Net-metering policies, which have been instrumental in the growth of residential solar across the United States, are undergoing dramatic changes nationwide. These policies—which allow solar customers to receive credit for the electricity they contribute to the grid—are being reduced or eliminated in state after state, often at the urging of utility companies.

Why is net metering important?

Net metering is a billing mechanism that credits solar energy system owners for the electricity they add to the grid. When a solar system produces more electricity than the home uses during daylight hours, the meter runs backward to provide a credit against what is consumed at night or during periods when household electricity use exceeds the system’s output. Customers are only billed for their “net” energy use. On average, only 20-40% of a solar energy system’s output ever goes into the grid, and this exported solar electricity serves nearby customers’ loads.

Currently, 34 states plus Washington, D.C. and Puerto Rico have mandatory net metering rules in place, though as we’ll discuss, many of these policies are under threat.

Policy shifts across the country

The pattern of utility companies pushing for reduced compensation is playing out across the nation:

California: The introduction of Net Energy Metering (NEM) 3.0 in late 2022 reduced compensation rates for surplus solar power by 75%. This radical change led to a 90% drop in new solar applications by May 2023 and resulted in over 17,000 job losses in the state’s solar industry (1).

Hawaii: After being an early leader in solar adoption, Hawaii transitioned away from traditional net-metering to a self-supply model, effectively requiring new solar customers to install batteries if they want to maximize their investment.

Arizona: In 2016, the Arizona Corporation Commission transitioned from traditional net metering to a net billing system, significantly lowering compensation rates for solar owners. Discussions in 2023 considered further reductions, highlighting ongoing challenges for the solar sector in the state.

Florida: Legislators passed a bill in 2022 aimed at reversing net metering, backed by major utilities. However, public opposition led to the governor vetoing the bill, demonstrating the potential impact of collective advocacy.

Virginia: Appalachian Power Company (APCo) is now proposing to cut net-metering compensation by more than 70%, jeopardizing the economics of solar for many homeowners.

Arkansas: In 2016, the state enacted Act 827, directing a review of net metering policies. By 2017, regulators decided to grandfather existing solar customers into retail net metering rates for 20 years, while considering future changes for new customers.

Indiana: State lawmakers passed a law in 2017 to phase out net metering, which took effect in the summer of 2022, altering the compensation structure for solar energy producers.

West Virginia: The state has significantly reduced net-metering rates, making solar economics challenging for homeowners.

The real impact of net-metering changes

When net-metering policies are weakened, the effects ripple throughout the solar ecosystem:

• Extended Payback Periods: Reduced compensation extends the time it takes for solar investments to pay for themselves, potentially deterring new installations.
• Job Losses: California’s experience shows how policy changes can lead to substantial job losses in the solar sector. This is particularly concerning given that the solar industry currently employs more than 230,000 American workers, largely thanks to strong state net metering policies.
• Slowed Clean Energy Transition: Decreased incentives for solar adoption may slow progress toward renewable energy goals and reduce grid resilience.
• Battery Adoption: Battery attachment rates tend to rise dramatically after net-metering cuts, as it makes it more necessary to store your own energy, or lose it. In California, battery attachment skyrocketed to 60% under NEM 3.0 (up from just 10%), while Hawaii now sees rates exceeding 90%.

Debunking the cost-shift myth

A central argument utilities make against net-metering is that it shifts costs onto non-solar customers. However, studies have found little to no evidence supporting this claim. In reality, distributed solar provides several benefits to all ratepayers and the grid:

• Creates a smoother demand curve for electricity, allowing utilities to better manage their peak electricity loads
• Reduces strain on the grid during peak demand periods
• Decreases the need for expensive transmission infrastructure upgrades
• Provides power generation closer to where it’s consumed, reducing losses in long-distance electricity transmission and distribution
• Contributes to grid reliability and resilience

If utilities were truly concerned about cost-shifting, they would apply this principle consistently across their operations. Instead, they selectively target solar while ignoring significant cost shifts inherent in their standard business model.

The real cost shifts in utility models

Infrastructure for Large Industrial Customers: Residential ratepayers typically subsidize the cost of grid expansions and power plants built to serve industrial customers, yet utilities never cite this as an unfair cost shift.

Rural vs. Urban Subsidies: Rural customers require substantially more infrastructure investment per capita, but urban customers pay the same rates, effectively subsidizing rural service.

High vs. Low Energy Users: All residential customers pay the same base rate regardless of consumption levels, meaning lower-income households with less energy usage often subsidize wealthier, higher-consuming households.

Fighting for fair solar policies

Despite the concerning trend in net-metering rollbacks, public advocacy has proven effective in protecting fair solar compensation. The most successful strategies include:

Coalition building | Organizations like SEIA, Sierra Club, Solar United Neighbors, and local environmental groups have experience in policy battles and can help rally support. By creating coalitions, solar advocates can develop cohesive messaging that effectively counters utility misinformation.

Public education and mobilization | Florida’s example shows that when ratepayers understand what’s at stake, they can effectively pressure lawmakers to protect solar rights. Successful campaigns focus on:

• Educating the public about the economic and environmental benefits of distributed solar
• Encouraging public testimony at regulatory hearings
• Mobilizing solar customers to contact their representatives
• Highlighting the job creation and economic development that solar brings to communities

Data-driven counterarguments | When utilities claim that solar shifts costs to other ratepayers, advocates can point to independent studies that show distributed generation actually provides net benefits to the grid. For example, research from Lawrence Berkeley National Laboratory found that concerns about cost shifting are generally overstated.

Adapting to the new reality

As net-metering compensation decreases, battery-backup systems become increasingly attractive. Batteries allow homeowners to store excess generation and use it when needed, reducing reliance on grid exports. This shift represents both a challenge and an opportunity:

• Economic viability: While fewer homeowners may choose to install solar without strong net-metering, those who do are more likely to invest in complete solar-plus-storage systems, increasing the value of each installation.
• Energy independence: Battery systems provide homeowners with greater energy security during outages, an increasingly valuable benefit as extreme weather events become more common.
• Tax incentives: The federal investment tax credit currently covers batteries installed with solar systems, making the economics more favorable.

Matt Powers is a master electrician, and the founder of Virtue Solar, a solar installation company in Charlottesville Virginia. Matt is a solar advocate and has been installing solar for over 10 years. Matt started working in solar in the industry in 2012, and formed Virtue Solar in 2015. He is passionate about sustainability, outdoors, climbing and his family.

Tags: net metering