The way homeowners save money with solar energy is changing. Net metering – the policy that allows solar panel owners to earn credits for extra electricity sent back to the grid – has been one of the biggest financial incentives for going solar. However, as solar adoption grows across the U.S., many states are making adjustments to their net metering programs, leading to a mix of new rules, compensation structures, and alternative billing models.
If you’re considering installing solar panels or already have a system, it’s crucial to understand how net metering works in 2025, how it’s evolving, and what it means for your energy savings.
What is Net Metering?
Net metering is a billing arrangement between solar homeowners and utility companies. It ensures that when your solar panels produce more electricity than your home needs, the excess power is sent back to the grid, and you receive energy credits. These credits help offset the cost of electricity you draw from the grid when your solar panels aren’t producing enough – such as at night or on cloudy days.
How Does Net Metering Work?
The operation of net metering is straightforward and involves a bidirectional meter. Here’s a step-by-step explanation of how it functions
Solar Energy Production
Your solar panels generate electricity, which is used to power your home.
Excess Energy Sent to the Grid
Any unused electricity is exported to the utility grid, and your meter records how much you contribute.
Energy Credits Earned
You receive a credit on your electricity bill for every kilowatt-hour (kWh) of excess energy you send to the grid.
Energy Use from the Grid
When your solar panels don’t produce enough energy, your home pulls electricity from the grid.
Net Usage Calculation
At the end of the billing cycle, your utility company subtracts the electricity you sent to the grid from the electricity you consumed, and you pay only for the difference.
For years, traditional net metering allowed homeowners to receive full retail rates for the solar energy they sent to the grid, making it a significant financial benefit. But with growing solar adoption, many states are re-evaluating their policies.
Changes in Net Metering Across the U.S. in 2025
As of February 2025, net metering policies are shifting in multiple states. Some have reduced compensation rates, while others are moving toward alternative billing structures.
Here’s an overview of how different states are adjusting their net metering programs:
States Maintaining Full Net Metering
A few states still offer full net metering, where homeowners receive credits at the retail electricity rate for excess solar energy:
- New Mexico
- Oregon
- Colorado
- New Jersey
- Massachusetts (Expanded eligibility for larger residential systems)
These states continue to provide strong financial incentives for solar homeowners.
States Transitioning to Net Billing
Many states are shifting away from traditional net metering and replacing it with net billing. Under net billing, homeowners sell excess solar energy at a lower rate (often based on the wholesale or avoided-cost rate) rather than the full retail price. This change reduces the financial savings from net metering.
- California: NEM 3.0 reduces export rates by 75%, making battery storage more attractive.
- Illinois: Transitioned to supply-rate net billing with a rebate for solar adopters.
- South Carolina: Adjusted its program, lowering compensation rates over time.
- Arizona: Offers export rate net billing instead of full retail net metering.
States Limiting Net Metering
Some states are imposing caps on the number of customers eligible for net metering, making it first-come, first-served:
- Washington (Puget Sound Energy has reached its net metering limit)
- New York (New applicants transition to the Value of Distributed Energy Resources program)
- Nevada (Utility-specific rate adjustments for new solar customers)
States with No Statewide Net Metering
A few states do not require utilities to offer net metering, but some utilities voluntarily provide compensation programs:
- Tennessee
- South Dakota
- Alabama
- Mississippi
- Texas (Utility-based solar buyback programs exist)
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Alternative Solar Compensation Models in 2025
As net metering policies evolve, various alternative compensation models have emerged to regulate how homeowners are credited for the solar energy they generate. These models impact the financial return on residential solar investments and vary significantly from state to state. Below are the most common solar compensation mechanisms currently in use across the United States.
Net Billing
Under net billing, homeowners are credited for excess solar energy sent to the grid, but at a lower rate than what they pay for electricity. Instead of receiving full retail credit, they are compensated at wholesale or avoided-cost rates. This reduces overall savings compared to traditional net metering but still allows homeowners to offset part of their electricity bills. Net billing is currently used in California, Arizona, Illinois, and South Carolina.
Feed-In Tariffs (FITs)
With feed-in tariffs, homeowners sell all the electricity their solar panels generate to the grid at a predetermined fixed rate, rather than using it directly. They then buy back the electricity they consume at standard retail rates. While this model ensures a stable return on solar investment, the rate paid for exported energy is often lower than the retail price. FITs are primarily used in Hawaii under its Self-Supply Program.
Time-of-Use (TOU) Pricing
TOU pricing ties solar compensation to the time of day, aligning with demand fluctuations on the grid. Homeowners receive higher credits for electricity exported during peak hours but lower rates during periods of low demand. This encourages solar users to shift energy consumption to off-peak hours to maximize savings. TOU pricing is mandatory in California, Nevada, and Michigan.
Buy-All, Sell-All
In this model, homeowners sell all the electricity their solar system produces at a set rate, while purchasing all their electricity needs separately at standard retail prices. This approach treats solar customers more like independent energy producers, rather than allowing them to offset their own consumption directly. It is currently in use in Louisiana.
As net metering phases out in some states, understanding these emerging compensation models is essential for homeowners looking to invest in solar in 2025.
Disclaimer: The information presented here is intended to provide a general overview of net metering policies and their potential benefits for homeowners with solar installations. However, this information should not be considered as official financial, legal, or technical advice. Net metering policies, utility rates, and incentive programs can vary significantly by location and are subject to change over time.
How Homeowners Can Maximize Solar Savings in 2025
With changing net metering policies, here’s how homeowners can still make the most of their solar investment:
Consider a Solar Battery
Installing a solar battery lets you store excess solar energy for later use instead of sending it to the grid. This is especially beneficial in states like California and Arizona, where net billing rates are lower, ensuring you maximize self-consumption and reduce reliance on the grid.
Research Local Utility Programs
Some utility companies offer solar buyback programs that provide better compensation than standard net billing. It’s worth checking with your local utility to see if they have special incentives, such as time-of-use rates or additional solar credits, that can help you maximize your energy savings.
Shift Energy Use to Peak Solar Hours
Maximize your solar benefits by running appliances like dishwashers and washing machines during daylight hours. Charging your electric vehicle while the sun is shining further reduces reliance on the grid and increases savings.
Explore Community Solar
For those who can’t install solar panels at home, community solar programs offer an alternative way to benefit from solar energy. By subscribing to a shared solar farm, you receive credits on your electricity bill for the solar energy generated. These programs are widely available in states like New York, Minnesota, Illinois, and Maryland.
The Future of Net Metering
Net metering has been one of the biggest financial incentives for solar energy adoption, but its landscape is evolving. While some states continue to offer full net metering, others are transitioning to net billing, time-of-use pricing, or feed-in tariffs.
The good news? Solar energy is still a smart investment, and as battery storage costs decrease, homeowners can take greater control of their energy savings. Understanding your state’s net metering policies and exploring alternatives will ensure that you maximize the benefits of going solar in 2025 and beyond.
Want to find out how much you can save with solar? Try our Solar Calculator to estimate your potential savings and explore the best solar options in your area!
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How Electricity Bills Work with Net Metering
Typically, homes produce excess electricity in summer and use more from the grid in winter. Instead of receiving monthly checks for surplus production, you build up credits in high-production months to use during low-production periods. With a properly designed system, your annual production can match your total electricity consumption, even if monthly outputs vary.
When your system generates more electricity than you use in a month, you receive a credit based on the net kilowatt-hours returned to the grid. If you consume more than you generate, you pay for the net electricity used, minus any credits from excess generation.
