This winter has brought some big news for the solar power industry in the United States. In December, a budget deal in Congress renewed solar tax credits for another five years, which also renewed the optimism of companies who install photovoltaic (PV) panels on roofs. But state policy is a whole other playing field—and in state after state, regulators are making decisions that could make or break the market for solar panels on homes.

At the state level, the big political football is the rate utility companies are required to pay residential customers for the surplus power that flows into the electric grid any time solar panels produce more juice than the house is using at that moment. Also in play is the “net metering” regime that determines how production is weighed against...

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