Net energy metering (NEM) is the practice of measuring the difference between the amount of electricity supplied by a utility to a customer and the excess amount of electricity produced by a customer’s generation system (RCW 80.60.010).
NEM enables customers with onsite generation to consume some of the electricity they produce and receive credits for excess electricity that they contribute to the electric grid. In traditional NEM, these credits can be applied to the next month’s bill to offset future electricity costs.
In Washington state, approved power generation systems include fuel cells, electric and thermal energy producers, and renewable energy generators (water, wind, solar, or biogas). System requirements:
- Generating capacities are less than or equal to 100 kW.
- Located on customers’ premises, operate alongside the electric utility systems.
- Connected to the grid.
- Offset some or all of the customer’s electricity needs.
Electric utilities are required to offer the retail rate NEM until either June 30, 2029, or until the total generating capacity of NEM systems connected to the utility reaches 4% of the utility’s 1996 peak demand, whichever comes first (RCW 80.60.020). Retail rate NEM means customers earn credits for the energy they send to the grid at the same rate they pay for the energy they use from the grid. Once utilities reach one of the thresholds established in statute, they can continue to offer retail rate NEM or propose an alternate tariff schedule.
Status of NEM in Washington
Washington State University maintains a net energy dashboard that tracks the status of each utility’s progress toward reaching its 4% of 1996 peak demand generating capacity NEM threshold. The dashboard also includes information on whether utilities that have reached the threshold have diverged from retail rate NEM.
While several utilities have reached the threshold, only a few have diverged from retail rate NEM. Commerce’s summary of these NEM successor tariffs shows that utilities have generally lowered the maximum allowable system size, reduced the value of exported electricity below retail rate, and discontinued the banking of kilowatt-hours.
Summary of E3 Report and Technical Advisory Group Report
In the fall of 2023, a number of Washington electric utilities and the Washington Public Utility Districts Association (WPUDA) hired the consulting firm E3 to evaluate the benefits and costs of NEM in the state. E3’s final report, published on Dec. 21, 2023, focuses on residential solar systems participating in retail rate NEM. The report found that NEM programs benefit participating solar customers through electric bill savings and provide non-monetary benefits, but NEM programs generally provide fewer benefits than costs for customers who are not NEM participants and for residents of Washington.
The study concluded that the compensation provided to solar customers through retail rate NEM in Washington is greater than the value that NEM generation systems provide to the electric system, creating a cost shift from participants to non-participants. Based on NEM utility data, E3 forecast a cost shift from residential NEM systems of $39 million per year by the end of 2024 that will increase over time.
Commerce and the group of utilities that started the E3 study established a Technical Advisory Group (TAG) to bring together stakeholders from various organizations. Commerce hired Gridworks to help the group develop a list of benefits of solar NEM, review the work of E3, and provide feedback on the study methods and results. The final TAG report, published on Dec. 22, 2023, reflected the range of opinions held by TAG participants on the E3 report. Members critiqued the study, noting that it did not include the full benefits of NEM, misused avoided cost calculations, and did not sufficiently determine impacts of NEM on low-income communities. Members also shared concerns that that the study contained inherent bias due to being funded by utilities and that the study and TAG processes were rushed.
What’s next?
In May 2024, the Washington State Legislature gave $500,000 to Commerce to hire the Washington State Academy of Sciences (WSAS) to study the value of distributed solar and battery storage. The study is currently in its first year, and an interim report (PDF) was published on June 30, 2025. The report included a plan and cost estimates for further work in the 2025-2027 period to develop policy recommendations.
In the 2025–2027 operating budget, the Legislature allocated $450,000 to Commerce for WSAS to finish the study and submit a final report by October 1, 2026. WSAS is tasked with making future rate recommendations for customer-generated solar energy. Visit the WSAS Value of Solar Project website for more information about WSAS and the study.