If you’ve looked into solar power options in California lately, chances are you’ve come across NEM 3.0. You might’ve also heard that the program slashed the amount utilities pay for extra solar power, made batteries more important, or even made solar a bad deal altogether.
The truth isn’t quite so dramatic.
NEM 3.0 did change how new solar customers are credited for the electricity they send back to the grid. That means the way you use the power your panels produce matters more than it used to, and sending every extra kilowatt-hour back to your utility may not be as beneficial as it once was.
So, does solar power still make financial sense in California?
For plenty of homeowners, the answer is still a resounding yes. The math just looks a little different under NEM 3.0, especially once you factor in when you use electricity, how much power you send back to the grid, and whether you have a battery.
What is NEM 3.0?
NEM 3.0 is the common name for California’s current Net Billing Tariff, which changed how many homeowners with solar are credited for excess electricity they send to the grid.
It applies to most new solar customers of PG&E, Southern California Edison, and San Diego Gas & Electric who submitted their interconnection applications on or after April 15, 2023.
Under NEM 3.0, your solar panels still power your home first. And when they produce more electricity than you’re using, that extra power can flow back into the grid.
With the latest changes to the Net Billing Tariff, the utility credits those exports based on their estimated value to the electrical grid at that particular time rather than generally crediting them at the retail electricity rate.
That’s the change that gets most of the attention. The electricity your panels produce can still offset electricity you would otherwise buy from the utility, but excess power sent back to the grid is generally worth less than it was under NEM 2.0.
How NEM 3.0 Changes What Your Solar Energy Is Worth
The biggest difference under NEM 3.0 comes down to what happens to each kilowatt-hour your panels produce. Power that goes straight into your home and power that goes back to the grid are valued differently, so where your electricity goes matters quite a bit.
If your panels are producing electricity while you’re running the air conditioner, doing laundry, or charging an EV, that solar power serves your home first. Every kilowatt-hour you use directly is one you don’t have to buy from the utility.
Once your panels produce more than your home needs, the excess goes back to the grid. Under NEM 3.0, you get Energy Export Credits for that electricity based on its value to the grid at the time it’s exported.
Those values change throughout the day and by time of year, and they’re usually lower than the retail rate you pay for electricity. That’s a pretty big difference compared to NEM 2.0. Here’s a quick look at how the two compare:
| NEM 2.0 | NEM 3.0 | |
| Solar Used in Your Home | Offsets electricity you would otherwise buy | Offsets electricity you would otherwise buy |
| Excess Solar Sent to the Grid | Credited based on your applicable retail import rate | Credited based on CPUC Avoided Cost Calculator values |
| Export Credit Value | Tied to retail electricity rates | Changes by hour, month, and other timing factors |
| Battery Storage | Helpful, but less central to savings | Can help you use more of your own solar and take advantage of higher-value hours |
TL;DR: Under NEM 3.0, using the electricity your panels produce (or storing it) can be more valuable than immediately sending the excess back to the grid.
Why Battery Storage Matters More Under NEM 3.0
With the new changes in net billing, a battery starts to make a lot more sense. Your panels might be cranking out electricity at noon while you’re at work and can’t use much of it.
Under NEM 3.0, sending all that extra power straight to the grid usually won’t earn you as much as using it yourself.
A battery lets you hang onto that excess energy you produced in the afternoon, so you can use it later, when the AC is still running, dinner is cooking, and the sun has gone down. You buy less electricity from the utility during those hours and get more out of the power your panels already produced.
A battery isn’t required, but if your household produces a lot of extra daytime solar, it can make the numbers much more interesting.
Can You Still Save Money With Solar Under NEM 3.0?
You sure can save money with solar under NEM 3.0. You just can’t count on sending a bunch of extra power to the grid to do as much of the heavy lifting.
Your savings depend on how much electricity your home uses, when you use it, how much your system produces, and how much of that solar you can use yourself. A battery can help here, but so can something as simple as doing laundry or charging your EV while your panels are producing.
Cost is worth factoring in, too.
A larger system or battery will cost more, so the goal shouldn’t necessarily be to squeeze as many panels onto the roof as possible. A system that fits your actual electricity needs can give you a much clearer picture of what solar could save you over time.
How to Get More Value From Solar Under NEM 3.0
NEM 3.0 puts a bigger premium on actually using the solar power you produce. Here’s what you can do to make the most of your solar system:
Use More Electricity While the Sun Is Out
If you have flexibility, daytime is a good time to run bigger electrical loads. Charging an EV, running the dishwasher, or doing a load of laundry while your panels are generating power means more of that electricity goes straight into your home instead of back to the grid.
Size Your System for the Way You Use Electricity
Bigger isn’t always better under NEM 3.0. That extra energy doesn’t work as hard for you when you send it back to the grid as it once did. Look at your current electric bills, roof, energy habits, and future plans (like an EV or heat pump) to figure out what size you’ll need.
Think About Where a Battery Fits In
If your home produces plenty of solar during the day but uses most of its electricity later, a battery may help close that gap. You can store more of what you produce and tap into it after solar production drops for the day.
What If You Already Have Solar Under NEM 1.0 or NEM 2.0?
If you already have a solar system that’s been grandfathered into NEM 1.0 or NEM 2.0, the arrival of NEM 3.0 didn’t automatically bump you onto the new rules. In these cases, you can usually keep your original NEM tariff for 20 years after the date your system was interconnected.
There is one catch to keep in mind if you’re thinking about adding more panels: Grandfathered systems generally get a one-time expansion of up to 1 kW or 10% of the original system size, whichever is greater.
Go beyond that allowance, and you could end up moving the entire system to NEM 3.0.
That makes it worth checking your current tariff, original system size, and Permission to Operate date before making changes. A few extra panels may sound simple, but you’ll want to know what they mean for the NEM terms you already have.
Frequently Asked Questions
NEM 3.0 gets a little more complicated once you start applying the rules to your own home. Here are a few answers that can help clear up the details.
Is solar still worth it in California under NEM 3.0?
Solar can still be worth it under NEM 3.0, especially if you use a good portion of the electricity your panels produce. Your electricity rates, energy use, system size, and battery setup will affect how much you can save.
Do I need a battery with NEM 3.0?
Nope. You can install solar without a battery under NEM 3.0. A battery can help you keep more of your excess daytime solar for use later instead of immediately sending it back to the grid.
How much does a solar battery cost in California?
A solar battery in California typically costs around $1,100 per kilowatt-hour. For an average battery size of 13.5 kilowatt-hours, that comes out to about $14,000. This can vary based on incentives, installation requirements, capacity, battery type and brand, and whether it’s installed with a new solar system or added later.
Does NEM 3.0 affect PG&E, SCE, and SDG&E customers?
Yep. California’s Net Billing Tariff applies to eligible new solar customers of Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric. Customers of municipal utilities may have different solar billing rules.
Are NEM 3.0 export rates always the same?
Nope. Export credit values can change based on the hour, month, and the other timing factors. That means the same amount of electricity sent to the grid can be worth more at some times than others.
Will adding solar panels make me lose NEM 2.0?
It can if you expand beyond the amount allowed under the grandfathering rules. NEM 1.0 and NEM 2.0 systems generally have a one-time expansion allowance of up to 1 kW or 10% of the original system size, whichever is greater. Check your existing agreement before adding panels so you know how the change could affect your tariff.
How long does NEM 2.0 grandfathering last?
NEM 2.0 customers are generally grandfathered under their original tariff for 20 years from the system’s original interconnection date. Once that period ends, the system will be subject to the applicable tariff rules in place at that time. So, if your system was installed in 2016 under NEM 2.0, that’ll expire in 2036.
See What Solar Could Save You Under NEM 3.0
NEM 3.0 might have changed the math on solar in California, but there’s no one-size-fits-all answer to what it means for your electric bill. Your energy use, roof, system size, and battery options will determine what you can actually save with solar.
We can take a look at how your household actually uses electricity and design a solar system around it. If you’re considering solar or adding battery storage, contact Fisher Electric to talk through your options and get an estimate for your home.
Sources & References
- California Energy & Electric – “NEM 2.0 Grandfathering in California”
Explains how NEM 2.0 grandfathering works for existing California solar customers, including the 20-year grandfathering period and rules for expanding an existing solar system.
https://cali-energy.com/blog/nem-2-grandfathering-california - California Public Utilities Commission – “Distributed Energy Resources Cost-Effectiveness”
Provides information on how California evaluates the costs and benefits of distributed energy resources, including the Avoided Cost Calculator used to determine the value of energy supplied to the grid.
https://webtraining.cpuc.ca.gov/industries-and-topics/electrical-energy/demand-side management/energy-efficiency/der-cost-effectiveness - EnergySage – “How Much Do Solar Batteries Cost in California?”
Provides current pricing information for home battery storage in California, including average installation costs and factors that can affect the final price.
https://www.energysage.com/local-data/energy-storage-cost/ca - Lawrence Berkeley National Laboratory – “One Year In: Tracking the Impacts of NEM 3.0”|
Examines how California’s NEM 3.0 policy has affected residential solar installations and battery adoption during its first year.
https://emp.lbl.gov/publications/one-year-tracking-impacts-nem-30
