Published November 5, 2025 · Updated July 14, 2026 · 8 min read
The short answer
NEM 3.0 (the Net Billing Tariff) cut what utilities pay for exported solar by about 75%. The result: instead of selling power back cheaply, you save by storing your daytime solar in a battery and using it during the expensive 4–9 PM peak.
By Vinnie Curcie, Founder & CEO
The simple version
Your power costs the most from about 4–9 PM — exactly when you're home using it. Under NEM 3.0, the rate the utility pays you for solar you export during the day is much lower than the rate it charges you at night. So exporting is no longer where the value is.
NEM 3.0 is officially called the Net Billing Tariff. The CPUC adopted it in December 2022 (Decision D.22-12-056), and it applies to anyone who submitted a solar interconnection application to SCE, PG&E, or SDG&E after April 15, 2023.
NEM 2.0 vs. NEM 3.0: what actually changed
One thing changed that matters: what exported solar is worth. Under NEM 2.0, a kilowatt-hour you sent to the grid earned close to the retail rate you pay. Under NEM 3.0, exports are credited at the CPUC's avoided-cost values — on average roughly 75% less.
| NEM 2.0 | NEM 3.0 (Net Billing) | |
|---|---|---|
| Who's on it | Interconnection applications through April 14, 2023 | Applications from April 15, 2023 onward |
| Export credit | Near-retail rate | Avoided-cost values — roughly 75% lower on average |
| Best strategy | Export surplus, net it against usage | Store surplus in a battery, use it during the 4–9 PM peak |
| Battery | Optional | The core of the savings math |
Am I on NEM 2.0 or NEM 3.0?
The date that decides it is when your interconnection application was submitted — not when your system was installed or turned on. Applications in by April 14, 2023 locked NEM 2.0; anything after is NEM 3.0.
NEM 1.0 and 2.0 customers are grandfathered for 20 years from their original interconnection, and that legacy status follows the system — if you buy a home with grandfathered solar, the remaining years of its NEM 2.0 window come with it.
One trap to know before expanding: legacy customers can add capacity up to 10% or 1 kW (whichever is greater) without losing grandfathered status — go beyond that and the system moves to NEM 3.0. If you're weighing an expansion, read our guide on adding panels to an existing system first.
What exports actually pay under NEM 3.0
Export credits follow the CPUC's avoided-cost calculator, which prices every hour of the year differently. Most hours are worth a few cents per kilowatt-hour — far below the 33–46¢ retail rates the big three charge — but late summer evenings, when the grid is strained, can briefly be worth several dollars.
That pricing shape is the whole design: the grid doesn't need more midday solar, it needs power in the evening. Which is exactly what a battery lets you deliver — to your own house first.
The fix: store it, don't sell it
A battery stores the cheap (free) solar your panels make during the day, then powers your home during the expensive evening peak. That's the whole strategy under NEM 3.0 — and it's why a battery is now part of almost every system we design.
The same 4–9 PM window that makes NEM 3.0 sting is also the most expensive power you buy. Covering it yourself attacks the bill from both sides. Our SCE peak-hours guide shows the exact windows by utility, and our battery storage page covers the hardware options.
It applies to PG&E, SCE, and SDG&E
If you applied for interconnection after April 15, 2023 with one of California's big three investor-owned utilities, you're on NEM 3.0 (the Net Billing Tariff). Municipal utilities have their own rules, which we navigate for you.
That includes LADWP in the City of Los Angeles and Anaheim Public Utilities in Orange County — both set their own solar tariffs, and neither is bound by the CPUC's decision.
Does solar still pencil under NEM 3.0?
Yes — but the design changed. A NEM 3.0 system is sized to what you use, not to maximize exports, and it pairs with storage so your midday production covers your evening peak. Self-consumption, not export credits, drives the return.
Whether that pencils for your house depends on your usage, your utility, and your roof — which is why we start from your actual bill, not a state average. Our is solar worth it in California guide walks the full math.
FAQ
NEM 3.0 — the Net Billing Tariff covering SCE, SDG&E, and PG&E interconnections after April 15, 2023 — cut what utilities pay for exported solar by roughly 75%. The savings now come from storing your daytime solar in a battery and using it during the expensive 4–9 PM peak instead of selling it back cheaply. It's why nearly every system we design includes storage.
Sources
- 1.CPUC — Net Energy Metering and Net Billing — California Public Utilities Commission · accessed 2026-07
- 2.CPUC — Net Billing Tariff (NEM Revisit, D.22-12-056) — California Public Utilities Commission · accessed 2026-07
- 3.IRS — Residential Clean Energy Credit (Section 25D) — Internal Revenue Service · accessed 2026-07
- 4.IRS — FAQs on Termination of Sections 25C, 25D and Other Energy Provisions Under the One Big Beautiful Bill (P.L. 119-21) — Internal Revenue Service · accessed 2026-07
- 5.SCE — Time-of-Use Residential Rate Plans — Southern California Edison · accessed 2026-07
- 6.PG&E — Solar Billing Plan — Pacific Gas and Electric Company · accessed 2026-07
Incentives and rates change. This page is kept current — but always confirm specifics for your home.
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