| Quick Answer: NEM 3.0 — officially the Net Billing Tariff — is California’s current solar compensation policy for PG&E, SCE and SDG&E customers. It cut the value of exported solar power by roughly 75%, from near-retail rates to about 5–8 cents per kilowatt-hour, while evening peak rates climbed to 35–62 cents. The result: solar-only systems stopped making financial sense for most new customers, and solar paired with battery storage became the standard California design. |
If you own solar panels in California — or are thinking about them — NEM 3.0 is the single policy that most shapes your economics. It is also chronically misexplained, buried under acronyms and outdated 2023 coverage. Here is the clear version: what changed, who it affects, what the numbers look like in 2026, and why it turned batteries from an accessory into the main event.
What Is NEM 3.0 and Who Does It Apply To?
The California Public Utilities Commission approved the Net Billing Tariff in December 2022, and it took effect in April 2023 for new solar customers of the state’s three big investor-owned utilities — PG&E, Southern California Edison and San Diego Gas & Electric. “NEM 3.0” is the industry nickname; net billing is the official name, and the distinction actually matters: under the old net energy metering, exports offset your usage near one-to-one, while under net billing, exports are purchased from you at a separately calculated — much lower — rate.
Customers who interconnected under NEM 1.0 or 2.0 are grandfathered on their original terms for a set period, which is why neighbors with identical roofs can have wildly different solar economics.
The Core Change: What Exported Solar Is Worth Now
Under the old rules, a kilowatt-hour exported to the grid earned close to the retail rate — around 30 cents. Under NEM 3.0, export compensation is based on the grid’s avoided cost, hour by hour, and averages roughly 5 to 8 cents per kilowatt-hour — about 75% less. Meanwhile, the power you import in the evening costs 35 to 62 cents at peak depending on your utility and season, with SDG&E’s summer peak at the top of that range.
That asymmetry is the whole story in two numbers: the utility buys your surplus at around 8 cents and sells power back to you at up to 62. A solar-only system manufactures its energy at noon, gives it away cheap, then buys expensive evening power — which is how solar-only paybacks stretched to 11–16 years and why the design logic flipped.
Why NEM 3.0 Made Batteries the Main Event
A battery breaks the bad trade. Instead of exporting midday generation for cents, you store it and spend it through the 4–9 PM peak — capturing the full retail value of your own power. That converts a weak solar-only investment into a solar-plus-storage system with paybacks typically in the 7–11 year range, plus backup power through outages and Public Safety Power Shutoffs. The market has voted: roughly 69% of new California solar customers now install a battery with their system.
This is also why the policy’s design is not an accident — the CPUC built the tariff to reward storing solar for the hours the grid actually needs it, aligning household incentives with a grid drowning in midday sun and starving at dusk.
What NEM 3.0 Means for Existing Solar Owners in 2026
If your panels went in under the old rules, your grandfathered terms are valuable — but many existing owners are discovering the retrofit case anyway, because panels do not store anything: production still stops at sunset and the expensive hours start right after. Adding a battery to an existing array is usually the cheapest energy upgrade available in California — the panels are paid for, the roof work is done — and AC-coupled batteries like the FranklinWH aPower retrofit onto most existing systems regardless of inverter brand or age. Your rate plan matters more than your roof, which is why any honest retrofit analysis starts with your bill.
NEM 3.0 Strategy for New Solar Buyers
New systems in PG&E, SCE or SDG&E territory should be designed around self-consumption plus storage from day one: solar sized to your usage, battery sized to your evening load, exports treated as a minor byproduct rather than the business model. Federal incentives changed in 2026 as well — the residential tax credit expired at the end of 2025 — so what remains available depends on your utility, and the current picture lives on Solari Storage’s incentives and rebates page. The one-line summary of the era: solar alone is no longer the complete answer in California; solar paired with batteries is.
How Export Credits Are Actually Calculated
Under net billing, exported energy is valued by the CPUC’s avoided-cost methodology — an estimate of what your exported kilowatt-hour actually saves the grid at that specific hour — rather than at the retail rate you pay. The values vary by month, by hour, and by weekday versus weekend, producing hundreds of distinct export prices across a year. Most of those hours land in the 5-to-8-cent range for the obvious reason: rooftop solar exports overwhelmingly at midday, precisely when the grid is awash in solar and values additional supply least. A small number of late-summer evening hours are worth far more — which only a battery, not panels, can actually deliver into.
New NEM 3.0 customers are also placed on time-of-use import rates, so the tariff shapes both directions of your meter: cheap exports at noon, expensive imports at dinner. Seen whole, the design is a consistent price signal — the grid pays little for what it has too much of and charges dearly for what it lacks — and a battery is simply the household appliance that lets you respond to that signal instead of being run over by it.
Frequently Asked Questions
Is NEM 3.0 the same as net metering?
No — it replaced net metering with net billing. Exports no longer offset your usage near-retail; they are purchased at a separately calculated avoided-cost rate averaging roughly 5–8 cents.
Does NEM 3.0 apply to municipal utilities like SMUD or LADWP?
The tariff covers PG&E, SCE and SDG&E. Municipal utilities set their own solar compensation rules — another reason the analysis is always utility-specific.
Am I grandfathered if I installed solar years ago?
Customers who interconnected under NEM 1.0 or 2.0 keep their original terms for a set period. Adding a battery to an existing system is a separate question from your tariff status and is checked as part of any retrofit design.
Can solar still pay for itself under NEM 3.0?
Paired with storage, yes — typical paybacks run 7–11 years for solar-plus-battery versus 11–16 for solar alone. The battery is what restores the economics.
Do I need a battery if I already have solar?
Under NEM 3.0, usually yes if you want the system to pay back — the value now lies in storing your own generation for the evening peak rather than selling it. If your usage pattern means a battery would not pay for itself, an honest specialist will say so.
Ready for a straight answer? Send Solari Storage a recent utility bill and find out exactly what a battery would do for your home — including if the numbers say don’t buy. Contact Solari Storage for a free assessment.
Key Takeaways
- NEM 3.0 (the Net Billing Tariff) cut export compensation roughly 75% — to about 5–8¢ — for new PG&E, SCE and SDG&E solar customers.
- Evening peak rates of 35–62¢ against 5–8¢ exports are the two numbers that define California solar economics in 2026.
- Batteries restore the math: store midday generation, spend it 4–9 PM — paybacks of roughly 7–11 years versus 11–16 solar-only.
- About 69% of new California solar customers now attach a battery; self-consumption-plus-storage is the standard design.
- Existing solar owners can usually retrofit an AC-coupled battery without touching their panels or inverter.
