How Net Metering Works in 2026: State-by-State Guide

Last updated: February 2026

Net metering is the financial engine behind residential solar economics for most U.S. homeowners. When your solar panels produce more electricity than your home is using — which happens on sunny afternoons when you're at work — that excess power flows out to the grid, and net metering credits you at a defined rate.

How much that credit is worth, and how it's applied to your bill, varies enormously by state. The difference between retail-rate credit and reduced "avoided cost" compensation can add years to your solar payback: in our state model, California's 8 kW example takes about 15.9 years versus about 9.6 in New York and Massachusetts.

Here's what you need to know about net metering in 2026: how it works mechanically, which states still have the most favorable policies, how California's controversial NEM 3.0 changes the math, and how to factor all of this into your solar ROI calculation.

How Net Metering Works: The Mechanics

The Basic Credit System

Under traditional net metering, your utility installs a bidirectional meter that tracks both electricity flowing from the grid into your home and electricity flowing from your solar panels out to the grid. At the end of each billing period (monthly for most utilities), the utility nets these two flows:

• If you consumed more than you produced → you pay for the net consumption at your standard rate
• If you produced more than you consumed → you receive a credit, typically applied to future bills

Example: You consume 900 kWh in June but produce 1,100 kWh from your solar panels. Net metering means you owe nothing for that month and carry forward a 200 kWh credit ($28 at 14¢/kWh flat rate) to July.

Annual True-Up

Most states with net metering use a 12-month rolling credit period with an annual "true-up." Throughout the year, credits accumulate when solar overproduces (typically spring and summer) and are drawn down when production falls short of consumption (typically winter). At the annual true-up, remaining credits are either:

1. Carried forward indefinitely (most favorable)
2. Paid out at retail rate (good outcome)
3. Paid out at avoided cost (lower — typically 3–7¢/kWh)
4. Forfeited (worst outcome — rare in major states)

Virtual Net Metering

Some states allow virtual net metering (VNM), which lets the benefits of a solar installation at one location be credited to electric bills at another location (such as a landlord crediting tenants, or a community solar subscriber receiving credits from a shared array). This is expanding access to solar economics for renters and those without suitable roofs.

Net Metering Policy in 2026: State by State

The tables below reflect state rules and utility tariffs we checked in October 2026, with electricity rates from EIA's Electric Power Monthly (June 2026). Policies change, so confirm the current tariff with your utility before you buy.

States That Credit Solar at or Near the Retail Rate

In these states, solar is credited at the retail rate (or a rate built from retail components) up to your own use. Production beyond your annual use is generally credited at a lower rate.

States That Credit Exports Below the Retail Rate

California (Net Billing Tariff): Since April 15, 2023, new customers of PG&E, SCE, and SDG&E are credited for exports at hourly Avoided Cost Calculator values. Weighting PG&E's 2026 export credit values by when a typical rooftop system exports gives about 4¢/kWh, against retail prices above 30¢/kWh.

Arizona: APS buys exported energy at a Resource Comparison Proxy rate, $0.06171/kWh for September 2025 through August 2026, a value that has stepped down in recent years.

Nevada: Under AB 405, energy left after monthly netting is credited at a percentage of the retail rate that stepped down from 95% to 75%; new customers receive 75%, locked for 20 years.

Michigan: The distributed generation program bills grid purchases at retail and credits exports at an outflow rate based on the power-supply component of the retail rate.

Illinois: Customers who connected from January 1, 2025 receive supply-only credit for exported energy; earlier customers keep full net metering for the life of the system.

Georgia: Georgia Power's monthly netting pilot is closed to new participants. New customers use instantaneous netting, with exports credited at the solar avoided cost rate (3.2188¢/kWh for 2026).

New Hampshire: Net metering 2.0 credits exports for the supply and transmission charges but only part of the distribution charge.

Vermont: Credits equal the retail or blended rate minus siting and REC adjustors set by the Public Utility Commission.

Hawaii: Net metering closed to new customers in 2015. Replacement tariffs credit exports at fixed, island-specific rates well below Hawaii's retail prices, so battery storage is common in new installations.

Texas: There is no statewide net metering in the competitive market. Buyback plans are optional and set by each retail electric provider, so terms range from near-retail to wholesale.

California NEM 3.0: The Detailed Impact

Because California is the largest residential solar market in the U.S., NEM 3.0 deserves deeper analysis.

What Changed

Under NEM 2.0 (the previous system), PG&E customers who exported solar power during peak hours (4 PM – 9 PM) received credits at peak retail rates — sometimes exceeding 50¢/kWh. This created strong economics for systems sized to maximize export.

NEM 3.0 replaces those retail export credits with time-varying "Avoided Cost Calculator" (ACC) values that reflect what it costs the utility to generate or procure power in each hour of each month. The pattern matters more than any single number:

• Midday (when most solar is exported): typically only a few cents per kWh, far below retail prices
• Evening hours, especially in late summer: much higher, and in some hours above the retail price
• Values are published per hour and month and are locked in for nine years from interconnection under the CPUC decision

Because most rooftop solar is exported at midday, the average credit per exported kWh is a small fraction of the 30–50¢/kWh retail prices many California customers pay.

How Battery Storage Changes the Calculation

The CPUC (California Public Utilities Commission) designed NEM 3.0 to reward exporting in the evening, which in practice favors battery storage. For the first five years of the tariff (through April 2028), residential PG&E and SCE customers also receive an "ACC Plus" adder on exports — larger for low-income customers, paid for nine years, and stepping down 20% for each new annual cohort. It applies to solar with or without storage. The bigger lever is that batteries let you use midday solar during the evening instead of exporting it at low ACC values.

The strategy under NEM 3.0: size your solar system for self-consumption (not overproduction), add a battery to capture midday solar surplus and discharge during peak hours (4–9 PM), and buy grid power only from off-peak TOU windows when rates are lowest.

Payback under NEM 3.0 depends heavily on how much of your solar you use on-site, your rate plan, and battery cost; it is generally longer than under NEM 2.0, especially for systems that export most of their output. Model your own load and export share rather than relying on a statewide average.

How Net Metering Affects Your Solar ROI

The value of net metering in your solar ROI calculation comes down to three variables:

1. Export rate vs. retail rate gap: The smaller the gap, the less battery storage you need and the simpler your system design. In Massachusetts (credits near the 29.6¢/kWh retail rate), a battery is not needed for strong economics. In California under NEM 3.0 (about 4¢/kWh for a typical system's exports vs. 30¢+ retail), using solar on-site, with or without a battery, matters far more.

2. Export volume: How much of your solar production you export vs. self-consume matters significantly. A household that's home during the day (retirees, remote workers) self-consumes more and exports less, making reduced export rates less impactful. A household that's away during peak solar production hours exports more — making a favorable net metering policy or battery storage more important.

3. Annual credit carryover rules: States that allow unlimited credit carryforward let you bank summer surplus against winter deficit at full value. States that pay out annual surplus at avoided cost (rather than retail) effectively reduce your compensation for over-sizing your system.

Net Metering and System Sizing: The Key Relationship

In states with full retail net metering, the traditional advice is to size your solar system for 100–110% of your annual consumption — produce roughly what you use, with a slight buffer. Any surplus earns full retail credits.

In states with reduced export compensation (California NEM 3.0, Arizona, Hawaii), the math shifts significantly:

• Right-size for self-consumption: Match production to your daytime usage rather than your annual total
• Add battery storage to capture solar surplus and displace peak grid purchases
• Avoid over-sizing — excess production that can't be self-consumed or stored earns low export credits and doesn't justify the additional panel cost

What to Ask Your Solar Installer About Net Metering

Before signing any solar contract, ask these specific questions:

1. What is the current export rate under my utility's net metering program? (Get the specific tariff name and rate)
2. Is my utility considering changes to its net metering program? (Many states have active utility commission proceedings)
3. How did you size this system — for self-consumption or for maximum production? (Critical in reduced-NM states)
4. Does your proposal account for NEM 3.0? (In California — many proposals still use outdated assumptions)
5. Am I grandfathered under any existing net metering policy if I sign now? (Relevant in states with changing policy)

The Solar ROI calculator below incorporates current net metering policy for your state, updated with February 2026 tariff data. Use it to model your specific scenario before requesting installer quotes.

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Data sources: CPUC Net Energy Metering 3.0 Decision, 2022; DSIRE Database of State Incentives for Renewables & Efficiency, February 2026; Lawrence Berkeley National Laboratory Tracking the Sun 2025; EIA Electric Power Monthly February 2026; NREL Solar-Plus-Storage Research