In short: NEM 3.0, officially California’s Net Billing Tariff, replaced the old net metering rules for new solar customers of the big utilities (PG&E, SCE and SDG&E) whose applications came in on or after April 15, 2023. It pays for exported solar at an “avoided cost” rate of roughly $0.05–$0.08 per kWh on average, about 75% less than the old near-retail credit. Solar is still worth it for many California homes because electricity prices are high, but the smart design now focuses on using your own power, and usually on adding a battery.
This article is general information. Rules, rates and utility programs change; confirm current terms with the California Public Utilities Commission (CPUC) and your utility before you decide.
California was the classic example of generous net metering, and NEM 3.0 changed the math for anyone going solar today. This guide explains what changed, who it affects, how much solar still saves and how to design a system that works under the new rules. For how net metering and export tariffs work in general, read Net Metering vs Export Tariffs first.
What is NEM 3.0?
NEM stands for Net Energy Metering. Under the earlier versions (NEM 1.0 and 2.0), the electricity you sent to the grid was credited at close to the retail price you paid to buy it. NEM 3.0, adopted by the CPUC in December 2022, changed that: exports are now credited at the avoided cost of energy from the state’s Avoided Cost Calculator, which varies by hour and season and is far lower during sunny midday hours when everyone’s panels are producing.
NEM 2.0 vs NEM 3.0: what changed
| NEM 2.0 (grandfathered) | NEM 3.0 (Net Billing Tariff) | |
|---|---|---|
| Applies to | Systems that received permission to operate before April 2023 | New interconnection applications on or after April 15, 2023 (PG&E, SCE, SDG&E) |
| Export credit | Near the retail rate (about $0.25–$0.30 per kWh, varying by plan) | Avoided-cost rate, averaging roughly $0.05–$0.08 per kWh, varying by hour and season |
| Billing | Annual true-up | Monthly billing |
| How long terms last | Typically about 20 years from interconnection | Export rates locked for 9 years from interconnection |
| Best design | Size panels to your annual usage; exports are valuable | Maximize self-consumption; batteries usually improve the economics |
Sources differ on exact averages (some describe reductions of 60–80% depending on utility and timing), so treat these as approximate.
How export rates work under NEM 3.0
Under the Net Billing Tariff, each kWh you export gets a rate that depends on when you export it:
- Midday (sunny hours): low values, because solar supply is abundant.
- Evening (roughly 4–9 pm on typical time-of-use plans): much higher values, because demand is high and solar isn’t producing.
- Summer versus winter: values are generally higher in summer peak periods.
- Adders: some customer groups, such as certain income-qualified households, may receive higher export values through additional adders.
That timing gap is why a battery matters: it lets you move your midday solar into the evening, when you’d otherwise pay high retail prices.
Who is affected?
- New solar customers of PG&E, SCE and SDG&E, with applications on or after April 15, 2023: on NEM 3.0.
- Existing NEM 2.0 customers: generally keep their terms for about 20 years from interconnection.
- Customers of municipal and smaller utilities (for example, LADWP or SMUD) follow their own rules, so check with your utility.
If you already have solar on NEM 2.0, be careful before changing the system. Adding capacity or making other changes can affect your grandfathered status, so confirm the rules with your utility before you expand. The same goes for what happens to your terms when a home is sold.
Is solar still worth it in California under NEM 3.0?
Often yes, but payback is longer than it used to be. California’s electricity prices are among the highest in the US, and every kWh you use from your own panels avoids buying power at those prices. Estimates vary by source and by utility:
| System type | Typical payback range reported |
|---|---|
| Solar under NEM 2.0 (for reference) | about 5–8 years |
| Solar only under NEM 3.0 | about 8–13 years (some estimates go higher) |
| Solar + battery under NEM 3.0 | about 7–10 years (some estimates are 10–12) |
These are broad ranges from industry sources, many of which have a commercial interest. Your result depends on your rate plan, usage pattern, roof, system price and whether you get any incentives. Since the federal credit no longer applies to systems bought after 2025, paybacks are longer than earlier articles suggested. See Federal Solar Tax Credit Changes and Is Solar Worth It Without the Federal Tax Credit?
Why batteries matter under NEM 3.0
Illustrative example only: suppose midday exports are worth about $0.06 per kWh and evening electricity costs about $0.40 per kWh.
- Without a battery, 10 kWh of surplus exported at midday earns about $0.60.
- With a battery (about 90% round-trip efficiency), you store that 10 kWh and use about 9 kWh in the evening, avoiding about $3.60 of purchases.
- The battery adds roughly $3.00 per day, or around $900 a year on 300 cycling days.
On a battery costing about $12,000 installed, that alone gives a simple payback of over 10 years, so a battery is not automatically a bargain. Some sources claim faster paybacks, but they often assume larger evening rates or more favorable conditions. The battery also adds backup power, which has value beyond the numbers. See Do You Need a Solar Battery?, Tesla Powerwall vs Enphase vs FranklinWH and Solar + Battery Cost After US Incentives.
How to design a system for NEM 3.0
- Size for self-consumption, not maximum export. Oversizing panels to send more power to the grid doesn’t pay as well as it used to.
- Consider a battery, sized to your evening usage rather than your whole day. See How Many Solar Panels Do I Need?
- Pick the right time-of-use plan. Your rate plan changes both what you pay and what your savings are. Ask installers to model your actual plan.
- Shift usage to sunny hours: run dishwashers, laundry, pool pumps and EV charging when your panels produce (or, with a battery, when it’s charged).
- Use orientation strategically. West-facing panels can align production with late-afternoon usage. See Best Roof Direction and Angle.
- Check incentives. California utilities and programs may offer battery rebates or other incentives, with changing availability. See Battery Storage Incentives by State and State Solar Incentives and Rebates Directory.
- Get itemized quotes with your own rate plan built in, not a generic savings estimate. See How to Compare Solar Quotes and Spot Red Flags.
What could change next?
One industry source reports that the CPUC is expected to review NEM 3.0 after April 2026, and litigation over the decision has continued in the courts. Any changes to export rates or program structure would take time to implement, and NEM 3.0 customers get a 9-year lock on their export rates at interconnection. Because this is an evolving area, check the CPUC website and your utility for updates before you sign.
Common mistakes
- Using old payback numbers from the NEM 2.0 era.
- Sizing the system to export as much as possible.
- Assuming a battery always pays for itself, without modeling your rate plan.
- Adding panels to a NEM 2.0 system without checking whether it affects your grandfathered terms.
- Believing a generic savings estimate that ignores your time-of-use plan.
- Assuming rules that apply to PG&E, SCE or SDG&E also apply to a municipal utility.
Next steps
- Identify your utility and current rate plan, and get 12 months of usage data (especially evening usage).
- Get quotes with and without a battery, each modeled on your actual plan.
- Compare paybacks and warranties: How to Calculate Your Solar Payback Period.
- Read our complete Solar Panels in California guide for costs and local details.
Where to next:
- 🇺🇸 Solar Panels in California: Complete Guide After NEM 3.0
- 🇬🇧 Smart Export Guarantee: Best Tariffs Compared
Frequently asked questions
What is NEM 3.0 in California?
NEM 3.0, officially the Net Billing Tariff, is the solar compensation program for new customers of PG&E, SCE and SDG&E with applications on or after April 15, 2023. It credits exported power at an avoided-cost rate that varies by hour and season, on average about 75% lower than the old near-retail credit.
Is solar still worth it in California under NEM 3.0?
For many homes, yes, thanks to high electricity prices, especially if you design for self-consumption and consider a battery. Payback is longer than under NEM 2.0, and results depend on your rate plan and usage.
Do I need a battery with NEM 3.0?
Not required, but it often improves the economics because it lets you use midday solar in the expensive evening hours. Whether it pays back depends on your rates, usage and battery cost, and it also provides backup power.
Are existing solar customers affected by NEM 3.0?
Generally no. Customers who were interconnected under NEM 2.0 before April 2023 keep their terms for about 20 years from interconnection. Check with your utility before making changes to your system.
How long are NEM 3.0 export rates locked in?
Nine years from interconnection, according to industry sources. After that, your export terms may follow whatever rules apply then.
Does NEM 3.0 apply to all California utilities?
It applies to the large investor-owned utilities (PG&E, SCE and SDG&E). Municipal and smaller utilities set their own net metering rules, so confirm with yours.