State incentives
With the federal residential solar tax credit gone for systems finished after December 31, 2025, net metering is now the single biggest lever on home-solar payback — and the rules are set by your state and your specific utility, not Washington.
Updated June 30, 2026 · 9 min read
Net metering is the single biggest state-level lever on home-solar payback in 2026 — and with the federal residential tax credit gone for systems finished after December 31, 2025, it matters more than ever. The catch: the rules that decide what your exported power is worth are set by your state utility commission and your specific utility, and they range from generous full-retail credit to sharply reduced "net billing." So whether solar is still worth it now depends heavily on a policy most people have never read. Here's how it works, and how to find your own numbers.
For years, the conversation about home-solar economics started with the 30% federal tax credit. That conversation is over for new cash and loan buyers. The federal residential solar tax credit (Section 25D) is no longer available for systems whose installation is completed after December 31, 2025. The One Big Beautiful Bill (Public Law 119-21, enacted July 4, 2025) replaced the credit's prior multi-year phase-down schedule with a hard cutoff: the credit "shall not apply with respect to any expenditures made after December 31, 2025," and for installed property an expenditure "is treated as made when the original installation of the item is completed" (IRS OBBB FAQ; 26 U.S. Code § 25D).
A homeowner buying with cash or a loan in 2026 gets $0 federal credit. (We unpack exactly what survived and what didn't in Is there a solar tax credit in 2026?.)
That matters here because removing a 30% upfront discount makes everything after the install — the bill savings you accumulate year after year — a bigger share of whether solar pays off. And the lion's share of those ongoing savings is governed by net metering: the rule that decides what the utility gives you for the power your panels send back to the grid. When the federal subsidy was doing heavy lifting, a mediocre export rate was survivable. In 2026, it's central. If you're weighing the whole picture, Is home solar worth it in 2026? walks through the full math.
Net metering isn't one thing. There are broadly three ways a utility can value the electricity you export, and they produce very different bills. Note up front: net metering is purely state and utility policy — no federal action created or changed it, and the end of the federal tax credit didn't touch it.
| Regime | How exports are valued | Rough value vs. retail | What it means for your bill | Example states |
|---|---|---|---|---|
| Full-retail net metering | Each kWh exported is credited at the same per-kWh retail rate you pay to buy power | Roughly 1:1 with retail | Best case: a kWh sent out offsets a kWh you'd otherwise buy | Many states still credit exports at the full retail rate (EIA) |
| Net billing | Exports credited at a separate, lower "export rate," often based on avoided cost | Well below retail | Exporting pays little; using your own solar (a battery helps) is where the value is | California (CPUC) |
| Avoided-cost / value-of-DER | Exports paid near wholesale, set by an avoided-cost or value-of-resource formula | Far below retail (above wholesale) | Lowest export value; self-consumption matters most | Arizona (avoided cost); New York (VDER) (EIA) |
The distinction that drives everything is retail vs. wholesale. Under traditional net metering, an exported kilowatt-hour is worth a kilowatt-hour you don't have to buy — full retail price. Under net billing or value-of-DER structures, exports are valued closer to what the utility would have paid a power plant for that energy, which is a fraction of retail (EIA).
A note on that EIA source: it's a 2020 explainer, so use it for durable framing, not current 2026 data. It's useful for explaining how these structures differ and for the Arizona and New York examples it names, not for any "as of today" count of which states do what. To confirm what your own state and utility do right now, go to the primary sources described below.
Here's the part that trips people up: even within a single state, two homeowners on different utilities can face different rules. Net metering terms, interconnection caps, the rate schedule you land on, and time-of-use windows all vary at the utility level, and they change the answer to "what's my export worth?" by a lot.
That's why a generic headline — or a salesperson's quoted "savings" — may not reflect your actual payback. The export-rate assumption baked into a too-good proposal is one of the most common ways solar pitches mislead. We catalog the others in Solar scams and red flags in 2026.
To verify the policy yourself against primary sources: look up your state and utility in DSIRE (the DOE-funded, NC State–managed Database of State Incentives for Renewables & Efficiency), and then read your utility's actual tariff for the export/compensation terms. If a savings number can't be traced to a tariff or a public-utility-commission document, treat it as an estimate to confirm rather than a settled figure.
California is the clearest illustration of how a regime change reshapes solar economics. What's marketed as "NEM 3.0" is officially the Net Billing Tariff (NBT), and since April 15, 2023, new customers applying for interconnection have taken service on it (CPUC).
Under the prior NEM 2.0, exports earned full retail credit. Under the Net Billing Tariff, exports are instead compensated "at a rate reflecting the value of this generation to the grid," using the CPUC's Avoided Cost Calculator values — which, in the commission's own words, are "usually lower than the retail rate" (CPUC).
How much lower? There's no single number — the NBT export rate changes by hour, day, and season, so a kWh exported at noon is worth something very different from one exported on a summer evening. As a rough order of magnitude, one industry estimate put 2025 avoided-cost export values for California's three largest utilities at around 3–4 cents per kWh (Palmetto) — a secondary, illustrative figure, not a CPUC-published rate. Either way, the direction the commission itself confirms is unmistakable: exported solar is now worth well below the retail price you pay to import power.
The takeaway isn't "California killed solar." It didn't. The takeaway is that the strategy for making solar pay had to change — which we'll get to. If you're in the state, see our California residential solar page for the local picture.
When a state changes its rules, what happens to people who already went solar? Often they're "grandfathered" onto their old terms for a set period — but the specifics are state-by-state, so don't assume one state's rules travel.
California's rules are detailed:
(CPUC)
Those 20-year and nine-year figures are California-specific — don't apply them elsewhere. The generalizable lesson: many states grandfather existing systems, so the vintage of your install — which rule set you lock into and when — can be worth real money. Before you commit, find out whether your state has a grandfathering window and what your in-service date would secure.
This is the practical heart of the matter. When exports are worth pennies but grid power at the evening peak still costs full retail, the value of your solar shifts from selling it to using it yourself. A battery lets you store cheap midday solar and discharge it during the expensive evening hours — instead of exporting low and buying back high.
The data backs this up plainly. Lawrence Berkeley National Laboratory found that battery attachment on new residential solar in California jumped from about 10% under NEM to roughly 60% under the Net Billing Tariff after April 2023 (LBNL via Utility Dive). That's a market voting with its wallet: once exports stopped paying retail, self-consumption became the way to capture value.
To be clear, a battery isn't legally required, and it doesn't "pay off" for every household — the economics depend on your rates, usage, and battery cost. But under net billing it frequently becomes what makes the math work, which is exactly why California's storage attachment rate climbed so sharply once exports stopped paying full retail.
You can answer this for your own home in five steps:
For a state-by-state lay of the land, start with the best states for solar in 2026 and our full states index. When you're ready to turn policy into a number for your specific roof, you can get a free residential solar estimate that accounts for your situation rather than a generic national average.
Net metering can make or break solar payback in 2026 — and the answer is local. With the federal residential tax credit gone for new cash and loan buyers, the export compensation set by your state and utility now carries more weight in the math than it ever has. Don't generalize from a headline about California or any other state; the rule that governs your bill is your utility's, and it may grandfather, cap, or value exports in ways that change the picture entirely.
The practical move is the simple one: verify your utility's current terms before you sign anything, and model your payback carefully — battery included if you're in a net-billing world. When you want that run for your actual home, start with a free estimate.
Educational content, not tax, financial, or legal advice. Figures are current as of the update date above; verify with a qualified professional before acting.
Not nationwide — but it's shrinking in some places. Net metering is set by each state's utility commission and individual utilities, so it's not changing everywhere at once. Several states have shifted new solar customers from full-retail net metering to "net billing," which pays much less for exported power. California is the biggest example: since April 15, 2023, new customers applying for interconnection take service on the Net Billing Tariff, which credits exports at avoided-cost values that the CPUC says are usually lower than the retail rate (CPUC). Check DSIRE and your own utility's tariff for your current rules.
Under traditional net metering, every kilowatt-hour you export is credited at the same retail rate you pay, so a kWh sent out is worth a kWh you buy back. Under net billing, exports are credited at a separate, lower "export rate" — often based on the utility's avoided cost, which the CPUC describes as usually lower than the retail rate (CPUC). Those export rates also vary by hour, day, and season rather than being a single fixed number. The practical result: net billing makes using your own solar (ideally with a battery) far more valuable than exporting it.
NEM 3.0 (officially the Net Billing Tariff) didn't kill solar in California, but it sharply cut what exported power is worth. Exports are now compensated at CPUC Avoided Cost Calculator values that the commission says are usually lower than the retail import rate, instead of at full retail under the old NEM 2.0 (CPUC). The clearest sign of the impact: Lawrence Berkeley National Lab found battery attachment on new home solar jumped from about 10% under NEM to roughly 60% under the Net Billing Tariff — because storing your own power now beats exporting it cheap (LBNL via Utility Dive).
Often, to capture the value — though it isn't legally required. Under net billing, exporting midday solar pays little, while grid power at the evening peak still costs full retail. A battery lets you store cheap daytime solar and use it during expensive hours instead of exporting low and buying back high. That economic shift is why California's storage attachment rate jumped from about 10% under net metering to roughly 60% under the Net Billing Tariff (LBNL via Utility Dive). Whether a battery actually pays off depends on your rates, usage, and battery cost — model it both ways.
In many states, existing systems are "grandfathered" for a set period — but the rules are state-specific, so verify yours. In California, NEM 2.0 customers can remain on their old retail-rate tariff for 20 years from interconnection (per CPUC Decision D.14-03-041); however, customers who switch from a prior NEM tariff to the new Net Billing Tariff lose that legacy protection, and a new NBT customer is guaranteed use of the NBT for nine years (CPUC). Don't assume California's rules apply elsewhere — check DSIRE and your utility.
Free, no obligation, and sourced from the IRS, USDA, and EIA.