NEM 3.0 is the most significant US solar policy change in a decade. Here is what changed, how it hits the numbers, and who it affects least.
Direct answer
California's NEM 3.0 (Net Billing Tariff), effective April 2023, replaced full-retail export credit with time-of-use export rates averaging 3??¢/kWh during peak daytime hours ??roughly 75% lower than retail.
A solar-only system that formerly paid back in 6?? years now takes 10??4 years for export-heavy generation profiles under the new tariff.
Battery storage partially restores the economics by shifting captured daytime surplus to evening peak hours where TOU rates can reach 40??5¢/kWh.
Key takeaways
- California's NEM 3.0 (Net Billing Tariff), effective April 2023, replaced full-retail export credit with time-of-use export rates averaging 3??¢/kWh during peak daytime hours ??roughly 75% lower than retail.
- A solar-only system that formerly paid back in 6?? years now takes 10??4 years for export-heavy generation profiles under the new tariff.
- Battery storage partially restores the economics by shifting captured daytime surplus to evening peak hours where TOU rates can reach 40??5¢/kWh.
Evidence snapshot
This article was reviewed by Solar Payback Map Editorial against public solar payback sources and the Solar Payback Map editorial policy.
What NEM 3.0 actually changed
Under NEM 1.0 and 2.0, California homeowners received a credit equal to the full retail rate for every kilowatt-hour exported to the grid. Under NEM 3.0 ??formally the Net Billing Tariff (NBT) ??export credits are set by a separate schedule that averages roughly 3??¢/kWh during peak solar production hours (10am??pm), compared to retail rates of 25??5¢/kWh.
This matters because typical residential solar systems in California produce far more than a home can consume on a sunny afternoon. Under prior rules, that excess was valued at retail. Under NBT, the same excess generates a fraction of that.
How NEM 3.0 extends solar payback
A 10 kW system in Los Angeles that previously exported 40% of production and received retail credits for that export saw its effective electricity value per kWh drop significantly. Annual savings that were roughly $3,000 under NEM 2.0 are now closer to $1,800??2,200 for a solar-only system, depending on usage pattern.
| Annual savings (NEM 2.0) | ~$2,800??3,200 (10kW, export-heavy) |
|---|---|
| Annual savings (NEM 3.0, solar only) | ~$1,800??2,200 (same system) |
| Effective net metering factor | 0.55??.65 (vs 1.0 under NEM 2.0) |
| Payback range (NEM 2.0) | Approx. 6?? years |
| Payback range (NEM 3.0, solar only) | Approx. 9??4 years |
| Payback range (NEM 3.0, solar + battery) | Approx. 7??1 years (depends on TOU optimization) |
Who NEM 3.0 hurts most ??and least
The impact is highest for homeowners who work outside the home during the day, run no significant daytime loads (EV charging, pool pump, AC), and send most solar production to the grid. These households lose the most per kWh.
The impact is lowest for homeowners who work from home, charge an EV during the day, run high-consumption appliances in mid-morning, or pair solar with a battery that captures daytime surplus for evening use.
Why battery storage partially restores the California solar case
Battery storage reshapes the generation profile: instead of exporting surplus at low daytime rates, the battery charges during peak production and discharges during evening peak-rate hours (4pm??pm). In SDG&E and PG&E territories, evening TOU rates can reach 40??5¢/kWh ??substantially higher than retail average and far above the NBT export rate.
A 13 kWh battery system paired with 10 kW of solar can shift 8??2 kWh of evening consumption per day away from peak grid rates in warm months. That shifts the effective export credit factor back toward 0.80??.90 compared to 0.55??.65 for solar-only.
Grandfathering and new system rules
Customers who had systems approved before April 14, 2023 are on NEM 2.0 terms for 20 years. New applications after that date are under the Net Billing Tariff. Customers expanding a system by more than 10% also move to NBT terms.
LADWP (Los Angeles Department of Water and Power) is a municipal utility and not under CPUC jurisdiction. LADWP retained a modified net metering structure. If you are in LADWP territory, the NEM 3.0 analysis above does not apply ??verify your utility.
FAQ
- Does NEM 3.0 apply to all California homeowners?
- NEM 3.0 (Net Billing Tariff) applies to customers of the three investor-owned utilities: PG&E, SCE, and SDG&E. Municipal utilities like LADWP operate their own net metering programs and are not subject to the CPUC ruling.
- Should I still go solar in California under NEM 3.0?
- The answer depends on your electricity rate, self-consumption share, and whether you pair battery storage. California still has among the highest residential electricity rates in the country ($0.28??0.40+/kWh). High rates mean even reduced export value still produces meaningful savings. The case is weaker than under NEM 2.0 but not gone ??run the calculator with a net metering factor of 0.60.
- Is there a way to lock in NEM 2.0 rates?
- The NEM 2.0 grandfathering window closed in April 2023. New systems go on NBT. There is no current pathway to NEM 2.0 terms for new installations.
Next step
Sources and further reading
Editorial review
- Reviewed against public sources listed above, not installer lead-generation data.
- Written for homeowner decision quality, with conservative assumptions favored over sales optimism.
- Updated and checked for policy, rate, source, and quote-risk context.
Read the Solar Payback Map editorial policy and Solar Payback Map Editorial profile for source, correction, advertising, authorship, and review standards.
This article is general information, not financial, tax, legal, or engineering advice. Verify current incentives, utility tariffs, and quote-specific assumptions before relying on any estimate.