Net metering is why
solar pays off — or doesn't.
The difference between earning full retail credit for your solar exports and earning a fraction of that comes down to one policy. Here's how it works, state by state.
Your meter tracks
flow in both directions.
A rooftop solar system usually produces more electricity than the house uses during sunny midday hours, and less than it uses at night. With a bidirectional (net) meter, the utility tracks both — power you draw from the grid and power you export back.
What happens to that exported power is where states diverge. Two basic models:
Every kWh you export earns a credit equal to the retail rate you'd otherwise pay to buy a kWh — typically $0.15-$0.30+ depending on the state. Over a billing period (often a full year), exports offset imports one-for-one. This is the policy that makes 5-7 year paybacks possible.
Exports are credited at the utility's "avoided cost" — what it would have paid a wholesale generator for the same power, usually $0.05-$0.08/kWh. Imports are still billed at full retail. The gap between buy price and sell price is what kills the economics of an export-heavy system without a battery.
Four states with currently
strong net metering.
These four are all currently full or near-full retail net metering — meaning rooftop solar economics still work the way most homeowners assume they do.
Full retail net metering, 25kW residential cap.[4] Combined with 5.3 peak sun hours, one of the more reliable policy environments for rooftop solar right now.
Colorado guide →Full retail credit at $0.29/kWh — among the highest rates in the country.[5] 5-7 year paybacks are realistic.
Connecticut guide →Strong net metering policy under PUC Rule 5.100, designed to also encourage community / group net metering specifically.[6]
Vermont guide →Currently full or near-full retail net metering under VA Code § 56-594[7] — but flagged by some analysts as a state that MAY see changes in coming years, similar to the cost-shift debate that drove California's NEM 3.0. Worth installing sooner if this matters to your decision.
Virginia guide →NEM 2.0 → NEM 3.0:
a ~75% cut to export rates.
California ran a retail-rate net metering program (NEM 2.0) for years. In December 2022 the California Public Utilities Commission approved the Net Billing Tariff, widely called NEM 3.0, which took effect for new solar interconnections on April 15, 2023.[1]
The change replaced retail-rate credit with avoided-cost export rates derived from the Avoided Cost Calculator — roughly a 75% reduction on average.[1,2] Imports are still billed at full retail. The result: payback periods on solar-only systems stretched from ~6 years to ~9-12 years depending on the utility and household profile.
The practical implication: under NEM 3.0, exporting power at $0.05-$0.08 while buying it back at $0.40+ during peak hours is a losing trade. Pairing solar with a battery — so you self-consume your own production instead of exporting it — becomes essential to making the math work.
Utilities and the CPUC argued that retail-rate net metering created a "cost shift": non-solar customers (often lower-income) end up covering more of the fixed costs of the grid — poles, wires, wildfire mitigation — because solar households' bills were reduced beyond what their actual reduced grid use justified. NEM 3.0 was framed as correcting that imbalance.
Distributed solar still provides real grid value: it reduces peak demand on the hottest afternoons, generates power close to where it's used (cutting transmission and distribution losses), and defers expensive grid upgrades. Studies from Lawrence Berkeley National Lab have estimated those benefits at well above the avoided-cost number — meaning the new export rate likely undercompensates solar's actual value to the system.[3]
Battery for backup, or
battery to capture value?
If you're in a strong net metering state (Colorado, Connecticut, Vermont, and currently Virginia[4,5,6,7]), a battery is optional for savings — useful mainly for backup power during outages. The grid effectively acts as a free, infinite battery, crediting your exports at full retail.
If you're somewhere with reduced export rates (like California under NEM 3.0), a battery becomes essential to capturing your solar's full value — because self-consumption matters more than exporting at low rates. Every kWh you store and use yourself is worth full retail; every kWh you export is worth a fraction.
These are two different reasons to buy a battery. Worth being clear about which one applies to you before you spend $10-15k on storage.
See solar + battery combinations →Find my power.
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