NEM 3.0, Explained for California Homeowners

California changed how rooftop solar gets paid in April 2023, and the rules are now settled. The policy is officially the Net Billing Tariff, but almost everyone calls it NEM 3.0. If you are planning solar for your California home, this is the single most important policy to understand, because it shapes how your system should be designed.

This guide explains what changed, who NEM 3.0 applies to, and how to design a system that still pays for itself under the current rules.

What NEM 3.0 Changed

Under the older NEM 2.0 rules, when your panels sent extra power to the grid, your utility credited you at roughly the full retail rate, often around 30 to 40 cents per kilowatt-hour. That made solar-only systems pay back quickly.

NEM 3.0 ties export credits to avoided-cost values that change by hour and season. In practice, midday exports now earn roughly 5 to 8 cents per kilowatt-hour, a drop of about 75 percent. Power you use directly in your home still offsets the full retail rate, so the strategy shifts from exporting to self-consumption.

Who NEM 3.0 Applies To

NEM 3.0 applies to new solar customers of the three large investor-owned utilities: PG&E, SCE and SDG&E. If you are served by one of these, your new system falls under the Net Billing Tariff.

Customers of municipal utilities such as LADWP and SMUD are not on NEM 3.0. Those utilities run their own net metering programs, often with more favorable terms, so the right design depends on who delivers your power.

Why Battery Storage Became the Baseline

Because midday exports earn little and evening grid power costs the most, a battery is now the piece that makes the economics work. Your panels charge the battery during the day, and the battery powers your home through the expensive evening peak instead of buying that power back at premium rates.

Battery attachment rates in California climbed from around 11 percent before NEM 3.0 to more than half of new installations afterward. A well-sized solar-plus-battery system typically brings payback back into the range of solar under the old rules.

How to Design Around NEM 3.0

Three moves protect your return under the current rules. Size the system to your real usage rather than oversizing for export. Add storage so you self-consume more of what you produce. Shift heavy loads, like EV charging and pool pumps, into hours when your own solar or stored energy covers them.

• Size to roughly cover your annual usage, not to maximize exports.
• Pair solar with a right-sized battery to capture the evening peak.
• Move large loads into daylight or stored-energy hours.
• Confirm your utility, since LADWP and SMUD rules differ from the big three.