Net Metering Explained for 2026

What is Net Metering?

Net metering is a billing arrangement where your utility credits you for excess solar electricity you send to the grid. When your panels produce more than you're using, that surplus flows backward through your meter. Later, when you need more power than you're producing (at night, cloudy days), you draw from the grid and use those credits.

Think of the grid as a bank account for electricity. You deposit kWh when you have excess, withdraw when you need more, and at the end of the billing period (or year), you settle up.

How the Meter Works

• Bi-directional meter: Tracks both electricity you consume AND electricity you export
• Net calculation: Your bill is based on net consumption (imported minus exported)
• Credits roll over: Monthly excess typically carries forward to future months

Traditional 1:1 Net Metering

True net metering (1:1 kWh credit) means every kWh you export is worth the same as every kWh you import. This is the most favorable policy for solar owners and the original standard for net metering programs.

How 1:1 Works

Example: Monthly Billing with 1:1 NEM

• Monthly consumption from grid: 500 kWh
• Monthly export to grid: 600 kWh
• Net: -100 kWh (you're a net producer)
• Bill: $0 for electricity (may still have fixed fees)
• Credit: 100 kWh rolls to next month

Utilities with Good 1:1 Net Metering (2026)

• ComEd (Illinois): Full retail credit
• National Grid (MA, RI, NY): Full retail in most territories
• PSEG (New Jersey): Full retail credit
• Xcel Energy (CO, MN): Full retail in most programs
• Duke Energy (NC, SC): Full retail under current rules

Net Billing (Reduced Rates)

Net billing (also called "NEM 2.0" or "net metering lite") credits exports at a lower rate than the retail price you pay for imports. This has become increasingly common as utilities push back on traditional net metering.

How Net Billing Works

California NEM 3.0: The Cautionary Tale

In April 2023, California implemented NEM 3.0, dramatically reducing export values:

• Export rates: Dropped from retail (~$0.30/kWh) to $0.05-0.08/kWh
• Time-based credits: Exports valued at "avoided cost" which varies by hour
• Battery incentive: Strong push toward batteries to store rather than export
• Solar economics: Payback periods increased 2-4 years for solar-only systems

NEM 3.0 made batteries much more valuable in California because self-consuming your solar (stored in a battery for evening use) is worth far more than exporting to the grid.

Other Net Billing Examples

• Arizona (APS, SRP): Export rates as low as $0.02-0.04/kWh
• Nevada (NV Energy): Tiered export rates, lower than retail
• Hawaii (HECO): Various programs with reduced export credits
• Georgia (Georgia Power): Avoided cost rates for exports

State Variations

Net metering policies are set at the state level (with some utility discretion), creating a patchwork of rules across the country. Key variations include:

Credit Rate

System Size Caps

Many states limit how large your system can be under net metering:

• 100% of usage: Most common—can only offset your annual consumption
• 10-25 kW caps: Some utilities limit residential system size
• MW aggregate caps: State-wide capacity limits (when reached, rules change)

Credit Expiration

• Annual true-up: Credits reset once per year (you may lose excess)
• Monthly rollover: Credits carry month-to-month indefinitely
• Cash out: Some utilities pay for annual excess (usually at avoided cost)

Annual True-Up

Most net metering programs operate on an annual true-up cycle. Here's how it works:

The Annual Cycle

1. Monthly bills: You may see credits or small charges each month, but the real settlement happens annually
2. Summer surplus: Long sunny days = export lots of credits
3. Winter deficit: Short days + heating = use those credits
4. True-up date: Once per year, your account settles

True-Up Outcomes

Timing Your True-Up

Some utilities let you choose your true-up date. Strategic timing can help:

• April-May true-up: Start annual cycle at beginning of high-production season
• Build credits through summer: Bank excess for winter use
• Minimize wasted credits: True-up after winter when you've used summer surplus

Utility Policies Are Changing

Important: Net metering policies are under constant pressure to change.Utilities argue that solar customers don't pay their "fair share" of grid maintenance costs. As solar adoption grows, expect more states to reduce net metering benefits.

The Trend

• 2015-2020: Most states had strong 1:1 net metering
• 2020-2023: Major changes in CA, AZ, NV, HI
• 2024-2026: More states considering reforms
• Future: Net billing likely to become the norm

Grandfathering

Most net metering reforms include grandfathering provisions:

• Existing systems: Usually keep current rules for 10-20 years
• New installations: Fall under new rules after effective date
• Interconnection date matters: Get in before deadlines if changes are coming

What This Means for You

If your state has good net metering now, there's an advantage to going solar sooner rather than later. Grandfathering typically protects you under current rules even if the policy changes for new customers.