Net Metering by State 2026 — Full Retail, Avoided Cost, and What It Means for Your Solar ROI

Updated May 2026 · By Riley Kim · 10 min read

What net metering is, in plain English

When your solar panels produce more electricity than your home uses (typical mid-day), the excess flows back to the grid. Your utility has to decide how much to credit you for that excess. There are three common arrangements:

1. Full retail net metering (NEM 1.0/2.0): Your utility credits you at the same rate you'd pay them. If you pay $0.20/kWh, you get $0.20/kWh credit for excess production. Best case for solar economics.
2. Avoided-cost / reduced compensation (NEM 3.0): Utility credits at wholesale-equivalent rates ($0.03-$0.08/kWh) — what they'd otherwise pay to buy that power. Dramatically reduces value of excess solar.
3. No net metering: No credit for excess production. Only valuable for self-consumption + battery storage.

State-by-state net metering policy (2026)

Below is a snapshot of residential net metering policy as of May 2026. Always verify with your specific utility — even within a state, rules can vary between IOUs (investor-owned utilities like PG&E, ConEd) and POUs (publicly-owned/municipal utilities like LADWP, SMUD).

This table is a starting reference. Always verify your specific utility's NEM tariff — policies can change mid-year and vary between IOUs and POUs within the same state.

The California NEM 3.0 story (most consequential 2023 change)

The biggest NEM news of the past 3 years was California's transition from NEM 2.0 to NEM 3.0, effective April 15, 2023. The headline: excess solar production is now credited at "Avoided Cost Calculator" (ACC) rates that vary by hour and season but average roughly $0.05-$0.08/kWh — vs $0.32-$0.40/kWh under the old NEM 2.0 retail rates.

What this means for solar buyers in CA IOU territory

• PG&E, SCE, SDG&E customers: Payback periods extended from 5-7 years (NEM 2.0) to 7-10 years (NEM 3.0)
• Battery storage now economically attractive: A battery captures daytime production for evening use, recovering most of the lost NEM value
• Self-consumption is king: The more solar you use during the day (vs exporting), the better your ROI

What this does NOT mean

• Solar is NOT "dead in California" — it still pays back, just slower
• NEM 3.0 does NOT apply to municipal utility customers — LADWP, SMUD, Anaheim Public Utilities, Burbank, Glendale, Pasadena, Riverside, Long Beach, IID, MID, Silicon Valley Power, Roseville, and many others are NOT subject to NEM 3.0 and continue with full retail NEM
• Existing NEM 1.0/2.0 customers are grandfathered for 20 years from their interconnection date

How to verify YOUR specific utility's NEM policy

1. Search your utility name + "net metering tariff" or "interconnection agreement" — most post their current tariff publicly
2. Check DSIRE (dsireusa.org) — Database of State Incentives, well-maintained
3. Call your utility directly — ask for the "residential solar interconnection rate" and "export compensation rate"
4. Read the actual rate sheet on your last electric bill — many utilities now list export credits separately

FAQ

Which states still have full retail net metering in 2026?

Most do. The notable exceptions that moved to reduced/avoided-cost compensation are CA (NEM 3.0 for IOUs), HI, NV, AZ, LA, KS, KY, IN, MS, OK, TN, UT, and MI. Texas is deregulated so it varies by REP — many REPs offer full retail buyback.

How did California's NEM 3.0 change solar economics?

NEM 3.0 took effect April 2023 for PG&E, SCE, SDG&E customers. Excess production credits at ~$0.05-$0.08/kWh (75-80% less than retail). Extended payback from 5-7 yrs to 7-10 yrs. CA muni utility customers are NOT affected.

Does net metering policy really matter for solar ROI?

Yes, dramatically. The same 8 kW system can have 25-40% different annual savings between full retail NEM states (TX, FL, NY) and reduced-rate NEM states (CA IOU, HI, NV). Always model your specific state policy.

Should I add a battery if my state has reduced NEM?

Yes. Batteries become significantly more economic in reduced-NEM states because they let you self-consume daytime production during evening peak hours (saving full retail rate) instead of exporting at avoided cost (~$0.05/kWh). The math typically works for any reduced-NEM state.

Are existing NEM customers grandfathered when policy changes?

Usually yes. California grandfathered NEM 1.0/2.0 customers for 20 years from interconnection. Most state policy changes apply only to NEW installations after the effective date. Always verify your interconnection date and grandfather period.

Primary sources

• DSIRE — Database of State Incentives (gold standard for state policy)
• CPUC — California Public Utilities Commission (NEM 3.0 documents)
• Lawrence Berkeley Lab — Energy Markets and Policy reports