Net Metering in 2026: A State-by-State Guide to Solar Export Credits
Net Metering in 2026: A State-by-State Guide to Solar Export Credits
Net metering determines what happens to the solar electricity your panels produce but your home doesn't immediately consume. In peak production hours — typically 10 AM to 3 PM — a residential system can export 60-80% of its output to the grid. Whether you get full retail credit, wholesale credit, or something in between for those exports changes the 25-year NPV of your solar system by $10,000 to $30,000.
The policy landscape has shifted dramatically since 2022. California's NEM 3.0 slashed export credits by 75%. Several states have followed with their own net metering reforms. Meanwhile, other states have strengthened protections. Understanding where your state stands is essential before sizing a system or deciding whether to add battery storage.
How Net Metering Works
The basic concept is straightforward. When your solar panels produce more electricity than your home uses, the excess flows back to the grid through your utility meter. Under traditional net metering (sometimes called NEM 1.0), you receive a credit at the full retail rate for every exported kilowatt-hour. At the end of the billing period, you pay only for your net consumption — total usage minus total exports.
If you consumed 900 kWh and exported 400 kWh in a month, you'd be billed for 500 kWh. If you exported more than you consumed, the credit typically rolls forward to the next month.
This one-for-one exchange made the math simple and favorable: every kWh of solar production had the same value whether you consumed it immediately or exported it. System sizing was straightforward — just match annual production to annual consumption.
The Three Tiers of Export Credit
Net metering policies now fall into three broad categories, each with dramatically different impacts on solar economics:
Tier 1: Full Retail Credit (1:1 Net Metering)
Under 1:1 net metering, every exported kWh earns a credit equal to the full retail electricity rate. If your utility charges $0.15/kWh, your exports are worth $0.15/kWh. This is the most favorable policy for solar owners and the simplest to model.
States with full 1:1 net metering include New Jersey, New York, Florida, Maryland, Oregon, Minnesota, and several others. Some of these states have legislative mandates protecting net metering through specific dates.
At Elovane's default 7 kW system size, 1:1 net metering typically adds $4,000-8,000 in NPV compared to avoided-cost crediting, depending on the utility rate and how much of your production gets exported.
Tier 2: Reduced Export Credit
Several states have moved to a middle ground where exports are credited at a rate below retail but above wholesale. California's NEM 3.0 is the highest-profile example, with export credits ranging from $0.04 to $0.08/kWh depending on the hour and season — roughly 75% below the retail rate.
Other reduced-credit states include Nevada (75% of retail), Utah (export credit rate around $0.05-0.06/kWh), and Arizona (avoided cost rates of $0.03-0.04/kWh for new customers).
In reduced-credit markets, the economics shift fundamentally. For a detailed analysis of how TOU spreads drive battery value, see our TOU arbitrage guide. Self-consumption becomes far more valuable than exports. A kWh consumed directly saves you $0.28/kWh (California retail), but a kWh exported earns only $0.06/kWh. This $0.22/kWh gap is the economic case for battery storage — store midday solar, discharge it during evening peak, and capture the full retail value.
Tier 3: Wholesale or No Credit
A few states offer only wholesale energy rates for exports, typically $0.02-0.04/kWh. At these rates, exported solar is nearly worthless. States without statewide net metering mandates — like Alabama, Mississippi, and Tennessee (TVA territory) — often fall into this category, though specific utilities may offer better terms.
In wholesale-credit markets, solar systems should be undersized to minimize exports. A system producing 70-80% of annual consumption often has better ROI than one producing 100%, because every exported kWh above self-consumption earns a fraction of its value.
Net Metering and Battery Storage Economics
The decline of 1:1 net metering is the primary driver of residential battery adoption. The economics work as follows:
Under NEM 3.0 in California, midday solar exports earn $0.04-0.08/kWh. But evening peak electricity costs $0.35-0.58/kWh depending on your utility. A battery that stores 13.5 kWh of midday solar and discharges it during the evening peak captures the full retail value instead of the reduced export credit.
The daily arbitrage value is:
Daily Value = Usable Capacity × (Peak Rate - Export Credit Rate)
For a PG&E customer: 13.5 kWh × 90% efficiency × ($0.45 - $0.06) = $4.74/day = $1,730/year
Over 25 years with rate escalation and battery degradation, this can produce a positive battery NPV in markets with large peak/off-peak spreads. In markets with 1:1 net metering, the arbitrage case largely disappears — there's no spread to capture.
State-by-State Overview
Strongest Net Metering States
New Jersey offers 1:1 net metering plus SREC-II certificates worth $80-100/MWh, making it one of the most favorable solar markets in the country. Combined with relatively high utility rates ($0.18/kWh average), solar NPV in NJ consistently ranks among the top 10 nationally.
New York provides 1:1 net metering with monthly credits, plus the NY-Sun incentive program and a 25% state tax credit (capped at $5,000). The combination of high rates ($0.22/kWh average) and strong incentives produces exceptional ROI despite below-average irradiance.
Florida mandates statewide 1:1 net metering and exempts solar equipment from property tax and sales tax. At $0.14/kWh rates and 1,450 kWh/kW irradiance, Florida offers solid economics without relying on state tax credits.
States in Transition
California moved to NEM 3.0 in April 2023, reducing export credits by approximately 75% for new solar customers. The policy is explicitly designed to incentivize battery storage — and it's working. Battery attach rates in California have jumped from 15% to over 80% since the transition.
Indiana is phasing down net metering, with new interconnections receiving excess valued at wholesale after the 2032 transition date. Homeowners installing before the deadline are grandfathered under the previous policy.
Kentucky has effectively ended net metering for new installations, with new interconnections compensated at the avoided cost rate rather than retail.
Limited Net Metering States
Alabama has no statewide net metering mandate. Alabama Power and TVA distributors offer limited buyback programs at avoided cost rates.
Texas has no statewide net metering, with policies varying by retail electricity provider in the deregulated ERCOT market. Municipal utilities like CPS Energy (San Antonio) and Austin Energy offer their own buyback programs. Austin Energy's value-of-solar tariff at approximately $0.097/kWh is among the more favorable non-NEM policies.
How Net Metering Affects System Sizing
Your net metering policy should directly influence how you size your solar system:
1:1 Net Metering Markets: Size to 100-110% of annual consumption. Every kWh has full value whether consumed or exported. The slight oversize accounts for panel degradation over 25 years.
Reduced Credit Markets (NEM 3.0 style): Size to 80-90% of consumption and add battery storage. The battery captures the full retail value of production that would otherwise be exported at reduced rates. The combined solar + battery system often has better NPV than a larger solar-only system.
Wholesale/No Credit Markets: Size to 70-80% of consumption. Minimize exports by matching production more closely to daytime consumption patterns. Consider shifting discretionary loads (EV charging, water heating, laundry) to midday hours to increase self-consumption.
The Trend Line
The national trend is clearly moving away from 1:1 net metering toward some form of reduced export credit. Utilities argue that net metering creates a cost shift — solar customers reduce their bills but still rely on the grid for backup, maintenance, and nighttime power. The grid costs are then spread across fewer non-solar customers.
Whether this argument is valid is debated, but the policy direction is clear. For homeowners considering solar, this means:
- Act sooner rather than later — many states grandfather existing solar customers under the net metering policy in effect when they interconnect
- Factor battery storage into your analysis — in markets trending toward reduced credits, a solar + battery system is increasingly the optimal configuration
- Model your specific utility — even within states, policies can vary significantly between investor-owned utilities, municipal utilities, and cooperatives
If you're in a fire-prone area, pair your solar investment analysis with wildfire risk and insurance cost modeling to understand how location-specific hazards affect long-term returns.
Elovane models each utility's net metering policy in its state and utility-level analyses. Check your state's solar page or run a full analysis with your specific utility and consumption data.