As solar adoption accelerates across residential and commercial markets, one question continues to surface: Which states offer solar net metering?

The Quick Answer

Approximately 38 states plus Washington, D.C. require utilities to provide some form of solar net metering. However, the compensation model varies. Some states still offer full retail credit for excess energy, while others use lower “net billing” rates based on avoided-cost formulas.

Understanding how your state structures net metering is critical when evaluating long-term savings, policy stability, and return on investment, especially with federal tax credit changes now in effect.

What Is Solar Net Metering and How Does It Work?

Solar net metering is a billing agreement between a solar system owner and the local utility. When your solar panels produce more electricity than your property consumes, that excess energy flows back to the grid. In exchange, you receive bill credits.

Those credits offset the electricity you draw from the grid at night or during periods of low production. In traditional retail net metering models, utilities credit exports at the same rate customers pay for electricity. In newer net billing models, export credits are based on wholesale or avoided-cost rates, which are typically lower.

For both homeowners and commercial property owners, this structure directly impacts annual savings.

What Are the Main Benefits of Commercial Solar Net Metering?

For businesses, net metering plays a central role in solar project economics. Commercial buildings often consume large amounts of electricity during the day, precisely when solar panels generate the most power.

Net metering allows businesses to:

• Reduce operating expenses by offsetting peak daytime usage with on-site generation
• Balance seasonal production differences by rolling credits forward
• Stabilize energy costs against future rate increases
• Strengthen sustainability positioning for tenants and investors

When structured favorably, net metering shortens payback periods and improves long-term financial performance.

Which States Currently Mandate Solar Net Metering?

Most U.S. states offer some form of net metering or alternative compensation model. As of early 2026, policies fall into three broad categories.

Retail Rate States

Some states continue to offer traditional one-to-one retail crediting, meaning exported electricity is valued at the same rate as customers pay for grid power. States such as Arkansas, Florida, Illinois, Massachusetts, and Virginia have historically maintained strong retail credit structures.

Net Billing States

Other states have transitioned to net billing systems, where exported electricity is credited at a lower avoided-cost rate.

California (NEM 3.0) uses a Net Billing Tariff with time-sensitive export values.
Arizona has reduced export compensation to encourage on-site consumption.
Indiana and Nevada operate under revised credit structures tied to wholesale pricing.

These changes reflect grid modernization efforts and evolving utility cost-recovery models.

Non-Mandated States

South Dakota, Alabama, and Tennessee do not have statewide net metering mandates. In these states, individual utilities may offer voluntary programs, but participation and compensation vary widely.

How Do Utility Rate Structures Impact Solar Savings?

Even in states that mandate net metering, savings depend heavily on utility-specific rate design.

Time-of-Use (TOU) Pricing

In states like California, export credits fluctuate depending on the time of day. Sending electricity to the grid during peak demand hours may generate higher-value credits.

Fixed Charges

Some utilities apply monthly grid-access fees to solar customers, which can slightly reduce net savings.

Demand Charges

Commercial properties often face charges based on their highest peak usage during a billing cycle. While net metering reduces overall consumption, pairing solar with energy management strategies is essential to optimize demand-related costs.

Understanding these rate components is just as important as knowing whether your state offers net metering.

Why Battery Storage Is Becoming Essential in 2026

As more states shift from retail net metering to net billing, the value of exported electricity continues to decline. Battery storage changes the equation.

By storing excess generation instead of exporting it, property owners can:

• Use stored power during high-rate peak periods
• Reduce exposure to low avoided-cost export rates
• Lower demand charges
• Improve operational resilience

Solar-plus-storage strategies allow businesses to maximize self-consumption and protect ROI under evolving policy frameworks.

What Are the Major 2026 Solar Policy Changes?

Federal Credit Transition

The 30 percent Residential Clean Energy Credit (Section 25D) expired for new expenditures in 2026. Commercial projects under Section 48E now face stricter domestic content and labor requirements to qualify for full bonus credits.

Shift Toward Net Billing

More states are moving away from full retail net metering to manage grid load and align compensation with wholesale market conditions.

Participation Caps

Certain utility territories are implementing program caps or revised interconnection requirements, which may limit future eligibility. For businesses considering solar, timing can significantly influence project economics.

Final Thoughts

While most states offer some form of solar net metering, the details behind those policies determine financial impact. Retail versus wholesale crediting, rollover rules, demand charges, and 2026 federal updates all shape long-term savings potential.

Before investing in solar, evaluate not only whether your state mandates net metering, but how the compensation model works in practice. Policy design, not just program availability, ultimately determines return on investment. To learn more about funding opportunities for solar energy, contact Incentive Rebate360. Our rebate management experts can help minimize expenses with the help of financial rebates. To speak to one of our rebate recovery specialists, call 480-653-8180, email [email protected], or schedule a call that fits your needs by clicking the button below!