Originally published January 7, 2014. Updated August 12, 2026.
Net metering credits you on your power bill for the extra electricity your solar panels send back to the grid, and that math changed for good on April 15, 2023, when California swapped its version for a new formula called the Net Billing Tariff. Most states still offer some form of net metering or net billing, though the fine print changes by state and utility. Feed-in tariffs and solar leases run on different mechanics, and mixing either one up with net metering is an easy way to misjudge what your rooftop, or someone else’s, will pay you. Community solar adds a third set of rules, built for people who don’t have a roof to put panels on.
Net metering rules change by state, and some let you buy into a shared array
Most states have some form of net metering or net billing, but SEIA says the program rules vary by state and utility, which is the reason your neighbor’s deal in another state might not match yours at all.
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. That’s the option for renters and for homeowners whose own roof doesn’t get enough sun.
The number of houses with a reason to care about any of this grew fast. Wikipedia’s tally puts U.S. homes with rooftop solar at growing from about 30,000 in 2006 to 1.3 million by 2016. That growth continued after 2016, and Energy Collective’s look at solar’s growth picks up where this number 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 and often called NEM 3.0 even though the commission’s own name for it is the Net Billing Tariff. It took effect on April 15, 2023.
The old system, NEM 1.0 and 2.0, credited exported power near the full retail rate. The Net Billing Tariff pays exports at a grid avoided cost value instead, which usually runs lower than the retail rate, though it can climb above it during peak demand hours, which is the core of the fight over what a utility owes a rooftop solar owner for the power sent back. Customers on the new tariff need an electrification time-of-use rate plan, and they’re billed monthly instead of once a year. Those who enrolled when it started also keep nine years of bill protection.
If you want to see how pairing solar with storage works instead of exporting at the avoided cost rate, Energy Collective’s guide to home battery backup 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. Wikipedia’s summary of the mechanism describes a second meter that pays a fixed rate for every unit of power a system generates, whether the owner uses it on site or not, while net metering only nets metered import against export.
Germany ran the best-known version of this. According to Wikipedia’s account of the law, its Renewable Energy Sources Act took effect on April 1, 2000, building on a 1991 law, and guaranteed a fixed tariff for 20 years plus priority access to the grid. Starting in 2014, larger generators moved off the flat tariff and into direct marketing with a market premium added on top. The surcharge that had funded the program, the EEG-Umlage, came off consumer bills on July 1, 2022, with funding shifted to emissions-trading revenue and the federal budget.
A lease or a loan decides who owns the panels
Buying your solar system outright means you own the equipment, and you’re the one who can claim any tax credit tied to it. Financing that purchase with a solar loan works the same way for ownership purposes. You still hold title to the panels, and you’re paying for them over time instead of all at once.
A lease or a power purchase agreement works differently. A third party owns the panels, and you pay either a fixed monthly lease payment or a rate for the power the system produces, instead of paying for the hardware itself. That arrangement gets you solar power without paying the full cost of the system upfront.
Ownership is also what decides which tax credit applies. The homeowner credit belongs to whoever owns the panels, so a lease or power purchase agreement never qualified the homeowner for it in the first place. That split matters more now that the homeowner credit for purchased systems has an end date.
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, and there’s no version of it left for a purchased system installed after that date.
That deadline is about ownership. The financing method doesn’t change it. A cash purchase and a solar loan both count as owning the system, so both lose the credit for anything installed after that date. A lease or a power purchase agreement was never eligible for it, since the equipment belongs to someone else. Anyone weighing a purchase now is weighing it without the 30% credit that buyers had for the past several years.
What to check before you count on any of these numbers
Program rules are the moving part in all of this. SEIA’s own framing, that most states have some form of net metering or net billing but the details vary by state and utility, is also a warning that a state’s rules today aren’t guaranteed to be its rules next year, the way California’s weren’t. If your own state or utility ever redoes its export rate the way California did, that’s the number to check first, since most of the math in this piece runs through it. A program summary from last year, including this one, is only a starting point for that search. Your utility’s current tariff is the document with today’s number.
If you want to see whether any of this is worth it for your household, start with usage. The average U.S. household used 10,791 kWh of electricity in 2022, according to the EIA. Check that number against your own bill, then compare it to your utility’s current net metering or net billing tariff directly, since that’s the document that decides your credit, not any of the averages here.
