Net Metering Explained (2026): How Solar Credits Work, State by State

Net metering gives you a bill credit for the extra solar power you send to the grid. Under full retail net metering, each exported kWh cancels out a kWh you buy later, worth about 18.2¢ at the 2026 US average rate (EIA). Many states and utilities have switched to net billing instead, where exports often earn only about 3–8¢ per kWh. Which one you get can change your solar savings by hundreds of dollars a year.

How does net metering work?

Your solar panels power your home first. When they make more than you’re using, the extra flows out to the grid through your meter. At night or on cloudy days, you pull power back from the grid.

1. The meter counts both ways. A two-way (bidirectional) meter tracks power you import and power you export.
2. The utility nets them out. At the end of each billing period, it subtracts exports from imports.
3. You pay for the net. If you imported more, you pay for the difference. If you exported more, you get a credit.
4. Credits roll over. Most programs carry extra credits to the next month, so a sunny summer can cover part of winter.
5. There’s a yearly true-up. Once a year, leftover credits are usually paid out at a low rate or reset to zero.

In effect, the grid works like a free battery. That’s why net metering is often called the cheapest way to “store” solar. For the bigger picture on storage, see can you store solar energy?

What does a net metering bill look like?

Here’s one July month for a home with a 7 kW system. We use the 2026 US average rate of 18.2¢/kWh, a $12 monthly fixed charge, and a 5¢ export rate for net billing.

• Solar made: 1,000 kWh. The home used 400 kWh of it directly.
• Exported to the grid: 1,000 − 400 = 600 kWh.
• Imported from the grid (mostly at night): 500 kWh.

Under full retail net metering

1. Net use: 500 imported − 600 exported = −100 kWh.
2. Energy charge: $0. You bank 100 kWh of credit for next month, worth 100 × $0.182 = $18.20.
3. Bill: $12 fixed charge only.

Under net billing

1. Imports: 500 kWh × $0.182 = $91.00.
2. Export credit: 600 kWh × $0.05 = $30.00.
3. Bill: $91.00 − $30.00 + $12 = $73.00.

The panels made the same power in both cases. Only the export rule changed. That’s why checking your state’s rules is one of the first steps in going solar.

What is the difference between net metering and net billing?

Under net billing, power you use yourself is worth much more than power you export. So system design shifts toward matching daytime use, running big loads while the sun is up, or adding a battery.

Which states have net metering in 2026?

Here’s how 12 large states handle home solar exports. Rules often differ by utility, and city utilities and co-ops may follow their own.

What about California’s NEM 3.0?

Since April 15, 2023, new customers of California’s three big utilities get net billing, where exports earn about a quarter of the retail rate on average. Existing NEM 2.0 customers keep full retail credits for 20 years from their connection date. For costs, payback math and battery rebates, see solar panels in California.

What about Texas buyback plans?

In deregulated areas, you pick a retail plan, and some pay for exports while others don’t. City utilities such as Austin Energy and CPS Energy set their own credits. Our solar panels in Texas guide covers the options.

What happens to unused net metering credits?

Most utilities settle up once a year, at a “true-up” or anniversary date. Leftover credits are then paid out at a low rate, such as avoided cost, or simply expire. So there’s little reward for making far more power than you use in a year.

1. Suppose you end the year with 1,000 kWh of extra credits.
2. Used during the year, they’d be worth 1,000 × $0.182 = $182.
3. Paid out at a 3¢ avoided cost, they’re worth 1,000 × $0.03 = $30.

That’s why installers usually size systems to cover about 100% of your yearly use, not more.

Do I need a battery if I have net metering?

With full retail net metering, a battery adds almost no bill savings, because the grid already gives full value for exports. It’s mainly for backup power. With net billing, a battery or smart load shifting can raise your savings a lot. Our guide to storing solar energy without batteries covers low-cost options like timing your water heater and EV charging, and our solar batteries guide covers the battery route.

How do I sign up for net metering?

1. Your installer files an interconnection application with your utility, usually before installing.
2. You sign the utility’s net metering or net billing agreement.
3. After the local inspection, the utility installs or reprograms a two-way meter.
4. You get permission to operate (PTO). Credits start once the system is approved and on.

The date your application is filed or approved often decides which rules you’re locked into. If your state is about to cut credits, filing early can matter.

Frequently asked questions

Is net metering going away?

In some states it already has for new customers. The trend is toward net billing, but many states still offer full retail credits, and existing customers are often grandfathered for years.

Can net metering make my bill zero?

Rarely. Most utilities charge a fixed monthly fee or minimum bill that credits can’t cover.

Does net metering transfer if I sell my house?

Usually, but the new owner may need to sign a new agreement. See buying a house with solar panels.

Do off-grid systems use net metering?

No. Net metering needs a grid connection. Off-grid homes rely on batteries and sometimes a generator.

Sources

• DSIRE: State net metering and incentive programs
• Illinois Shines: Changes to Illinois net metering bill credits
• PV Tech: Arizona cuts solar export rate by 10%
• EIA: Short-Term Energy Outlook

Last updated: October 2026. Net metering rules change often and vary by utility; confirm current terms with your utility or state commission. This article is for information only and is not financial advice.