NEM 3.0 is the biggest change to California residential solar economics since the program began. Effective April 15, 2023, the CPUC restructured net metering to reduce the retail-rate subsidy for solar exports — from the $0.28–0.35/kWh retail rate under NEM 2.0 to an Avoided Cost Calculator rate averaging $0.05–0.08/kWh.
The impact: solar-only systems in California have longer payback periods. Solar+storage systems retain competitive economics. And every installer in California now needs to understand the difference between NEM 2.0 grandfathered customers and new NEM 3.0 customers — because the financial analysis is completely different.
NEM 3.0 Decision Date
The effective date is April 15, 2023 — the date interconnection applications must have been filed (not the PTO date) to qualify for NEM 2.0 grandfathering. A customer who applied in March 2023 but received PTO in September 2023 is on NEM 2.0. A customer who applied in May 2023 is on NEM 3.0 regardless of when they got PTO.
What Changed Under NEM 3.0
The Core Change: Export Compensation Rate
| Program | Export Rate | Export Compensation |
|---|---|---|
| NEM 2.0 (grandfathered) | Full retail TOU rate | $0.28–0.35/kWh peak |
| NEM 3.0 (new systems) | Avoided Cost Calculator (ACC) | $0.04–0.16/kWh (time-varying) |
The ACC rate varies by time of day, month, and utility territory. Summer afternoon rates are higher (grid is more constrained); overnight and winter rates are lowest.
NEM 3.0 Export Rates by Period (PG&E, Approximate 2026)
| Period | Month | Approximate ACC Export Rate |
|---|---|---|
| Peak (4–9 PM) | Summer (May–Oct) | $0.12–0.16/kWh |
| Peak (4–9 PM) | Winter (Nov–Apr) | $0.06–0.10/kWh |
| Off-peak | Summer | $0.04–0.08/kWh |
| Off-peak | Winter | $0.03–0.05/kWh |
| Super off-peak (overnight) | Year-round | $0.01–0.03/kWh |
Solar produces maximum power between 10 AM and 3 PM — during the off-peak period when ACC rates are lowest. The peak (4–9 PM) is when customers want power but solar is declining. This mismatch is the core economic problem NEM 3.0 creates for solar-only systems.
The Midday Surplus Problem
Under NEM 2.0, midday solar surplus exported at $0.30/kWh retail was economically equivalent to avoided consumption at the same rate. Under NEM 3.0, that midday surplus earns $0.05–0.06/kWh in export credits — but the customer still pays $0.22–0.28/kWh for evening grid power when solar isn’t producing. The self-consumption value is high; the export value is low. Battery storage bridges the gap.
NEM 2.0 Grandfathering Rules
Customers who were on NEM 2.0 before April 15, 2023 are protected:
| Feature | NEM 2.0 Grandfathered |
|---|---|
| Compensation rate | Full retail TOU rate |
| Duration | 20 years from PTO date |
| Storage additions | Allowed without losing NEM 2.0 status |
| System expansion | Adding modules triggers NEM 3.0 review |
| Transfer on home sale | NEM 2.0 status transfers with the property |
The 20-year grandfathering means some NEM 2.0 customers won’t transition to NEM 3.0 until 2043. For a new customer buying a home with a 2020 solar installation, the NEM 2.0 grandfathering is a meaningful asset — factor it into the home’s value analysis.
Solar Economics Under NEM 3.0: Solar-Only vs. Solar+Storage
Solar-Only Under NEM 3.0
Example: 7 kW system, Los Angeles, 9,100 kWh/year production
- Self-consumption: 60% (5,460 kWh) → saved at retail rate ~$0.24/kWh = $1,310/year
- Export: 40% (3,640 kWh) → ACC rate ~$0.06/kWh = $218/year
- Total annual savings: ~$1,528/year
- System cost (after 30% ITC): ~$16,800
- Payback: ~11 years
Solar+Storage Under NEM 3.0
Same system + 13.5 kWh battery (Powerwall equivalent)
- Self-consumption: 90%+ with battery shifting (8,190 kWh) → saved at retail rate ~$0.24/kWh = $1,966/year
- Export: 10% (910 kWh) → ACC rate ~$0.06/kWh = $55/year
- Battery discharge during 4–9 PM peak → savings at peak TOU rate ~$0.32/kWh
- Total annual savings: ~$2,200–2,600/year (depends on TOU optimization)
- System cost (after 30% ITC on solar+storage): ~$26,000–28,000
- Payback: ~10–12 years
California SGIP Reduces Storage Cost
The California Self-Generation Incentive Program (SGIP) provides $0.20–0.25/Wh in rebates for battery storage for general residential customers, and up to $0.85–1.00/Wh for equity/PSPS-qualifying customers. A 13.5 kWh Powerwall might receive $2,700–3,375 in SGIP rebate, reducing the effective system cost and improving payback by 1–2 years.
NEM 3.0 TOU Rate Plans
NEM 3.0 requires enrollment on a time-of-use rate plan. The rate plan selection significantly affects bill outcomes:
PG&E Rate Plans for Solar Customers
| Rate Plan | Peak Hours | Peak Rate |
|---|---|---|
| E-ELEC | 4–9 PM daily | $0.32–0.40/kWh summer peak |
| EV2-A | 7 PM–12 AM peak | Designed for EV + solar combo |
E-ELEC is the primary plan for most NEM 3.0 residential customers. Its summer peak (4–9 PM at up to $0.40/kWh) creates strong incentive to shift consumption out of peak and strong savings value for battery discharge during peak.
SCE Rate Plans for Solar Customers
| Rate Plan | Peak Hours | Notes |
|---|---|---|
| TOU-D-PRIME | 4–9 PM | Primary solar customer rate |
| TOU-D-4-9PM | 4–9 PM | Similar structure |
SDG&E Rate Plans
SDG&E has the highest electricity rates in California — $0.40–0.55/kWh peak as of 2026. Even with NEM 3.0 export compensation, the high retail rates provide strong bill savings for self-consumed solar.
Rule 21 Interconnection Under NEM 3.0
The Rule 21 interconnection process is unchanged under NEM 3.0. All grid-tied solar systems in PG&E, SCE, and SDG&E territory interconnect under Rule 21 regardless of which NEM tariff applies.
For NEM 3.0 systems:
- Same application process as NEM 2.0
- IEEE 1547-2018 smart inverter functions still required
- TOU rate enrollment handled by utility after PTO
For battery storage additions:
- AC-coupled storage: separate interconnection application typically not required
- DC-coupled storage: included in original interconnection application or amendment
- Grandfathered NEM 2.0 customers adding storage: no NEM 3.0 reclassification
Implications for Solar Proposals in California
Every California solar proposal for a new customer (post-April 2023) should:
- Use NEM 3.0 export rates — not NEM 2.0 rates, which no longer apply
- Model TOU rates — the specific utility and rate plan matter significantly
- Present solar-only and solar+storage scenarios — customers deserve both options
- Include SGIP rebate if customer qualifies — reduces storage cost substantially
- Show 10-year and 20-year returns — NEM 3.0 payback periods are longer; showing the 20-year NPV is important context
Model NEM 3.0 Economics Accurately
SurgePV incorporates NEM 3.0 Avoided Cost Calculator rates, SGIP rebates, and TOU optimization to generate California solar+storage proposals with accurate payback periods.
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Frequently Asked Questions
What is NEM 3.0?
NEM 3.0 is California’s current net metering tariff for new solar interconnections filed on or after April 15, 2023. It compensates solar exports at Avoided Cost Calculator rates averaging $0.05–0.08/kWh — about 75% below the retail-rate NEM 2.0 compensation that preceded it.
Are existing solar customers affected by NEM 3.0?
No. Customers who applied for interconnection before April 15, 2023 are grandfathered on NEM 2.0 terms for 20 years. They retain full retail-rate compensation. NEM 2.0 customers can add battery storage without losing their grandfathered status.
Does battery storage fix NEM 3.0’s economics?
Yes, substantially. Battery storage allows customers to store low-value midday solar export (at ACC rates of $0.05–0.06/kWh) and instead discharge during the evening peak (saving at retail rates of $0.30–0.40/kWh). Solar+storage payback periods under NEM 3.0 are typically 10–12 years — comparable to NEM 2.0 solar-only paybacks.
