Grid & off-grid

Avoided cost rate calculator

Avoided cost is the utility's estimate of what your exported solar power saves it. Enter each individual cost component for a precise, itemized build-up.

Your numbers

1 Project details Optional
Shown on your exported report. Leave blank to skip.
2 Energy component
What the utility would otherwise pay to generate or purchase that energy elsewhere. Usually the largest component.
Solar exports concentrated at midday often coincide with lower wholesale energy prices.
3 Capacity and grid components
The value of not needing to build or maintain additional generating capacity.
Some utilities include a small credit for reduced grid infrastructure strain. Many exclude this entirely.
Distributed solar generated near where it's used avoids some line losses that centralized power plants incur.
A small number of jurisdictions add a separate environmental value credit on top of avoided cost.
4 Comparison
Used only to show how the avoided cost compares to what you pay.

How it works

Three steps to your result

Step 1

Gather the individual cost components

These typically come from your utility's rate case filings or interconnection tariff documents, often published by the state public utility commission. The state pages on the grid and off-grid hub show how each state credits exports, which tells you whether an avoided cost build-up applies to you at all.

Step 2

Enter each component separately, including time-of-day and line loss

The energy component is usually the largest, and can be adjusted for time-of-day value. Capacity, transmission and distribution, line loss, and environmental credits are smaller and sometimes excluded entirely by a given utility.

Step 3

Compare the total to your retail rate

The result shows the built-up avoided cost rate and what share of your retail rate it represents. Run the net billing vs net metering comparison tool next to see the dollar impact on your specific bill.

How avoided cost rates are built

The core components utilities typically use

Under the federal PURPA rules, avoided cost is the incremental cost a utility would otherwise bear to generate that power itself or buy it from another source, and state regulators set the actual figures for the utilities they oversee. In practice it is usually assembled from an energy component (the cost of the electricity itself), a capacity component (the value of not needing additional generating capacity), and sometimes a transmission and distribution component (the value of reduced strain on the grid). The energy component is almost always the largest of the three, and some utilities exclude the transmission and distribution piece entirely.

Why time-of-day pricing complicates the energy component

A flat average energy cost figure can overstate what solar exports are worth, since most rooftop solar production is concentrated in a narrow midday window. In grids where wholesale prices dip during that same window because of high overall solar output regionally, a time-weighted avoided cost calculation values those exports below the simple average, a gap that a battery sized for time-of-use arbitrage can narrow by holding midday output for the pricier evening hours. The buy all sell all vs net metering comparison tool shows a related structure where this same time-of-day dynamic can matter.

Smaller components: line loss and environmental credits

A handful of avoided cost methodologies also account for line losses, the share of electricity lost as heat on its way through the grid, which locally generated solar can help avoid. The U.S. Energy Information Administration estimates that transmission and distribution losses averaged about 5 percent of the electricity transmitted and distributed from 2018 through 2022, and the calculator's presets of 3, 5, and 8 percent bracket that figure. Some jurisdictions add a separate environmental or renewable energy value credit on top of the base avoided cost figure, though this remains uncommon nationally.

Where to find your utility's actual avoided cost rate

Your state's public utility commission website typically publishes approved avoided cost rates as part of a utility's rate case or net billing tariff filing. Your installer or interconnection agreement may also reference the specific figure your utility currently applies. The grid interconnection cost estimator covers related fees you might see referenced in that same paperwork.

What this means for your solar payback period

A lower avoided cost rate extends your payback period compared to full retail net metering, since exported electricity earns less credit. Sizing your system closer to your actual usage, so more of your production is self-consumed at full retail value rather than exported, is the most direct way to reduce the impact. Use the net billing vs net metering comparison tool to see that effect on your own numbers.

Questions

Frequently asked

Avoided cost is an estimate of what a utility would otherwise have to pay to generate or purchase electricity if your solar system weren't sending power back to the grid. It's typically well below the retail rate, since retail rates also fund transmission, distribution, and other fixed costs that avoided cost doesn't directly capture.

Retail rates bundle together the cost of generation, transmission, distribution, and various utility overhead and program costs. Avoided cost isolates only the generation-related savings, which is a portion of the full retail rate. How large a portion depends on the utility and the hour, and the calculator above shows that share for your own inputs.

Wholesale energy prices vary by hour, and solar production concentrates heavily around midday. In many grids, midday wholesale prices are lower than evening peak prices, meaning the time-weighted average value of solar exports can be meaningfully below a flat, unadjusted energy cost figure.

Some electricity is lost as heat between the power plant and your meter, and the share depends on the utility and how far the power travels. Solar generated and consumed locally avoids part of that loss, so a handful of avoided cost methodologies add a small credit reflecting that saving. The net billing vs net metering comparison tool shows what a resulting rate like this costs you in dollar terms.

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