NEM 3.0: What It Is, How It Works & What It Means for Solar Owners
For years, California homeowners were told to think of the electric grid as a kind of shared battery. On a sunny afternoon, their panels would send extra power out, and bill credits would help cover the electricity they bought after dark. NEM 3.0 changed that bargain.
The panels still lower a home’s electric use, and exported power still earns credit. What changed is what that export is worth. A kilowatt-hour used in the house can avoid a retail purchase, while the same kilowatt-hour sent to the grid at noon may earn only a small credit. Its value depends on the hour, season, utility, and tariff year.
That makes timing much more important than it used to be. Homeowners now get the most from solar by using more of their production on-site, moving flexible loads into daylight hours, or storing excess energy for later. This guide explains the rules, the difference from NEM 2.0, and the questions worth asking before buying or expanding a California solar system.
What Is NEM 3.0?
NEM 3.0 is the common name for California’s current billing arrangement for many new customer-owned solar systems in the service territories of the state’s three large investor-owned utilities. The official name is the Net Billing Tariff. Instead of settling imports and exports at one matching price, the program measures them separately and assigns them different values.
NEM 3.0 Explained in Simple Terms
Picture a house producing 6 kilowatts of solar power at lunchtime while using 2 kilowatts. The first 2 kilowatts serve the house. That power never needs to be purchased from the utility, so it avoids the applicable retail charge. The remaining 4 kilowatts flow to the grid and earn an Energy Export Credit.
Later, when the sun is down, the house buys electricity from the grid at its retail time-of-use rate. Under NEM 2.0, daytime exports generally earned credits tied to the customer’s retail rate. Under NEM 3.0, exports receive time-dependent values based on the electricity’s estimated benefit to the grid.
The credits are sometimes described as “wholesale rates,” but that is only shorthand. They come from California’s avoided-cost framework, change by hour, and are usually low when the grid already has abundant solar power. The often-quoted 75% to 80% reduction describes the policy’s early average estimates, not every customer’s bill.
When Did NEM 3.0 Take Effect in California?
The California Public Utilities Commission adopted the new framework in December 2022. It took effect on April 15, 2023 for customers applying to interconnect eligible renewable generation systems in the territories of PG&E, SCE, and SDG&E.
The application date matters. Signing a sales contract before the deadline did not necessarily qualify a project for NEM 2.0; the required interconnection paperwork had to be submitted on time. Anyone buying a house with solar should ask for its permission-to-operate date and tariff records.
Who Does NEM 3.0 Apply To?
The Net Billing Tariff generally covers new eligible customer-generation systems in the service territories of California’s three major investor-owned utilities:
Customers served by a Community Choice Aggregator should review information from both the CCA and the investor-owned utility. Municipal providers such as the Sacramento Municipal Utility District (SMUD) and Los Angeles Department of Water and Power (LADWP) set their own solar compensation rules, so NEM 3.0 does not automatically apply to them.
Is NEM 3.0 the Same as California’s Net Billing Tariff?
Yes. “NEM 3.0” is the familiar industry nickname. The CPUC calls the program the Net Billing Tariff (NBT), and PG&E, SCE, and SDG&E commonly refer to it as the Solar Billing Plan.
The names are used interchangeably. “Net billing” is more precise because on-site solar offsets on-site use, while exported electricity receives a separate dollar credit.
How Does NEM 3.0 Work?
An NBT bill separates solar power used in the home, solar power exported to the grid, and electricity imported from the grid. Customers also use designated time-of-use plans: currently E-ELEC for PG&E, TOU-D-PRIME for SCE, and EV-TOU-5 for SDG&E. A contractor’s proposal should use the current plan for the home’s utility, not a generic California average.
How Solar Energy Is Used, Exported, and Credited
Solar production goes to household loads first. If the air conditioner, refrigerator, and other devices are using 3 kilowatts while the panels produce 5, the home uses 3 directly and exports 2. The meter records the energy moving in each direction.
Direct use usually creates the clearest savings because it prevents a retail purchase. Exported energy earns a dollar credit calculated under the NBT schedule. If the home needs more power than the panels or battery can provide, it imports the difference and pays the retail time-of-use rate.
NBT customers pay charges monthly, while eligible export credits can roll forward during the annual period. Fixed charges, non-bypassable charges, taxes, and other items may remain even when solar covers much of the home’s energy use.
How Are Solar Export Rates Calculated Under NEM 3.0?
Energy Export Credits are based on values from California’s Avoided Cost Calculator (ACC). In broad terms, the calculator estimates costs the grid avoids when a customer supplies electricity at a particular time. Those values reflect more than the energy itself; the methodology considers factors such as generation capacity, grid impacts, and environmental value.
There is no single permanent “NEM 3.0 rate.” Most midday values are lower than the retail import price because California already has abundant solar power then. Certain late-summer evening periods can be much more valuable and may occasionally exceed retail. Those limited windows are one reason batteries and well-configured controls matter more under the NBT.
Why the Time You Export Solar Power Matters
A rooftop array often reaches its strongest output near the same time thousands of neighboring systems do. Sending another kilowatt-hour to the grid then may not help the system nearly as much as delivering it during the evening ramp, when solar production is falling and demand remains high.
Understanding a Time-of-use rate helps explain why the value of importing, using, storing, or exporting electricity changes by hour.
That creates a scheduling problem. A solar-only home may export heavily at noon and buy electricity after sunset. Running the dishwasher, pool pump, water heating, or EV charging during solar hours can increase direct use. A battery can shift surplus production later, although the best schedule depends on the rate plan and household priorities.
How Does NEM 3.0 Affect Your Electricity Bill?
Solar still reduces utility purchases while it is producing. The difference becomes obvious when production and household demand do not line up. A lightly occupied home may send most of its midday generation to the grid, then import heavily during the evening peak. Under NBT pricing, the export credits may cover only a portion of those later charges.
A household with daytime air conditioning, a pool pump, remote workers, or an EV at home may absorb power that would otherwise receive a low export credit. Do not judge performance from total production alone. A smaller system that matches the home’s load can save more than a larger array that sends most of its output away at low-value hours.
NEM 3.0 vs. NEM 2.0: What Changed?
The central change is the treatment of exported electricity. Both tariffs allow solar production to serve on-site load, but NEM 2.0 generally credited exports according to the customer’s retail time-of-use rate. The NBT uses hourly avoided-cost values instead.
Feature | NEM 2.0 (Pre-April 2023) | NEM 3.0 / Net Billing (Current) |
Export Credit Value | Generally tied to the customer’s retail TOU rate | Hourly Energy Export Credits based on avoided-cost values |
Export Credit Reduction | Retail-style offset, subject to NEM rules and charges | Usually far below retail during solar-heavy midday hours |
Grid Independence Benefit | Helpful, but not essential to the billing model | More valuable because on-site use can avoid the import/export price gap |
Battery Storage Role | Often purchased mainly for backup or personal resilience | Useful for backup, self-consumption, and shifting energy to higher-value hours |
Mandatory Rate Plans | Eligible standard Time-of-Use rates | Specific electrification TOU rates designated for NBT customers |
Payback Period (Solar-Only) | Project-specific; often more favorable under retail-rate export credits | Project-specific and generally longer when much of the output is exported midday |
Payback Period (Solar + Battery) | Depends heavily on battery cost and backup value | May improve with load shifting, incentives, and good controls, but is not automatically shorter |
These are policy-level differences, not a project estimate. Price, shade, financing, household load, rate assumptions, incentives, and battery replacement can all change the result.
Lower Compensation for Solar Exports
Under NEM 2.0, a midday export could create a credit close to the retail time-of-use value for that interval, allowing the grid to function economically like a virtual battery. NBT breaks that near-parity. Midday exports often earn substantially less than electricity costs later, so annual production alone no longer predicts annual savings.
How NEM 3.0 Export Credits Differ From Retail Electricity Rates
Import and export prices now come from different schedules:
Grid Import Rate (What You Pay): The retail time-of-use rate for electricity delivered to the home. Prices commonly rise during the utility’s late-afternoon or evening peak period and vary by season, baseline treatment, utility, and rate plan.
Solar Export Rate (What You Get): The hourly Energy Export Credit assigned to electricity sent to the grid. It depends on the ACC schedule, application vintage, utility territory, day type, month, and hour.
Fixed statewide figures such as “you pay 50 cents and receive 5 cents” are illustrations, not tariff quotes. The real spread can be narrower, wider, or briefly reversed during a high-value export hour.
Metric | NEM 2.0 (Legacy Net Metering) | NEM 3.0 (Net Billing Tariff) |
Daytime Export Credit | Around $0.30 to $0.45/kWh (Near-Retail) | Around $0.05 to $0.08/kWh (Wholesale Avoided Cost) |
Evening Grid Purchase | Around $0.35 to $0.50/kWh | Around $0.45 to $0.65+/kWh |
Net Billing Spread | Balanced (Around 1:1 value swap) | Often a substantial gap between import prices and export credits |
Note: This table uses hypothetical rates to illustrate how export compensation can differ under NEM 2.0 and NEM 3.0. These figures are not current PG&E, SCE, or SDG&E tariff rates. Actual import rates and export credits vary by utility, rate plan, season, time of day, and applicable tariff schedule.
The practical lesson is straightforward: compare the value of using a kilowatt-hour now, storing it, and exporting it. The correct answer can change over the course of the same day.
Grandfathering Rules for Existing Solar Customers
Customers with qualifying NEM 1.0 or NEM 2.0 systems can generally remain on their legacy tariff for 20 years from the system’s original interconnection date. The clock does not restart when the house is sold. Expanding or substantially changing the approved system can affect that status, so obtain written utility guidance before adding panels or altering the interconnection.
NBT has a separate nine-year legacy period for the original customer who caused the system to be interconnected. Always identify the tariff and dates when discussing grandfathering.
Why Battery Storage Matters More Under NEM 3.0
A battery can capture solar that would otherwise leave the property during a low-credit hour. Later, it can serve the house during an expensive import period or, where tariff settings and interconnection rules allow, export during a more valuable window.
Reviewing how solar batteries for home store and release energy can clarify the tradeoffs among self-consumption, rate shifting, and outage reserve.
A battery does not create free electricity. Charging and discharging involve losses, and a large backup reserve leaves less energy for daily rate shifting. Price, warranty, controls, and replacement belong in the financial comparison. Outage protection can still be valuable even when bill savings alone do not justify the purchase.
What Does NEM 3.0 Mean for California Solar Owners?
NEM 3.0 did not end rooftop solar. It changed the strategy from export maximization to self-consumption and made some designs more attractive than others. Ask an installer to show the assumptions behind the savings estimate, including the utility rate, hourly usage when available, export schedule, battery settings, financing, and incentives. A model that treats every solar kilowatt-hour as a retail-rate offset is not modeling the NBT correctly.
Does NEM 3.0 Make Solar Less Valuable?
It generally makes exported midday energy less valuable than it was under NEM 2.0. That can lengthen the payback of a standalone, solar-only array, particularly for a home that is empty during the day and uses most of its electricity after sunset.
Solar used on-site still avoids a retail purchase. Homes with daytime demand, good roof exposure, sensible pricing, or plans to add EVs and electric appliances may still find it worthwhile. Others may be better served by a smaller array, efficiency work, storage, or no project. The honest answer comes from the address and the household’s interval data.
Households that also prioritize resilience can evaluate a home battery separately from projected tariff savings.
Why Self-Consumption Matters More Under NEM 3.0
Self-consumption simply means using more of your solar power at home instead of sending it straight to the grid. Some is used as soon as the panels produce it, while a battery can save the excess for later.
Each kilowatt-hour used directly avoids the retail charge that would otherwise apply. Stored energy should be evaluated against battery losses, reserve settings, and the rate it avoids when discharged. The goal is not necessarily 100% self-consumption; it is using the energy where it provides the most value.
Load shifting does not have to make life complicated. A dishwasher timer, scheduled EV charging, a pool-pump controller, or a modest pre-cooling routine may move meaningful consumption without requiring anyone to monitor the meter all day.
Should You Add a Battery Under NEM 3.0?
Maybe—but “NEM 3.0 requires a battery” is sales language, not a universal rule. Ask how much energy must be shifted daily, which circuits need backup, and what the installed price is after confirmed incentives. Check output as well as capacity; a battery may store enough energy for the night without being able to run every large appliance at once.
For homes that already have compatible rooftop solar, the EcoFlow TITAN 5000 Plus, when paired with a compatible 120V/240V EcoFlow Smart Home Panel 10, provides a way to keep more midday generation on-site instead of exporting it immediately at a potentially low credit. TITAN 5000 Plus supports up to 8kW of solar input and can work with compatible existing third-party rooftop solar through AC coupling. Stored energy can then supply selected household circuits after sunset, when solar production has fallen and retail electricity may cost more. Actual savings depend on the home’s interval usage, utility rate, battery settings, solar production, and installed system design. Because the Smart Home Panel 10 connects to household wiring, it must be installed by a qualified electrician in accordance with the equipment instructions and applicable local electrical codes.
Connecting Smart Home Panel 10 to household wiring or configuring AC coupling with an existing solar system requires compatible equipment and installation by a qualified electrician in accordance with local electrical and interconnection requirements.
How to Optimize Solar Use Under NEM 3.0
Begin with utility data, not the equipment catalog. A year of interval usage can reveal the daytime base load, evening peak, and seasonal swings. Those patterns help determine whether the best next step is load shifting, efficiency, solar, or storage.
When comparing solar panels, match expected production to the home’s daytime load, roof conditions, and export assumptions.
Practical adjustments include:
Schedule dishwashers, laundry, pool pumps, and other flexible loads for solar-producing hours.
Charge an EV during the day when the car is home instead of automatically waiting for an overnight window.
Pre-cool the house before the evening peak without pushing the thermostat so low that total consumption rises unnecessarily.
Use battery controls that reflect the current rate schedule, export values, outage reserve, and weather forecast.
Review performance after the first few bills. A default installer setting may favor backup reserve when the homeowner expected daily bill savings, or vice versa.
Storage should be sized around the home’s actual midday surplus and evening demand rather than a generic household average. EcoFlow TITAN 5000 starts with 5kWh of capacity and can accept up to 4kW of compatible solar input, allowing daytime solar energy to be stored for later household use. Additional battery capacity can be added if interval data shows that the home regularly produces more surplus solar than the initial system can store. Compare usable capacity, output, expansion options, controls, warranty, installation requirements, and compatibility with the planned solar configuration before choosing a system.
Check the proposal’s math. Ask for solar-only, solar-plus-battery, and no-project cases using the same rate assumptions. Separate the cash price from the financed cost, and confirm every claimed rebate, tax credit, or export adder before signing.
Conclusion
NEM 3.0 turned California solar into a timing problem. Solar used in the home can still avoid retail costs, while exports receive hourly values that are usually lower at midday and may be higher during limited grid-need periods.
The answer is not automatically “buy the largest battery.” Understand when the house uses electricity, verify the tariff, and compare direct use, storage, and exports using the same assumptions. Before committing, request the rate schedule, interval-based model, equipment details, interconnection plan, and warranty in writing. A well-matched system can still lower grid purchases and add backup capability, but its value comes from hourly operation—not simply the number of panels on the roof.
FAQs
Is NEM 3.0 Still in Effect in California?
Yes, NEM 3.0 remains in effect for eligible new customer-generation systems in the service territories of PG&E, SCE, and SDG&E. Municipal utilities may follow different solar compensation rules.
Does NEM 3.0 Affect Existing Solar Customers?
Generally, existing customers with qualifying NEM 1.0 or NEM 2.0 systems can remain on their legacy tariff for 20 years from the original interconnection date. However, the expiration of that period or certain system modifications may affect their eligibility.
Can You Still Sell Excess Solar Power Back to the Grid?
Yes. Surplus solar can still be exported, but Energy Export Credits are calculated from hourly avoided-cost values rather than a fixed retail-rate offset. The credit varies by utility, hour, season, day type, and tariff vintage.
How Much Does PG&E Pay for Solar Under NEM 3.0?
PG&E’s NEM 3.0 export credits vary by hour, season, and applicable tariff schedule. Midday export values can be relatively low; for illustration, a rate of $0.05 to $0.08/kWh would provide $0.05 to $0.08 in credits for each kilowatt-hour exported. Actual compensation should be checked against PG&E’s applicable Energy Export Credit schedule.
Is Solar Still Worth It Under NEM 3.0?
Solar can still be worthwhile under NEM 3.0, particularly for households that use more electricity during daylight hours or can store excess solar energy for later use. However, actual savings depend on installation costs, electricity rates, household consumption patterns, and export credits.
Is a Battery Worth It With NEM 3.0?
For many California homeowners, adding a battery is highly beneficial under NEM 3.0. By storing excess midday solar generation and discharging it during peak evening hours, a home battery can reduce grid imports during high-rate periods and potentially improve solar self-consumption and overall savings, depending on battery costs, usage patterns, and tariff settings.
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