Net Metering Changes 2026: How It Works and What Each State Pays

Last reviewed: October 2026.

Net metering changes 2026 work out differently in each state: net metering is the billing arrangement that credits a homeowner with rooftop solar for electricity pushed back to the grid, and the credit rate decides solar payback. Related: Solar system quotes. Three regimes run side by side: full-retail-rate net metering (California’s legacy NEM 1.0 and NEM 2.0 customers and most states with traditional policies), reduced-credit programs, and net billing, which credits exports at a separate, usually lower, rate. California’s net billing tariff (NEM 3.0) applies to interconnection applications filed on or after April 15, 2023 (per the CPUC NEM Revisit page). The worked example below shows the same system going from a 6.5-year to a 9.5-year payback when only the export rate changes.

How net metering actually works on the meter

Net metering is a billing mechanism, not a physical electricity flow. Related: Solar policy news 2026. On a typical home the solar inverter sends AC power to your main electrical panel. That power is consumed first by whatever loads in your house are running. If the array is generating more than the house is using, the excess flows backward through the utility meter to the grid. A bidirectional smart meter records both the forward (consumed-from-grid) and reverse (exported-to-grid) kWh and reports them separately to the utility billing system.

Under classic full-retail-rate net metering, the utility bills you for the net kWh consumed. If you pulled 1,200 kWh from the grid in March and exported 800 kWh, you pay for 400 net kWh at the standard residential rate. In many programs excess credit rolls over month to month, with an annual true-up that either pays out the balance at a set rate or zeroes it; the rule is in your utility tariff.

The retail rate matters because it includes more than the energy itself. EIA reports August 2026 average residential prices of 12.72 cents per kWh in Nevada, 15.91 in Texas, 24.61 in New Jersey, 29.75 in California and 47.18 in Hawaii (EIA Electric Power Monthly, Table 5.6.A), and part of each figure pays for wires, billing and customer service. Crediting exports at retail pays for delivery services the panels do not provide, which is the policy argument behind every move to net billing.

NEM 1.0, NEM 2.0, NEM 3.0: the California timeline

California is the test case for what happens when a commission rolls net metering back. The CPUC replaced NEM 2.0 with the net billing tariff (NBT, widely called NEM 3.0) for customers who submit an interconnection application on or after April 15, 2023, in decision D.22-12-056 (CPUC NEM Revisit page). Customers who applied by April 14, 2023 stay on their NEM tariff, and the legacy tariffs are closed to new enrollment. Under NEM 2.0, time-of-use rates were mandatory for new customers, and exports were credited against the same time-of-use rate that applied to imports.

Under the NBT, exports are credited at the Avoided Cost Calculator rate for the hour they occur, so the credit moves by hour and season. The rates below are illustrative round numbers for the arithmetic, not CPUC rates: look up your utility’s current export values before you rely on any figure.

The math impact is large. Take a 7 kW system on a California home that produces 11,000 kWh annually with 60 percent self-consumption and 40 percent export, assuming 35 cents per kWh retail and a 7 cent export credit. Under a retail-credit export (NEM 2.0 style), 4,400 exported kWh at 35 cents equals $1,540 per year, plus $2,310 in offset consumption (6,600 kWh at 35 cents), for $3,850 annual value. Under a 7 cent export credit, the export value equals $308 per year, plus the same $2,310, for $2,618 annual value. Same system, same household, $1,232 less per year. Against an assumed $25,000 installed cost before incentives, cash payback moves from about 6.5 years ($25,000 / $3,850) to about 9.5 years ($25,000 / $2,618).

Installers often propose a battery to shift midday production into the 4 p.m. to 9 p.m. evening peak, when self-consumption is worth the most. A battery can recover part of the lost value, but it adds cost: get itemized pricing for the battery model quoted (for example Tesla Powerwall 3 or Enphase IQ Battery 5P) and ask the installer to show payback with and without it. The federal 25D credit, which covered batteries, ended for expenditures made after December 31, 2025 (IRS residential clean energy credit page). We covered the cost side in solar installation cost in 2026.

State by state: what an exported kWh is worth

The policy rules differ by state and often by utility, so confirm yours in the tariff or the DSIRE database. What EIA data does show is how much retail price is at stake in each state. The table gives the average residential retail price for August 2026, which is the value of a full-retail credit; a net billing export rate is whatever your commission sets, so compare it with this number.

State	Average residential price, Aug 2026 (cents per kWh)	What a 5,000 kWh yearly export is worth at that price
Hawaii	47.18	$2,359
California	29.75	$1,488
New Jersey	24.61	$1,231
Colorado	17.17	$859
Indiana	17.02	$851
New Mexico	16.51	$826
Texas	15.91	$796
Arizona	15.05	$753
Florida	14.99	$750
Nevada	12.72	$636

Source: EIA Electric Power Monthly, Table 5.6.A. Values are 5,000 kWh multiplied by the average price and ignore time-of-use differences. Texas has no statewide net metering law, so the buyback comes from your retail electricity provider’s plan; compare the export rate on each plan before you sign. Florida’s utilities offer net metering under a state commission rule, so confirm the current credit with your utility. Hawaii, Nevada and Indiana have each moved away from full-retail credit for new customers, so a table price there is a ceiling, not the export value.

Net billing vs. net metering: the technical distinction

Net metering nets your consumption against your exports at the kWh level. If you imported 1,000 kWh and exported 600 kWh, you pay for 400 net kWh at the retail rate. The export credit and the import charge are the same dollar value per kWh.

Net billing treats imports and exports as separate transactions at separate rates. Using illustrative rates, if you imported 1,000 kWh at 14 cents retail and exported 600 kWh at 4 cents, you pay $140 for imports and receive a $24 credit for exports, netting $116 owed. Under net metering the same month nets to 400 kWh at 14 cents, or $56. The $60 difference comes entirely from the export rate.

Aggregate and virtual net metering, which some states allow for multifamily buildings, schools and municipalities, let one host meter offset other meters owned by the same customer or by tenant accounts on the same property. California has a virtual net energy metering tariff for multi-tenant properties, described on the CPUC customer generation page. Availability and credit rules vary by state.

If X, then Y: what to check by situation

If you are	Then
In California and your interconnection application is on or after April 15, 2023	You are on the net billing tariff; model the quote at the hourly export rate, not the retail rate.
In California and applied by April 14, 2023	You stay on your NEM tariff; keep the interconnection approval paperwork.
In a state with full-retail credit	Each exported kWh is worth the import price (for example 17.17 cents in Colorado, August 2026); battery payback is smaller.
In Texas	Compare the buyback rate on each retail electricity plan before signing the solar contract.
Quoted a payback under 7 years	Ask which export rate, self-consumption ratio and rate escalation produce it, then re-run at a 7 cent export credit.

Time-of-use rates and the shift problem

Many utilities place rooftop solar customers on time-of-use (TOU) rates. TOU prices electricity higher during a peak window (often late afternoon to evening) and lower midday and overnight, and solar production peaks near noon. The result is that midday exports earn off-peak credit value while evening imports are charged at the peak tier.

Under a TOU rate with full-retail net metering, this still works if the rates are denominated in kWh credit. You bank 10 kWh of midday off-peak export and use 10 kWh of evening peak consumption, and the meter zeros out. Under TOU rates with dollar-denominated net billing (the NEM 3.0 model), the dollar value of off-peak export is much lower than the dollar cost of peak import, even if the kWh numbers match. This is the core math problem NEM 3.0 introduced.

Adding a battery sidesteps the TOU mismatch by shifting midday production into the evening peak (the 4 p.m. to 9 p.m. window in the example above). The economics of pairing solar with storage depend on the spread between off-peak and peak rates and on the export credit: ask the installer to show the quote with and without a battery under your utility’s actual tariff. We get into installer selection (including who recommends batteries appropriately versus reflexively) in how to choose a solar installer.

How to read a solar quote for the policy assumption

Every solar quote contains a production estimate (kWh per year), a dollars-saved-per-year number and a payback calculation. The dollars-saved number carries the policy assumption, so ask to see the export rate in cents per kWh written out; the example above moved by $1,232 a year on that one input.

Three things to verify: (1) the export credit rate used in the calculation, stated in cents per kWh; (2) the assumed self-consumption ratio (60 percent in the example above; a different ratio changes the export volume and the result); and (3) any utility-rate-escalation assumption applied to future years. A 3 percent annual escalation compounded over 25 years multiplies the 25th-year rate by about 2.09 (1.03 to the 24th power is 2.03; to the 25th is 2.09), so check what escalation a long-horizon savings figure assumes.

A quote that shows both the first-year value at today’s rates and the 25-year value at a stated escalation lets you test the assumption. We list this in our broader vetting framework alongside questions to ask any roofing contractor.

Solar Renewable Energy Credits (SRECs) on top of net metering

In states with renewable portfolio standards that include solar carve-outs, a system can also earn SRECs (Solar Renewable Energy Credits). One SREC represents one megawatt-hour (1,000 kWh) of solar electricity generated, tracked through a state registry and sold separately from the electricity. Program rules and prices are set by each state and change often; check the state program page and the DSIRE database for the current structure.

SREC revenue stacks on top of the net metering credit. A 7 kW system generating 9,000 kWh per year produces 9 SRECs annually, and at an assumed $80 per SREC that is $720 a year (the $80 is an illustrative price, not a market quote). The federal Section 25D credit that used to cover the system itself ended for expenditures made after December 31, 2025 under Public Law 119-21; we cover what changed, and how leases and PPAs are treated, at the 2026 solar tax credit guide.

Grandfathering and what happens when your state changes the rules

The most important policy detail in any net metering decision is how long the current rules apply to your specific system. California customers who submitted a NEM interconnection application by April 14, 2023 stay on their NEM tariff, and the NBT applies to later applications (CPUC NEM Revisit page). On the example above, the $1,232 yearly gap is $30,800 over 25 years before any rate change.

State net metering changes usually come with a grandfathering clause, and its length and trigger date differ by state and utility. If your state’s commission has opened a review, ask the installer which interconnection date the current rules would lock in; in California that date was April 14, 2023.

Verify the grandfathering clause in writing before signing. Ask the installer for the exact tariff section that defines the grandfathering window (the CPUC page above is the California source), and confirm the interconnection-application date that triggers it. In California the trigger is the interconnection application date, not the install date, so an installer who can file before a deadline matters during a policy transition.

The bottom line

Net metering is the largest variable in solar payback math after system cost. At the same gross price, the California example above goes from about 6.5 years with a retail-rate export credit to about 9.5 years with a 7 cent credit, before any battery, and with no federal homeowner credit for a 2026 install the gross price is what you are paying back. Before you accept any payback claim, verify the state policy, the export-credit rate used in the assumption, and the grandfathering window.

For the installation-cost side of the math, see solar installation cost in 2026. For what happened to the federal 30 percent credit, see the solar tax credit guide. For broader context on solar shingles versus rack-mounted panels, see solar shingles vs panels. And for help reading installer quotes, see how to choose a solar installer. The learning hub has the full Solar cluster index.