Net Metering vs Avoided Cost: What Your Exported Solar Is Worth
The panels are the easy part. What your utility pays for the power you send back can change your payback by years — here is how the three credit systems work.
Your panels make more than you use — at noon
A typical home uses little power in the middle of the day and a lot in the morning and evening. A rooftop system does the opposite: it peaks at solar noon. So unless you have a battery, a large share of production — often 40% or more — flows out to the grid, and power flows back in after dark. What the utility pays you for the exported share is one of the biggest variables in solar economics, and it comes in three flavors.
The three export credit types
1. Net metering (retail-rate credit)
Exported kWh offset imported kWh one-for-one. An exported kWh is worth exactly what an imported one costs — the full retail rate. This is the most generous arrangement, and the one most older solar math assumes.
2. Avoided cost
The utility credits exports at its avoided cost: what that power is worth to the utility itself, usually a few cents per kWh. California's current export regime and municipal utilities like LADWP work this way. Your self-consumed power still saves the full retail rate; only the exported share takes the haircut.
3. Value of solar
A set rate per exported kWh, calculated by the utility or regulator to reflect solar's grid value — Austin Energy uses this model. It typically lands between avoided cost and the retail rate, and can change on a schedule.
Same system, three paybacks
Run our standard example — a 6 kW system, $12,180 net after the 30% credit, producing 9,900 kWh a year in a 17¢/kWh state — and assume the household directly uses 60% of production (5,940 kWh) and exports 40% (3,960 kWh):
| Export policy | Self-use savings | Export credit | Total / year | Payback |
|---|---|---|---|---|
| Net metering (17¢) | $1,009.80 | $673.20 | $1,683 | 7.2 yrs |
| Value of solar (8¢) | $1,009.80 | $316.80 | $1,327 | 9.2 yrs |
| Avoided cost (4¢) | $1,009.80 | $158.40 | $1,168 | 10.4 yrs |
Nothing about the hardware changed. The export rule alone moved payback by more than three years. Two lessons follow. First, when you compare quotes, compare the export assumption, not just the price — an installer quoting net-metering savings in an avoided-cost territory is flattering the numbers. Second, self-consumption is the hedge: every kWh you use directly is worth the full retail rate under every policy. Shifting loads to midday and sizing the system to your usage (not your roof) protects the math.
How to check your utility
Each SolarMath city page lists the local utility and its export credit type. Before signing a contract, confirm the current terms with the utility itself — several states are mid-transition between regimes — and make sure the installer's production and savings estimates use the credit rate you will actually get. Then run the payback calculator with your own bill for the full picture.
Export credit FAQ
What is net metering in simple terms?
Your meter effectively runs backwards. Power you export during the day offsets power you draw at night, kWh for kWh, so exported energy is worth the full retail rate you pay.
What is avoided cost?
The wholesale value of electricity to the utility — roughly what it would cost them to generate or buy that power themselves. It is typically a few cents per kWh, far below the retail rate.
Which states still have full net metering?
Policies change constantly and several states are mid-transition from retail-rate crediting to avoided-cost or value-of-solar schemes. Your city page lists your utility's current approach; confirm before signing, and get the credit terms in writing.
How do I protect myself if export credits drop?
Size the system to your own usage, use more power during the day (run the dishwasher, charge the EV at noon), and treat any export income as a bonus rather than the core of the payback math.