The forty-year argument over what your extra power is worth

Net metering was written in 1983 for a handful of households and almost nobody noticed. Four decades later it is the single number that decides whether a rooftop solar system pays for itself, and states have spent the last ten years taking it apart.

It started as a rounding error

The problem net metering solved was mundane. A house with solar panels sometimes makes more power than it uses. In 1980 there was no good way to account for that. Utilities in Idaho began simply letting the meter spin backward, and Arizona utilities followed the next year. In 1983 Minnesota wrote the first state law requiring it.

The reasoning was practical rather than generous. Almost nobody had solar. Metering the exports separately would have cost more than the electricity was worth. Letting the disc run in reverse was the cheapest accounting anyone could devise for a problem that barely existed.

That simplicity is the reason the policy spread. It needed no new hardware, no rate case, no forecast. A homeowner could understand it in one sentence: the power you send out cancels the power you bring in.

Four decades of quiet expansion

State by state, legislatures copied the idea through the 1990s. The federal government gave it a push in 2005, though a gentler one than is often remembered: the Energy Policy Act required state regulators to consider adopting net metering rules. Not to adopt them. A nudge, and it worked — by early 2015, 44 states and the District of Columbia had mandatory net metering rules for at least some utilities.

Through that whole stretch the arrangement held because the assumption underneath it held. Rooftop solar was rare and expensive. Whatever the policy cost other ratepayers, it was too small to see on anyone's bill.

Then solar got cheap

The cost of a residential system fell by roughly an order of magnitude between the late 2000s and the early 2020s. Adoption followed. And a subsidy that is invisible at one percent adoption becomes an argument at fifteen.

The argument runs like this. Your retail rate doesn't only pay for electricity — a large share of it pays for poles, wires, substations, storm crews, and billing. A solar household still uses all of that, especially at night, but net metering lets it avoid contributing. The shortfall gets recovered from everyone else, who are on average less wealthy than the people who can afford solar.

Solar advocates dispute the size of the effect and argue it ignores benefits — avoided generation, deferred grid upgrades, reduced peak strain. That disagreement has not been settled, and it is not going to be. What changed is that regulators stopped waiting for it to be settled.

The breaks

The first came in Nevada in December 2015, and it came hard. The Public Utilities Commission moved compensation from retail to wholesale rates — and applied it to customers who had already installed systems. The residential solar market in the state effectively collapsed; major installers left. The legislature restored near-retail compensation in 2017, but the episode taught the industry something it had not previously believed: these rules could change underneath you.

Hawaii closed net metering to new customers the same year, replacing it with grid-supply programs paying a fraction of retail. Arizona followed in 2016, swapping net metering for an export rate that steps down annually.

California, the largest market, moved in stages. NEM 2.0 in 2017 kept near-retail credit but pushed customers onto time-of-use rates. The real shift came in April 2023, when net billing — NEM 3.0 — replaced retail credit with roughly wholesale value for exported power. Existing customers kept their old terms for twenty years from interconnection.

What replaced it

No single thing, which is precisely the difficulty. The successors fall into a few shapes: net billing, where exports earn an hourly wholesale value; percentage-of-retail credit, where exports earn a fixed fraction; buy-all, sell-all, where every kilowatt-hour produced is sold at one rate and every kilowatt-hour used is bought at another; and in states with no mandate at all, whatever the utility decides.

The practical consequence is the same across all of them. Under retail net metering, only one thing mattered: how much your system produced over a year. Under everything that replaced it, two more things matter — when you produce relative to when you use, and whether you can store what you'd otherwise export.

It is still moving

This is not a story with an ending. In a single recent quarter, states took more than fifty separate regulatory actions on net metering, and 45 states plus DC and Puerto Rico acted on distributed solar policy at all. In 2026 alone, Maryland and Connecticut legislators ordered successor programs adopted, Virginia regulators ruled on Dominion's successor, an Arizona court vacated a utility's grid access charge, and Texas regulators approved a new residential distributed generation rate for one utility.

Some of that movement runs the other way — courts striking down charges, legislatures restoring credit. The direction is not uniformly downward. What is consistent is the churn.

What this means if you are signing something

Three things follow from the history.

• A savings projection is only as good as its vintage. Proposals built on retail-credit assumptions are still circulating in states that abandoned retail credit years ago. If a quote implies your meter runs backward and you don't live in a state where it does, the number on page one is wrong.
• Interconnection timing is worth money. In most states the rules lock in when your system connects, not when you sign. A delayed installation can land you on materially worse terms than you were quoted. Get the tariff named in writing.
• Grandfathering is a transferable asset. If a system was connected under older rules, that protection typically runs with the property for a fixed term. When buying a home with solar, the terms that system operates under may be far better — or worse — than a new system would get. It belongs in the price, and it is almost never in the listing.

The through-line of the last forty years is that the most important number in a solar contract is one the contract usually doesn't state. It was a safe omission when the answer was the same everywhere. It isn't anymore.