Understanding Net Metering by State

What Is Net Metering?

Net metering (also called net energy metering or NEM) is a billing mechanism that credits solar energy system owners for the electricity they add to the grid. When your solar panels produce more electricity than you're using, the excess is exported to the grid — and your utility meter runs backward, crediting your account.

Three Types of Net Metering

Full Retail Net Metering

You receive a credit equal to the full retail rate you pay for electricity — typically 10–30¢/kWh. This is the most valuable form for solar owners because you're essentially "storing" electricity in the grid at full value. 41 states offer full retail net metering.

Partial or Avoided Cost Net Metering

Some states compensate exports at the utility's "avoided cost" — what it would cost the utility to generate that electricity itself — typically 4–8¢/kWh. This is significantly less valuable. Georgia, Oklahoma, and several others use this approach. 8 states have partial net metering.

No Net Metering

A few states (Indiana, West Virginia) have limited or no net metering requirements, meaning excess solar production may earn nothing or very little. 2 states in our dataset lack net metering. In these states, the best strategy is to maximize self-consumption and add battery storage.

California's NEM 3.0: The Important Exception

California moved from full retail net metering (NEM 2.0) to NEM 3.0 (also called Net Billing Tariff or NBT) in April 2023. Under NEM 3.0, solar exports are compensated at hourly avoided cost rates — averaging around 5¢/kWh — far lower than the 30¢/kWh retail rate.

The key change: battery storage became much more valuable in California. By storing solar energy and using it during peak demand hours (6–9 PM, when grid prices are highest), California solar owners can dramatically improve their ROI. The SGIP battery storage incentive helps offset battery costs.

How Net Metering Affects Your ROI

Net metering policy directly impacts your annual savings calculation. Consider a 6kW system in different states:

• Full retail NM at 25¢/kWh: 6,000 kWh/year × $0.25 = $1,500/year savings
• Avoided cost at 6¢/kWh: 6,000 kWh/year × $0.06 = $360/year savings
• Self-consumption only (70% usage): 4,200 kWh × $0.25 = $1,050/year

This is why the same system can have a 7-year payback in Massachusetts and a 12-year payback in Georgia.

States With the Best Net Metering Policies

States where solar owners can maximize net metering value (as of 2026):

• Maine, New Hampshire, Vermont — Full retail + high electricity rates
• New Jersey, Maryland, Delaware — Full retail + SREC income
• Illinois, Colorado, Minnesota — Full retail + performance incentives
• New York, Massachusetts — Full retail + strong upfront incentives
• Florida — Full retail until 2029 (transitioning to avoided cost)