Originally published January 7, 2014. Updated September 28, 2026.
Net metering credits solar customers for the extra power their panels send back to the grid, and the math changed for good in California on April 15, 2023, when the state swapped its version for a new formula regulators call the Net Billing Tariff and the industry calls NEM 3.0. Most states still run some kind of net metering or net billing, though the rules differ by state and utility.
Feed-in tariffs and solar leases work on different mechanics than net metering, and mixing them up is an easy way to misjudge what your rooftop, or someone else’s, will earn. Community solar offers a third path, letting people without a usable roof buy into a shared array instead.
Net metering rules change by state, and some let you buy into a shared array
Net metering isn’t one national rule. Each state, and often each utility inside it, sets its own terms for how much credit you get and how long it lasts.
Some states also run a version called community solar or virtual net metering. It lets you subscribe to a share of a solar array you don’t host on your own roof and get credited on your bill for your portion of what it produces.
Say your own roof faces north or sits under a stand of trees. A community solar subscription can still get you a share of a sunnier array a few miles away, credited on your regular electric bill instead of a separate payment. That’s the option for renters too, and for anyone whose lease or homeowners association rules out panels on the roof.
Rooftop solar has grown fast across the US. By September 2026, SEIA put total US solar capacity at enough to power more than 50 million American homes. That figure counts capacity, the amount of power the fleet could produce, and it doesn’t tally how many homes carry panels on their own roof. Energy Collective’s look at solar’s growth picks up where the homes count leaves off.
California swapped net metering for the Net Billing Tariff
California’s shift happened through CPUC Decision D.22-12-056, adopted in 2022. It took effect on April 15, 2023.
Under the previous rules, NEM 1.0 and 2.0 credited exports near the full retail rate. NEM 3.0 pays exports at a grid avoided cost value instead, usually lower than the retail rate, though it can climb above retail during peak demand hours. That gap is the core of the fight over what a utility owes a rooftop solar owner for power sent back to the grid. If you’re comparing what a new California system would earn against an older one grandfathered into the previous rules, that gap between the avoided cost value and the retail rate is where the difference on your bill comes from.
The new tariff requires an electrification time-of-use rate plan and bills monthly instead of annually. Anyone who enrolled when it started also keeps nine years of bill protection.
If you want to see how pairing solar with storage works instead of exporting at the avoided cost rate, the page on home battery backup with solar covers the mechanics.
Feed-in tariffs use a second meter and pay a fixed rate for everything
A feed-in tariff works differently from net metering. Picture two meters bolted side by side on the wall. One tracks the power your house pulls from the grid, the same as always. The other counts what your panels push out and nothing else, whether or not your household used any of that power itself.
That second meter is what a feed-in tariff pays for. It pays a fixed rate for every kilowatt-hour a system generates, while net metering only credits power a system exports to the grid. If your own utility ran on this model, a sunny month would raise your payment even in a month your house used plenty of that power itself, since the two meters keep separate tallies.
Germany’s Renewable Energy Sources Act built on a feed-in tariff system the country introduced in 1990, guaranteeing a fixed tariff for 20 years plus priority grid access. Since the 2014 EEG reform, installations larger than 100 kilowatts have had to sell their power on the exchange instead, collecting only the market premium, the gap between the tariff and the wholesale price. The surcharge that had funded the program, the EEG-Umlage, came off consumer power bills on July 1, 2022, with funding shifted to the country’s energy and climate fund, paid for by emissions-trading revenue.
A lease or a loan decides who owns the panels
Buying your solar system outright, whether with cash or a solar loan, means you own the equipment and you’re the one who can claim any tax credit for it. A lease or a power purchase agreement works differently. A third party owns the panels, and you pay a fixed monthly lease payment or a rate for the power the system produces instead of paying for the hardware.
A lease payment is often lower than a loan payment, since you’re paying for power instead of equipment. A loan payment builds toward owning the system outright once it’s paid off, and a lease never does. Which one fits depends on how long you plan to stay in the house and how the monthly numbers compare for your own roof and rate plan.
Ownership decides which tax credit applies. The homeowner credit belongs to whoever owns the panels, so a lease or power purchase agreement was never eligible for it.
The tax credit for buying your own system already ended
If you bought your system instead of leasing it, the federal Residential Clean Energy Credit covered 30% of the qualified cost, including battery storage installed alongside the panels. That credit applied to systems installed anytime from 2022 through December 31, 2025.
There’s no version of the purchase credit left for a system installed after that date. That deadline follows the equipment’s owner. A cash purchase and a solar loan both count as owning the system, so both lose the 30% credit for anything installed from 2026 on, regardless of how the purchase was financed.
Leases and power purchase agreements sit on the other side of that line. EnergySage says a lease or PPA still qualifies for a tax credit, since the panels belong to the leasing company and the credit goes to that company instead of the homeowner.
Your utility’s tariff decides what your export credit is worth
Program rules are the part that moves. SEIA frames it as most states offering some form of net metering or net billing, while the details vary by state and utility. A program summary, including this one, is a starting point and never a guarantee. DSIRE tracks current net metering and billing rules by state as programs change, including any state that redoes its export rate the way California did in 2023.
Start with your own usage. The average U.S. household used 10,791 kWh of electricity in 2022, according to the EIA. Pull that figure up against your own bill, then set it next to what your utility’s own tariff pays for a kilowatt-hour sent back to the grid. That comparison shows what your own roof would earn.
