Net Metering in the US: NEM 3.0 and the Shift to Net Billing

The United States has no national net-metering policy. Rules are set state by state, and often utility by utility within a state, which is why advice that applies perfectly in one place can be actively misleading a few hundred miles away.

Roughly 38 states plus Washington D.C. maintain some form of net metering or net billing. The headline, though, is the direction of travel: full retail-rate export credit is steadily being replaced with lower, separately-set export rates.

Export rates, tariff schedules and grandfathering terms change frequently. Verify with your own utility and state commission before making a purchase decision.

California and NEM 3.0

California matters disproportionately because it is the largest solar market and because other states watch what it does.

The Net Billing Tariff, universally called NEM 3.0, took effect in April 2023 for customers of the three big investor-owned utilities - PG&E, SCE and SDG&E. It replaced 1:1 net energy metering with export compensation based on the value of the energy to the grid at the time it is exported.

The practical effect: export compensation fell by roughly 75% compared with the previous arrangement.

Two consequences follow directly.

Midday export became low-value. California's grid has abundant solar at midday and scarcity in the early evening. Export rates now reflect that, which means a unit exported at 1pm is worth far less than a unit exported at 7pm.

Storage became the main lever. Under NEM 3.0 the strong play is to store midday generation and either use it or export it in the evening peak. This is why California attachment rates for batteries rose sharply after the change - the tariff is explicitly designed to reward it.

If you want the underlying mechanics, see net metering vs net billing.

Which other states have moved

California was not first, and will not be last.

• Nevada, Hawaii and Arizona moved to reduced export credit or net billing earlier.
• Michigan, Wisconsin and Indiana have cut export compensation in recent years.
• Colorado and Oregon have had their structures under active review.

Meanwhile, a substantial number of states still offer retail-rate net metering, frequently with aggregate caps - a limit on total enrolled solar capacity statewide, after which the programme can close or change. Sitting behind a cap that is close to full is a real risk worth checking before you buy.

The terms that actually decide your economics

The headline "does my state have net metering?" is less useful than these five questions.

1. What is the export rate, and is it time-varying?

A flat retail-rate credit and an hourly value-based rate produce very different outcomes for the same system. Under a time-varying rate, when you export is as important as how much.

2. What is the netting interval?

• Instantaneous or hourly netting compares production and consumption within short windows. Only genuinely simultaneous production offsets consumption.
• Monthly or annual netting lets a sunny afternoon offset a dark evening.

Shorter intervals are less favourable and are the quiet way a nominally intact net-metering programme gets tightened.

3. Are you grandfathered, and for how long?

Most states protect existing customers for a set term when rules change - often 10 to 20 years from interconnection. This is genuinely valuable. Find your term and note the date.

4. What happens to annual excess?

Some states pay out surplus at a low avoided-cost rate at the end of a true-up year. Others forfeit it. This determines whether oversizing is rewarded or wasted.

5. Are there fixed or demand charges for solar customers?

Some utilities apply monthly fixed charges, minimum bills or demand charges to customers with on-site generation. These can materially reduce savings without touching the export rate at all.

How to check your own situation

1. Identify your utility, not just your state. Investor-owned utilities, municipal utilities and rural cooperatives often operate different rules in the same state.
2. Find the tariff schedule for solar or distributed generation customers on your utility's site. That document is authoritative; marketing pages are not.
3. Check your state commission's current proceedings for pending changes.
4. Read the interconnection agreement before signing - it names your scheme, your grandfathering term and your true-up date.

What to do under net billing

If you are in a net-billing state, the strategy changes:

• Size to your daytime consumption, not to your annual total. Exports are worth less, so the marginal panel earns less than it used to.
• Shift load into daylight where you can.
• Model storage properly. Under 1:1 netting the grid acted as a free battery, so storage was mainly about outage protection. Under time-varying export rates, the arbitrage between midday and evening can be real money.
• Do not reuse old payback numbers. Any calculation built on retail-rate export is wrong for a new NEM 3.0 customer, often by years.

Whatever tariff you are on, you can put your actual meter readings into our free net metering calculator - it separates peak and off-peak imports from exports and carries surplus forward, in dollars.

Frequently asked questions

Is net metering going away in the US? Not uniformly, but 1:1 retail-rate credit is clearly declining. Most states retain a programme; the terms are getting less generous.

Am I protected if my state changes the rules? Usually yes, for a defined term, if you interconnected under the old rules. Confirm the length in your interconnection agreement.

Does NEM 3.0 mean solar no longer pays in California? No - it means the case shifted from export income to avoided consumption and storage arbitrage. Payback lengthened relative to NEM 2.0, but retail rates are high, which keeps avoided imports valuable.

Why do my neighbour's numbers look different? Different utility, different interconnection date, or a different grandfathered tariff. All three are common within a single state.