metering. Under NEM 2.0, solar owners received credits at close to the full retail rate (~$0.28–$0.35/kWh) for every kWh exported.
In April 2023, the California Public Utilities Commission implemented NEM 3.0, slashing export credits to an average of $0.05/kWh — an 80–85% reduction. The rationale was that high-income homeowners with solar were shifting grid maintenance costs to non-solar customers. The practical effect: selling excess solar to the grid barely covers maintenance fees.
This fundamentally changed the solar economics in California. Without battery storage, payback on new solar stretched from 6 years to 10–13 years. With battery storage — Powerwall, Enphase IQ Battery — homeowners store midday surplus for evening use at full retail value ($0.30/kWh) rather than exporting at ~$0.05/kWh. That dramatically improves the numbers.
The takeaway: in California, solar-plus-battery is now far more financially sensible than solar-only for new installations. If you’re already on NEM 2.0, you’re grandfathered until 2033. Protect that status.
States with the Best Net Metering Policies
| State | Export Rate | Carry-Forward Policy | Notes |
|---|---|---|---|
| New Jersey | Retail rate (~$0.17/kWh) | Annual | One of the strongest in the US |
| Massachusetts | Retail rate | Annual, cash out | Strong SMART programme supplements credits |
| Minnesota | Retail rate | 12-month rolling | Xcel Energy has solid net metering |
| New York | Retail rate (varies by utility) | Monthly carry | Con Ed territories favourable |
| Texas | Varies by utility | Varies | Deregulated market — shop your retail provider |
| Florida | Retail rate | Annual | Duke Energy, FPL still offer retail credits |
| Arizona | Below-retail | Annual | APS and SRP have reduced rates significantly |
| California | ~$0.05/kWh (NEM 3.0) | Monthly | Battery storage now essential |
Check your specific utility’s tariff at dsireusa.org — net metering rules often vary within states by utility.
Virtual Net Metering
In some states, virtual net metering allows a solar system at one location — like a community solar farm — to credit electricity bills of customers at different addresses. This is the mechanism that makes community solar work. Subscribers receive bill credits proportional to their share of the farm’s output, even though the panels are miles away. States with strong virtual net metering programmes include New York, Massachusetts, Colorado, and Minnesota.
How to Maximise Your Solar Bill Credits
Right-size your system. The goal under retail net metering is to produce roughly 100% of your annual consumption — not more. Oversizing generates excess credits that many utilities won’t pay out as cash, wasting the investment.
Shift consumption to solar hours. Run the dishwasher, washing machine, and EV charger between 10am and 3pm when solar production peaks. This reduces what you export (at a potentially lower rate) and reduces what you draw from the grid at night (at full retail).
Add battery storage in low-export-credit states. In California, Arizona, and other states where export rates are well below retail, storing excess solar and using it in the evening is worth 5–6 times more than exporting it.
Understand your utility’s true-up period. Most utilities reconcile credits annually. Avoid over-banking credits that won’t be paid out — time large appliance runs strategically throughout the year.
Check if time-of-use (TOU) rates affect your credits. Some utilities pay higher credits for solar exported during peak demand hours (4–9pm) and lower for midday exports. A smart inverter with TOU scheduling can optimise your export timing.
Net metering is the single most important policy variable in solar financial returns — more impactful than panel brand, inverter type, or even installer pricing. Before going solar, verify your utility’s current net metering rate and its policy trajectory. In states with strong retail-rate net metering, solar delivers strong returns without batteries. In California and other states that have cut export credits, pair solar with storage to capture the full value of what you produce.