Net Metering Explained (and Why It's Disappearing)
Net metering is one of the biggest reasons home solar saves money - and it’s quietly being scaled back across the country. If you’re considering solar, understanding it (and what your state actually offers) matters as much as the price of the panels.
What net metering is
Your solar system doesn’t produce power evenly with how you use it. Midday, the panels often make more than your home needs; at night they make nothing. Net metering is the billing arrangement that handles that mismatch:
- When you produce more than you use, the extra flows to the grid and you earn a credit.
- When you use more than you produce (at night, say), you draw from the grid and spend those credits.
Under traditional (1:1) net metering, each exported kilowatt-hour is worth the same as one you buy - the retail rate. Your meter effectively spins backward. This is the most generous version, and it’s what made solar payback so attractive for years.
Why it’s being cut back
As rooftop solar grew, utilities argued that 1:1 net metering shifts grid costs onto non-solar customers and overpays solar owners for power that’s most abundant exactly when it’s least valuable (sunny midday). Regulators in many states have responded by replacing full retail net metering with less generous structures.
The result is a patchwork: some states still offer strong net metering, others have moved to “net billing,” where exported power is credited at a much lower wholesale-style rate instead of the retail rate.
California’s NEM 3.0: the clearest example
California - the largest solar market - switched new solar customers to NEM 3.0 (officially the Net Billing Tariff) in April 2023. The change cut the value of exported electricity dramatically (by roughly 75% for many customers).
The effects were immediate and large:
- California’s residential solar installations fell about 40% in 2024.
- Battery attachment soared - from around 11% of new systems to over 50% by 2024 - because storing your own power became far more valuable than exporting it cheaply.
Sources: Lawrence Berkeley National Laboratory (NEM 3.0 impact tracking); California Public Utilities Commission; industry reporting.
What this means for you
Net metering policy can change your solar savings as much as the system price:
- Check your state and utility specifically. “Net metering” can mean full retail credit in one state and a fraction of that next door.
- Where export credits are low, batteries make more sense. If you can’t get good value for exported power, storing it to use at night often beats selling it cheap. See do I need a solar battery.
- Size around the rules. Under net-billing regimes, maxing out your roof to export a lot may not pay off. Sizing closer to your daytime use (plus storage) can be smarter. See how many panels do I need.
Bottom line
Net metering is the mechanism that turns your extra daytime solar into bill savings. The trend nationwide is toward less generous credits, with California’s NEM 3.0 leading the way. Before you commit to solar, find out exactly what your utility credits for exported power - it directly shapes whether solar is worth it for you.
Figures current as of June 2026. Policy varies by state and utility and changes often - confirm the current rules where you live.