Net Metering Explained: How to Get Credit for Excess Solar Power
By MySolarWidget Team · February 12, 2026 · 7 min read
Solar panels produce the most power during the middle of the day — often more than your home needs at that moment. Without net metering, that excess power would be wasted. With net metering, it flows to the grid and your utility meter runs backwards, earning you credits toward your bill.
Net metering is the single most important policy for solar economics. Understanding how it works in your state directly affects how much solar will save you.
How Net Metering Works
Net metering works through your existing electric meter (or a new bidirectional meter installed at no cost in most states):
- During the day, your solar panels produce power. Your home uses what it needs.
- Excess power flows back to the grid, spinning your meter backward (or registering negative consumption).
- At night or on cloudy days, you draw from the grid. The meter spins forward.
- At the end of each billing period, you pay only the net difference — what you consumed minus what you exported.
- If you exported more than you consumed, you receive a credit on your next bill (or an annual payment, depending on the utility).
The key benefit: solar power you produce during cheap midday hours offsets power you would have bought at full retail rate during evening peak hours. This is essentially 1:1 energy exchange at retail value.
Net Metering Policies by State (2026)
Net metering policies vary significantly. Here is a summary of key states:
| State | Policy | Export Rate | Notes |
|---|---|---|---|
| New Jersey | Full retail NEM | Retail rate | One of the best in the country |
| Massachusetts | Full retail NEM | Retail rate | Plus SMART program adder |
| New York | Full retail NEM | Retail rate | Phase-out discussions ongoing |
| Texas | Varies by utility | Wholesale (~$0.03–0.06/kWh) | No statewide mandate; most utilities pay avoided cost |
| California | NEM 3.0 (2023+) | ~$0.05/kWh avg export | Major reduction from NEM 2.0 retail rates |
| Arizona | Partial export credit | ~60–80% of retail | APS and SRP have own programs |
| Florida | Full retail NEM | Retail rate | Strong policy through major utilities |
Key insight: States with full retail net metering typically have 20–40% shorter solar payback periods than states with wholesale or avoided-cost export rates.
California NEM 3.0: What Changed and What It Means
California's NEM 3.0, which took effect in April 2023, dramatically reduced compensation for exported solar power. The changes are significant:
Before NEM 3.0 (NEM 2.0)
Export credits were at or near retail rate (~$0.25–0.35/kWh). A 7 kW system could earn $1,500+ per year in credits. Payback periods of 5–7 years were common.
After NEM 3.0
Export credits average ~$0.05/kWh ("avoided cost" rate). The same system earns ~$300/year in export credits. Payback periods stretched to 9–12 years for solar-only systems.
The Battery Workaround
NEM 3.0 was designed to incentivize battery storage. Evening time-of-use rates in California remain very high ($0.40–0.55/kWh). A battery lets you discharge stored solar power during peak evening hours instead of exporting it cheaply in the afternoon. Solar + battery in California under NEM 3.0 can actually outperform NEM 2.0 solar-only systems in some scenarios.
How to Maximize Your Net Metering Value
Tips to get the most from your net metering program:
- Size your system to your usage: In states with retail net metering, sizing to 100% offset maximizes value. In low-export-credit states, consider slightly undersizing to avoid generating excess power you will not be compensated fairly for.
- Shift consumption to daytime: Run dishwashers, laundry, and EV charging during peak solar production hours (10 AM–3 PM) to self-consume rather than export.
- Understand your billing cycle: Most net metering is calculated monthly, but annual true-up periods are common. Large credit balances accumulated in summer may be applied to high winter bills.
- Add a battery in low-export states: In states paying wholesale export rates, storing excess power for evening use is more valuable than exporting it.
Frequently Asked Questions
What happens to my unused net metering credits?
Most states carry credits forward month to month. At annual true-up (common in California), unused credits are either paid out at a low rate or forfeited. Check your utility's specific policy for how annual excess credits are handled.
Does net metering work with a battery?
Yes. With a battery, you typically self-consume daytime solar, charge the battery with excess, discharge the battery at night, and only export to the grid after the battery is full. This maximizes self-consumption and reduces reliance on net metering.
Can utilities eliminate net metering?
Yes — utility commissions can modify or end net metering programs. California's NEM 3.0 is an example. Homeowners who go solar before policy changes are typically grandfathered into existing rates for 10–20 years.