Net metering is the billing rule that decides what the extra power from your solar panels is worth. Where it exists, your utility credits you for the electricity you send to the grid, and you only pay for your net use. The details change a lot by location. California moved to NEM 3.0 and a much lower export credit, Texas has no statewide rule at all, Florida still credits exports at retail rates; and Illinois changed its terms for newer systems in 2025. This guide explains how net metering works, what NEM 3.0 changed, and how to read the policy that applies to your home before you sign a solar estimate.
Net Metering at a Glance
- Net metering credits you for solar power you export to the grid, and you pay only for your net usage.
- Your state and utility set the credit value, not your installer.
- California’s NEM 3.0 (the Net Billing Tariff) pays time-based export credits that are commonly cited at roughly 5 to 8 cents per kWh, compared with about 30 cents for retail power.
- Texas has no statewide net metering mandate. Your retail electricity provider or municipal utility sets the buyback terms.
- Florida’s investor-owned utilities credit exports at the full retail rate.
- Illinois systems interconnected after January 1, 2025 receive a supply-only credit instead of the full retail rate.
- Before you buy, confirm your interconnection date, credit rate, rollover rules, and true-up date.
What Net Metering Is
Net metering is a billing arrangement that credits you for the solar electricity your panels produce, but your home does not use in the moment. When your system makes more power than you are consuming, the extra flows onto the grid and the utility records it as a credit. When your panels stop producing, you draw power back from the grid, and the credits offset what you use. That exchange is why a grid-tied system can cover your usage even after dark.
The details of the credit are everything. How much each exported kilowatt-hour is worth, and at what time of day, determines how quickly your system pays for itself. That is why a change to net metering rules can matter more to your savings than the price of the panels.
How the Credit Works Step by Step
- Your panels produce more than your home uses, usually around midday.
- The surplus flows to the grid through a two-way meter.
- Your utility records the exported energy as a bill credit.
- At night or on cloudy days, you pull power from the grid, and credits offset that usage.
- Your bill shows the net result, which is why it is called net metering.
Credit Rollover and the Annual True-Up
Most programs let credits roll forward so that sunny summer production can offset darker winter months. Most also reconcile whatever is left once a year, on a date called the true-up. That date is generally tied to the day your system received permission to operate, so it helps to understand what happens after installation, inspection, and PTO.
| Rollover style | What happens to unused credits | What it means for system size |
|---|---|---|
| Monthly rollover with annual true-up | Credits carry forward for 12 months, then any leftover balance is paid out at a low, near-wholesale rate | Size close to your annual usage, since surplus at true-up is worth little |
| Indefinite rollover | Credits keep carrying forward with no yearly reset | More flexibility, but this is uncommon |
| Monthly reconciliation | Leftover credits are settled each billing cycle at a reduced rate | Avoid oversizing, because sunny-month surplus earns little |
Net Metering vs Net Billing and Other Buyback Models
People often say net metering when they mean any solar buyback program, but the models pay very differently. The label on your proposal matters less than how exports are actually credited.
| Model | How exports are credited | Who it favors |
|---|---|---|
| Net metering (1 for 1) | Each exported kWh offsets one kWh you use later, at or near retail value | Homes that export a lot |
| Net billing | Self-used solar offsets retail power, but exports earn a lower, often time-based rate | Homes that use their own solar or store it |
| Buy all, sell all | All solar output is sold to the utility, and all home power is bought at retail | Rarely a good deal for homeowners |
| Non-export (self-consumption) | No exports allowed, so you use or store everything you produce | Homes with batteries and complete control of loads |
| Virtual net metering | Credits from a shared solar project are split among subscribers | Renters and homes without a good roof |
Virtual Net Metering and Community Solar
Virtual net metering lets you receive credits for a share of an offsite solar project instead of panels on your own roof. It is only offered in some states, and the savings are usually smaller than owning a system. If your roof is not a fit, compare rooftop solar and community solar before you decide.
How NEM 3.0 Works in California
NEM 3.0, officially the Net Billing Tariff, applies to new solar customers of California’s three big investor-owned utilities (PG&E, SCE, and SDG&E) whose applications were filed on or after April 15, 2023. Instead of crediting exports near the retail rate, it pays a credit based on what the grid avoids spending to buy that energy at that exact hour. Those values come from hourly schedules, so a kilowatt-hour exported at 1 p.m. in spring is worth far less than one exported at 7 p.m. in summer. California’s 1st District Court of Appeal upheld the framework in March 2026, according to PV Magazine, so it remains the rule for new systems. Some municipal utilities, such as LADWP, follow their own rules, so confirm which tariff your address falls under.
NEM 2.0 vs NEM 3.0 Side by Side
| Feature | NEM 2.0 | NEM 3.0 (Net Billing Tariff) |
|---|---|---|
| Export credit basis | Close to the full retail rate | Time-based avoided cost |
| Typical midday export value | About 30 cents per kWh | Commonly cited at 5 to 8 cents per kWh |
| Overall change | Baseline | Export credits cut by roughly 75 to 80 percent |
| Best system strategy | Size to zero out annual usage and export the surplus | Right-size the array and use or store your own solar |
| Role of a battery | Optional extra | Central to the savings case |
| Who is on it | Applications filed before April 15, 2023 | Applications filed on or after April 15, 2023 |
Worked Example: Why Midday Exports Earn So Little
These figures are illustrative, built from the commonly cited rates above. Say your system exports 10 kWh at midday.
| Scenario | Credit per kWh | Credit for 10 kWh exported |
|---|---|---|
| NEM 2.0 style credit | About $0.30 | About $3.00 |
| NEM 3.0 export credit | $0.05 to $0.08 | $0.50 to $0.80 |
Now suppose you buy 10 kWh back during the evening peak at an illustrative $0.45 per kWh, which costs $4.50. Under NEM 3.0, the midday credit covers only about 11 to 18 percent of that purchase. If a battery stores the same 10 kWh and you use it in the evening, you avoid that $4.50 purchase instead (before battery losses). That gap is the whole reason storage moved to the center of the deal.
Why Batteries Move to the Center
Because midday exports earn little and evening grid power is expensive, the biggest savings come from keeping your own solar instead of selling it. A battery stores the surplus your panels make during the day so you can use it at peak rates later. To go deeper, read our guide to solar battery storage and compare which battery chemistry fits your usage and budget.
A panel-only system still saves money, especially if you use a lot of power during the day. It just tends to have a longer payback than the same system with storage. For the dollars-and-payback picture, see whether solar still saves money in California.
Sizing and Reading Your Estimate Under NEM 3.0
- Sizing: an array much larger than your daytime usage produces surplus that earns only the low export rate, so the extra panels add cost without much savings unless a battery captures it.
- Hourly modeling: a good estimate uses your hourly usage, your time-of-use rates, and the export schedule.
- Red flag: a proposal that assumes you will zero out your bill the way NEM 2.0 allowed is using outdated math.
Understanding what determines your solar estimate helps you tell a realistic proposal from an optimistic one.
Net Metering in Texas: How It Actually Works
Texas works differently from California, and this is where many homeowners get confused. There is no single net metering law that applies across the state. What your exported power earns depends on who sells you electricity and which plan you are on.
Why Texas Has No Statewide Rule
Texas has no statewide net metering mandate, and most of the state runs on competitive retail electricity. The four delivery utilities (CenterPoint Energy, AEP Texas, Oncor, and Texas-New Mexico Power) maintain the wires and handle interconnection, but you buy your electricity from a retail electricity provider, often called a REP. Because the REP is the one crediting your exports, the rules are set by plan terms rather than by a state tariff.
Retail Electricity Provider Buyback Plans
- A limited number of REPs offer true net metering, where exports offset your usage at the same rate.
- Others offer a solar buyback plan that pays a set rate per exported kWh.
- Buyback rates are set by each provider and can range from a few cents per kWh to a match of the retail rate, so check the current plan documents.
- Not every plan is available at every address, so your options depend on your service area.
Municipal Utilities and Co-ops
Cities and cooperatives that run their own electric service, such as Austin Energy and CPS Energy in San Antonio, set their own export credits and programs. These can differ a lot from the REP plans in Houston and Dallas, so confirm which utility serves your address first. For rebate amounts by utility, see solar rebates and incentives by state, and for what a system costs, see solar installation costs in Texas.
What to Compare Before You Pick a Texas Plan
| Factor | Why it matters |
|---|---|
| Buyback rate per kWh | Sets what your exports are worth |
| Energy charge and monthly fees | A strong buyback rate can come paired with higher charges on the power you buy |
| Contract length and early termination fee | Locks you in, and changing plans later can cost money |
| Credit handling | Bill credit versus per-kWh payment, and whether credits roll forward |
| Plan availability at your address | Not every provider serves every service area |
Net Metering in Florida and Illinois
Florida
Florida’s investor-owned utilities, including Florida Power & Light, Duke Energy Florida, and Tampa Electric, credit exports at the full retail rate. That one-to-one credit keeps panel-only economics strong, and it is one reason a well-sized Florida system can offset most of a year’s usage without a battery. Municipal utilities set their own terms, so confirm yours. For local pricing, see solar cost in Florida.
Illinois
Illinois requires ComEd and Ameren Illinois to offer net metering, and the terms depend on when your system was interconnected. Systems interconnected before January 1, 2025 keep full retail credit. Systems installed after that date receive a supply-only credit, which is less generous. State incentives such as Illinois Shines help close the gap, and our Illinois solar incentives guide covers them in detail.
Net Metering Rules by State at a Glance
| State | Policy type | What exports earn | What to confirm |
|---|---|---|---|
| California | Net billing (NEM 3.0) for PG&E, SCE, and SDG&E | Time-based credit, commonly cited at 5 to 8 cents per kWh | Application date, battery plan, municipal utility rules |
| Texas | No statewide mandate, REP or municipal programs | Varies by plan, from a few cents to a retail match | Your provider, plan terms, contract length |
| Florida | Net metering through investor-owned utilities | Full retail credit | Municipal utility tariff, rollover and true-up |
| Illinois | Net metering, with newer terms for newer systems | Full retail before 2025, supply-only credit after | Interconnection date, ComEd or Ameren tariff |
Policies change, so check the DSIRE database of state incentives and your utility’s current tariff before you rely on any number.
What to Check in Any Net Metering Policy
| Item | Question to ask |
|---|---|
| System size limit | Is there a cap, often tied to a share of your annual usage? |
| Credit rate | Are exports credited at retail, avoided cost, or a custom rate? |
| Measurement period | Is usage netted monthly, hourly, or instantly? |
| Rollover and cash-out | Do credits roll forward, and what rate applies at true-up? |
| Renewable energy certificates | Does the utility or you own the credits your system creates? |
| Meter aggregation | Can credits offset usage on more than one meter? |
| Interconnection date | Which version of the tariff applies to your system? |
Staying Grid-Connected Under Any Net Metering Policy
Even when the export credit is lean, staying connected to the grid is the right choice for almost every home. The grid is your backup on cloudy stretches and overnight, and going fully off-grid means a much larger battery bank that usually costs far more than the credits you would give up. See how grid-tied and off-grid solar compare.
One common point of confusion is outages. A standard grid-tied system shuts off when the grid goes down, even with net metering, and only a battery set up for backup keeps your home powered. Learn what your solar system does during a power outage.
How Axia Solar Estimate Models Net Metering for You
Export values are complex, and a system that looks great on a simple bill-offset assumption can look very different once your hourly usage and local credit rules are applied. A trustworthy estimate runs your real usage against your rates and the current export terms, then shows how storage changes payback. Axia Solar’s AI-driven roof design maps your actual roof and usage before that math is applied, instead of relying on rough averages.
Accuracy also depends on the installer, since modeling quality varies widely. If you are in California, work through choosing a solar installer who models NEM 3.0 correctly.
The Bottom Line on Net Metering Today
Net metering has not gone away, but it now means very different things depending on where you live. In California, midday exports are worth little, and storing your own solar beats selling it cheap. In Texas, your provider’s plan decides everything. In Florida, retail credit still makes panel-only systems work, and in Illinois, the install date matters. When you are ready to see how your local rules shape your numbers, start with a free estimate at Axia Solar Estimate, or compare quotes from local installers once you know what a well-modeled system should look like.
Frequently Asked Questions
What is net metering in simple terms?
Net metering is a billing arrangement that credits you for the extra electricity your solar panels send to the grid. Those credits offset the power you draw when your panels are not producing, so you pay only for your net usage. The value of each credit depends on your state and utility.
How does net metering work?
Your panels produce power during the day, and any surplus flows to the grid through a two-way meter and is recorded as a credit. At night, you pull power back, and the credits offset it. Most utilities roll credits forward and settle any leftover balance once a year on a true-up date.
Does Texas have net metering?
Texas has no statewide net metering mandate. Instead, your retail electricity provider or municipal utility sets the terms. Some providers offer true net metering, others offer a solar buyback plan at a set rate per kWh, and the rates vary widely. Compare the plan terms available at your address before you choose.
What is the difference between net metering and net billing?
Under net metering, an exported kWh is credited at or near the retail rate, so exports and usage offset one for one. Under net billing, self-used solar still offsets retail power, but exports earn a lower, often time-based rate. California’s NEM 3.0 is a net billing program, which is why it is a less generous form of net metering and not a separate concept.
What is NEM 3.0?
NEM 3.0, officially the Net Billing Tariff, is California’s current solar billing policy for new customers of PG&E, SCE, and SDG&E with applications filed on or after April 15, 2023. It credits exports at a time-based avoided cost value that is far lower than the retail rate.
How much do exports pay under NEM 3.0?
Export credits vary by hour and season, but they are commonly cited at roughly 5 to 8 cents per kWh on average, compared with about 30 cents under the old near-retail credit. The highest credits come during the late-afternoon and evening peak.
Does NEM 3.0 make solar not worth it?
Solar is still worth it for most California homes given rising utility rates, but the design that maximizes savings has changed. A right-sized array paired with a battery usually beats a large panel-only system that sells surplus at the low export rate.
Do I need a battery under NEM 3.0?
You do not strictly need one, and a panel-only system still saves money, especially if you use a lot of power during the day. A battery usually improves payback because it lets you use your own solar in expensive evening hours instead of buying from the grid.
Do net metering credits expire?
It depends on your utility. Some credits roll over indefinitely, but most programs settle any remaining balance at the end of 12 months, usually at a low rate, and some settle every month. Check your utility’s rollover and true-up rules.
Is net metering going away?
Net metering is changing rather than disappearing. Many states have moved to net billing or lower export rates, and others, such as Florida, still credit exports at retail. The trend in high-solar states is toward making self-consumption and storage more valuable than exporting.
Does net metering work the same in Texas, Florida, and Illinois?
No. Texas has no statewide rule and relies on provider plans, Florida’s investor-owned utilities credit exports at retail, and Illinois gives newer systems a supply-only credit. Always confirm the policy for your specific utility and interconnection date.