The math on solar panels is getting harder.
President Trump ended the federal tax credit last year, but the story goes back much further. Over the past decade, more than a third of U.S. states have changed their rules to allow utilities to pay homeowners less for the energy they send to the grid.
In some places, those changes have reduced homeowners’ savings by hundreds or thousands of dollars each year, making solar energy a less attractive investment and dealing a blow to the industry.
All the changes arise from one simple fact: solar energy generates most of its energy in the half of the day, but houses use energy all day. Here is a hypothetical house in Arkansas:
What does the utility do with that? extra energy it makes a big difference.
Many utilities pay homeowners the same rate they charge for electricity, meaning the energy sent to the grid when the sun rises offsets the cost of energy drawn from the grid at night. That’s called net metering, a system in which the energy sent is worth typical American prices of between 10 and 30 cents per kilowatt-hour.
Under newer policies, often called net billing, utilities purchase the additional power at a lower rate, often 2 to 10 cents.
Arkansas moved from a net metering system to a net billing system in 2024, reducing the value of additional electricity from about 12 cents to closer to 3 cents. Homes with solar power were protected under the old system, but homeowners who add solar power will now receive less money for the additional electricity they send back. This is what our hypothetical house would look like in both scenarios:
Utilities have long waged a campaign to get rid of net metering, and over the past decade, many have succeeded. Since the mid-2010s, major utilities across the country have moved away from traditional net metering (most notably in California) and toward programs where additional solar energy is credited at lower rates.
Some states have passed laws ending net metering statewide; In others, regulators gave individual utilities permission to move to new programs. Some states and utilities kept net metering intact but added fees or changed their rules in other ways that reduce savings.
These changes are happening in very different places and do not clearly correspond to policy or how much sun and solar energy a state has:
Net metering policies began to appear in the 1980s, as a way to boost rooftop solar when installation costs were extremely high.
“Net metering was created in a different era,” said Leah Stokes, a professor at the University of California, Santa Barbara, who specializes in energy and environmental policy. “Legislators and utilities didn’t imagine it would get this big.”
In the early 2010s, utilities had a relatively small number of customers sending electricity to the grid. But as panels became cheaper, millions of homeowners installed them and signed up for net metering programs.
And as home solar grew, those programs became more expensive for utilities, which began asking their regulators to let them pay less for all that rooftop solar.
In their fight against net metering, utilities have long argued that they not only source and generate power, but also build and maintain the grid, costs that are included in the price of electricity. Solar-powered homes pay less for the grid, but still rely on the same poles and wires as everyone else.
That means, utilities say, that maintenance costs are shifted from homes with solar to those without. (Research on this is limited, but one analysis found that net metering added less than half a cent per kilowatt-hour to average electricity costs in most places in recent years, and up to 2 cents in places with more solar power like California.)
Utilities can also get power from other places at lower prices than they have to pay homeowners. In Vermont, for example, utility companies will soon pay 46 percent more for rooftop solar than for other solar energy sources, according to the state’s public utility commission.
But net metering incentivizes people to install panels, which can make a bigger difference in states with small home solar markets like Indiana and Louisiana. In these states, electricity is already relatively cheap, reducing the incentive to install solar, and both have ended net metering in recent years.
And more rooftop solar, solar advocates say, reduces the load on the grid, reducing costly upgrade costs for everyone. (It is especially useful in summer as it reduces peak demand during heat waves.) The energy is also easy to transmit from one neighbor to another and can quickly increase the supply of clean electricity.
For states ending net metering, how they do it matters.
California, which has more than a third of the nation’s residential rooftop solar, abruptly ended its net metering program in 2023 and replaced it with much lower recovery rates that vary by day and time. The solar industry reeled after the decision, but has begun to recover. (California electricity is so expensive that panels can quickly pay for themselves even after net metering ends.)
In Illinois, by contrast, lawmakers decided to allow homeowners to sell excess power for about half the retail rate, and the transition took place over more than three years.
“California got rid of traditional net metering and Illinois got rid of traditional net metering,” said Amy Heart, vice president of public policy at Sunrun, the nation’s largest residential solar and storage company. “Nothing was heard in Illinois because it was planned.”
The battery solution
Debates over solar power in Illinois, California, and other states have reflected the central (and growing) problem with solar power: Power generated in the middle of the day simply isn’t worth as much when there is an abundance of solar power on rooftops and large-scale solar farms.
Some days, California has so much power and low enough demand that it has to dump excess solar energy. Even in New England, the influx of rooftop solar has reduced demand on spring afternoons, only to have gas plants come online after sunset.
This is where batteries come in.
Illinois is one of several states that subsidize home batteries. Instead of selling their excess solar energy For little money, owners can store it on its battery for use around the home. at night, saving money. That helps reduce emissions and demand on the grid; In some places, homeowners can even be paid to discharge their batteries.
The battery and solar market is growing rapidly, according to data from the Lawrence Berkeley Lab. In Hawaii, where rooftop solar is popular and net metering no longer exists, the vast majority of new solar installations come with a battery. In California, the share of new solar installations that came with a battery skyrocketed after net metering ended.
Excluding California, the average rate in the United States rose more modestly, from 5 percent to 8 percent.
But like solar panels, installing batteries can be so expensive that homeowners may not recoup their costs. And the math has changed there, too: Last year, President Trump ended the federal subsidy for residential batteries.
