Published November 5, 2025 · Updated July 22, 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.
New since 2024: net billing for multi-meter properties
The program hasn't stood still. Per the CPUC, a virtual net billing tariff (VNBT) and an aggregation subtariff of the NBT became available for applications submitted after February 14, 2024 — extending net-billing arrangements to properties with multiple meters, such as multifamily buildings and farms. For a typical single-family home, though, the core 2026 design principle is unchanged: cover your daytime load, store the surplus, and spend it during the evening peak.
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.
If you applied for interconnection with SCE, SDG&E, or PG&E after April 15, 2023, you're on NEM 3.0 (the Net Billing Tariff). Municipal utilities like LADWP set their own net-metering and rate rules, which can differ substantially. We read your actual utility bill and design to whichever tariff serves your address.
In practical terms, yes. Under NEM 3.0, exported daytime solar earns a low credit while evening grid power is the most expensive you buy. A battery charges on your cheap midday solar and discharges during the 4–9 PM peak, so you stop buying power at the highest rates — that daily shift is where modern California solar savings come from.
The export credit. NEM 2.0 pays near-retail rates for solar you send to the grid; NEM 3.0 (the Net Billing Tariff) credits exports at the CPUC's avoided-cost values, which average roughly 75% less. NEM 2.0 systems are designed to export surplus; NEM 3.0 systems are designed to store it in a battery and use it during the 4-9 PM peak.
20 years from the system's original interconnection. The legacy status follows the system, so if you buy a home with grandfathered solar, the remaining years of the NEM 2.0 window transfer with it.
Yes, within limits: legacy customers can expand capacity by up to 10% of the original system size or 1 kW, whichever is greater, without losing grandfathered status. Expansions beyond that move the system to NEM 3.0, so it's worth a design conversation before you commit.
No. NEM 2.0 closed to new applicants — the cutoff was an interconnection application submitted to SCE, PG&E, or SDG&E by April 14, 2023. Homeowners who made that window keep their legacy terms for 20 years from the original interconnection, and expansions beyond 10% of the original system size or 1 kW (whichever is greater) move the system to NEM 3.0 — so it's worth a design conversation before expanding.
The CPUC adopted the Net Billing Tariff in December 2022 (Decision D.22-12-056), and it applies to interconnection applications submitted to SCE, PG&E, or SDG&E on or after April 15, 2023. The application date — not the installation date — determines which tariff you're on.
It can be, with the right design. The value now comes from self-consumption: sizing the system to your usage and pairing it with a battery so your daytime solar covers the expensive 4-9 PM evening window. Homes with larger bills, EVs, or SDG&E rates tend to see the strongest case. The math depends on your actual usage and tariff, so start from your bill, not an average.
Yes — through newer subtariffs. Per the CPUC, a virtual net billing tariff (VNBT) and an aggregation subtariff became available for applications submitted after February 14, 2024, extending net billing to multi-meter properties like multifamily buildings. Single-family homes stay on the standard Net Billing Tariff.
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
- 7.CPUC — Net Energy Metering Revisit (NEM 3.0 / Net Billing Tariff) — California Public Utilities Commission · accessed 2026-07
Incentives and rates change. This page is kept current — but always confirm specifics for your home.
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