Last updated: April 2026 | Reading time: ~12 minutes
Thank you for reading this post, don’t forget to subscribe!If you’ve heard that solar can make your electric meter run backward, you’ve heard about net metering. It’s one of the most powerful financial advantages of going solar — and one of the most misunderstood. Depending on your state, it can mean near-zero electric bills or just modest savings. The difference can be worth thousands of dollars over your system’s lifetime.
This guide explains exactly how net metering works, what it’s actually worth in dollar terms, which states have the strongest programs, and what to watch out for as policies change.
What Is Net Metering?
Net metering is a billing arrangement between you and your utility company. When your solar panels produce more electricity than your home uses at any given moment, the excess power flows back to the electrical grid. Your utility company tracks that exported power and credits your account for it.
Then, when your panels aren’t producing enough — at night, during cloudy weather, or during high-usage periods — you draw power from the grid. Those credits offset what you’d normally pay.
At the end of the billing cycle, you only pay for the net difference: what you pulled from the grid minus what you sent back. That’s where the name comes from.
Think of it like a bank account for electricity. You deposit power during the day when the sun is shining, and you withdraw it at night or on cloudy days. The utility holds your balance and settles it monthly.
How Net Metering Works: Step by Step
- Your solar panels generate electricity during daylight hours
- Your home uses what it needs in real time (running appliances, HVAC, lights)
- Any surplus electricity flows backward through your utility meter to the grid
- Your utility’s smart meter logs the exported kilowatt-hours as a credit on your account
- When your panels aren’t producing (evenings, overcast days), you draw from the grid
- Your utility subtracts your export credits from your import usage
- You receive a bill for only the net amount — what you consumed minus what you generated
In many months during spring and fall, homeowners with properly-sized systems receive bills of only $5–15 — just the utility’s minimum service charge. In peak solar months, some generate more than they use and carry credits forward to higher-usage winter months.
How Much Can Net Metering Save You?
According to data from the Lawrence Berkeley National Laboratory and EnergySage’s marketplace, homeowners with solar and net metering save between $1,000 and $1,800 per year on electricity — with variation based on system size, electricity rates, and local sun hours.
Here’s a realistic snapshot of what the numbers look like:
| Scenario | Monthly Bill Before Solar | Estimated Bill With Net Metering | Annual Savings |
|---|---|---|---|
| Small home, sunny state (AZ, TX, FL) | $140/mo | $15–30/mo | ~$1,400/yr |
| Average home, moderate sun (CO, GA) | $180/mo | $20–50/mo | ~$1,600/yr |
| Larger home, high-rate state (MA, NY, NJ) | $250/mo | $10–40/mo | ~$2,500/yr |
| California (post-NEM 3.0) | $200/mo | $80–$130/mo | ~$900/yr |
Estimates based on correctly-sized systems (100% usage offset). Actual results vary by system size, local rates, and usage patterns.
The high-rate states (Massachusetts, New York, New Jersey, Connecticut) deliver some of the strongest net metering savings in the country precisely because electricity is expensive there. Every kilowatt-hour your panels generate is worth more.
Net Metering vs. Net Billing: What’s the Difference?
This distinction is critical and something many solar guides gloss over.
True net metering (full retail rate): You receive credits at the same per-kWh rate you’d pay to buy power. If electricity costs $0.15/kWh in your state, you get $0.15/kWh credit for every kWh you export. The financial math is favorable.
Net billing / avoided cost metering: You receive credits at a lower wholesale or “avoided cost” rate — often $0.04–$0.08/kWh — for exported power, but still pay retail rates when you import from the grid. The financial gap is significant.
California’s NEM 3.0 (2023): California’s 2023 update to net metering — called NEM 3.0 — cut the export credit rate by approximately 75% for new solar customers. A kilowatt-hour that previously earned you $0.30 in credits now earns roughly $0.08. This dramatically changed the math for new California solar buyers and is a key reason battery storage has become almost standard in California new installations.
State Net Metering Policy Overview (2026)
Net metering policies vary dramatically by state. Here’s a broad overview:
| State | Net Metering Status | Notes |
|---|---|---|
| New Jersey | Strong retail-rate NEM | One of the best programs in the country |
| Massachusetts | Strong retail-rate NEM | Net metering credits transferable to other accounts |
| New York | Strong — transitioning | Expanding Value of Distributed Energy Resources (VDER) program |
| Florida | Full retail-rate NEM | Statewide mandate; utilities must offer NEM |
| Texas | No statewide mandate | Depends on utility; varies significantly by provider |
| California | NEM 3.0 (reduced) | Export credits ~75% lower than pre-2023; battery storage now standard |
| Arizona | Reduced — net billing | APS and SRP pay below retail for exports |
| Nevada | Restored full NEM | Was cut in 2015, restored in 2017 after industry pressure |
Always confirm your specific utility’s current policy — state rules set the floor, but individual utilities sometimes have their own programs. Ask your installer for the current export rate before signing a contract.
Net Metering and Battery Storage
The relationship between net metering and battery storage is directly tied to your state’s export rate.
In states with strong net metering (full retail rate): The grid acts as your free battery. You export excess power at full value and pull it back when needed. In these states, adding a physical battery is harder to justify financially — you’re paying $10,000+ for a service the grid already provides.
In states with reduced net metering (California, Arizona, etc.): Exporting power to the grid is worth much less than using it yourself. A battery lets you store midday solar production and use it during peak evening hours, avoiding expensive peak-rate grid power. In these states, batteries often pay for themselves significantly faster.
For a detailed breakdown of whether battery storage is worth it for your situation: Solar Battery Storage Cost in 2026: Is It Worth Adding to Your System?
How to Maximize Your Net Metering Credits
- Right-size your system. Oversizing your array produces excess electricity that may only earn wholesale rates or expire at year-end. Aim for 95–105% of your annual usage offset.
- Shift energy-intensive activities. Running your dishwasher, washer/dryer, and EV charger during peak solar hours (late morning through mid-afternoon) uses your own power instead of grid power.
- Understand your true-up date. Most utilities settle annual net metering balances once a year. Unused credits above a certain threshold may be forfeited or paid out at a much lower rate. Know the rules before your system is installed.
- Add time-of-use awareness. If your utility charges TOU rates, net metering combined with shifted usage can save significantly more than flat-rate customers. More: Time-of-Use Rates Explained: How to Save More With Solar
Key Takeaways
- Net metering credits your account for excess solar power sent to the grid; you pay only the net difference at month’s end
- Savings range from $900–$2,500+/year depending on your state, electricity rate, and system size
- Full retail-rate net metering is the most valuable form — found in states like NJ, MA, FL, NY
- California’s NEM 3.0 (2023) cut export credits ~75% for new installs, making batteries standard there
- In high net metering states, the grid acts as a free battery; in low-rate states, physical batteries pay off faster
- Always confirm your specific utility’s export rate before sizing your system or signing a contract
Frequently Asked Questions
Does net metering work at night?
Not directly — your panels don’t generate at night. But the bill credits you’ve accumulated during the day offset what you pull from the grid after dark. The net financial effect is similar to having storage: you earn credits during the day and spend them at night. The difference is you’re using the utility grid as the “storage medium” instead of a physical battery.
What happens to unused credits at the end of the year?
It depends on your utility. Most utilities do an annual “true-up” — a year-end settlement where they calculate your net balance. If you generated significantly more than you used over the year, leftover credits are typically paid out at a low wholesale rate (often $0.02–$0.05/kWh) or forfeited entirely. This is why oversizing your system usually doesn’t make financial sense — you’re producing excess that the utility keeps for almost nothing.
Can I get net metering with a leased solar system?
Yes, technically — but the credits typically flow to the solar company, not directly to you. With a leased system, you benefit from a lower per-kWh rate on your electricity (or a fixed monthly payment), while the leasing company handles the net metering arrangement with your utility. You don’t see net metering credits directly on your bill. For a full comparison of ownership structures and how they affect your savings, see: Solar Lease vs. Loan vs. Purchase: Which Is Actually Better?
Is net metering going away?
It’s changing in some states, not disappearing. California, Arizona, and Nevada have all modified their programs over the past decade, and other states are actively revisiting their policies as solar adoption grows. The general trend is toward lower export rates in high-solar states. This is a reason to check current policy before finalizing your system — and to consider battery storage if your state’s rates are already declining or under review.
How do I know if my state has net metering?
The Database of State Incentives for Renewables & Efficiency (DSIRE) at dsireusa.org maintains up-to-date information on every state’s net metering policy. Your state’s public utilities commission website is the other authoritative source. Your installer should also know — if they can’t tell you the current export rate in your utility territory, that’s a red flag about their expertise.
Want to see how much net metering could reduce your electric bill with a solar system sized for your home? Get free quotes from top-rated installers at EnergySage — they’ll model your savings based on your actual utility rates and usage. Free, takes about 2 minutes.
→ Get Your Free Solar Savings Estimate at EnergySage