Net metering explained, and why it drives your solar payback
Net metering is the single policy that decides how much your solar panels are worth, and it is changing fast. As states replace full-retail credit with lower export rates, your utility's rules now matter as much as how sunny your roof is. Here is how net metering works and what to check before you buy.
Key takeaways
- Net metering credits you for the solar power you send back to the grid, offsetting the power you draw later.
- Traditional (full-retail) net metering credits exports at the same rate you pay; newer 'net billing' pays a lower avoided-cost rate.
- California's NEM 3.0 (April 2023) cut the average export credit by about 75%, the clearest example of the national shift.
- Lower export credits lengthen payback and make using your own power (a battery, or shifting usage) more valuable.
- Check your utility's current export rate and any grandfathering before you size a system.
How net metering works
When your panels make more electricity than you are using, the surplus flows back to the grid and your meter credits you. At night or on cloudy days you pull power back and the credits offset it. Under traditional full-retail net metering, a kilowatt-hour you export is worth the same as one you buy, so the grid effectively acts as a free battery. That one-to-one credit is what made solar pay back quickly for years.
The shift to net billing
Many states are replacing full-retail net metering with 'net billing,' which credits exported power at a lower avoided-cost rate (closer to what the utility would pay a power plant) rather than the retail price you pay. California's NEM 3.0, in effect since April 2023, is the clearest example: it cut the average export credit by roughly 75%, from around $0.30 to about $0.08 per kWh, and replaced a single rate with hundreds that vary by hour and season. Other states are moving the same direction at their own pace.
Why this drives your payback
Your solar payback is roughly your net system cost divided by your annual bill savings, and the export rate sets a big part of those savings. Under full-retail net metering, exporting is as good as using the power yourself. Under net billing, exported power is worth much less than power you use directly, so the math rewards using your own solar, by shifting big loads to daylight hours or adding a battery to store midday production for the evening. That is exactly why batteries have become more attractive under net billing.
Because the rules and rates are utility-specific, a national average is meaningless for your house. Model your own utility, and use your town dashboard as a starting point.
What to check before you buy
- Your utility's current export rate, and whether it is full-retail or avoided-cost net billing.
- Whether existing systems are grandfathered onto the old rules, and for how long (California grandfathers pre-April 2023 systems on NEM 2.0 for 20 years).
- Whether time-of-use rates apply, which change when your solar and your usage are worth the most.
- Whether a battery materially improves your payback under your utility's rules.
Frequently asked questions
What is net metering?
What is the difference between net metering and net billing?
How did NEM 3.0 change solar in California?
See the numbers for your town
These ranges are national. Open a dashboard to see solar prices modeled for your town, with a live estimator and local factors.
Cost figures in this guide are modeled national ranges for general planning, not quotes. Local pricing varies, always get an on-site assessment from a licensed pro before you commit. Evergreen guide