CALIFORNIA POLICY · GUIDE 04
California NEM 3.0 Explained
NEM 3.0 changes the value of electricity sent to the grid. It makes timing, self-consumption, and storage more important than a simple annual kWh comparison.
NEM 3.0 changes the value of electricity sent to the grid. It makes timing, self-consumption, and storage more important than a simple annual kWh comparison.
What NEM 3.0 means
NEM 3.0 is the common name for California's Net Billing Tariff, called the Solar Billing Plan by the large investor-owned utilities. It generally applies to new PG&E, SCE, and SDG&E customers whose interconnection applications fall under the successor tariff.
Solar produced and used onsite first offsets electricity the home would otherwise buy. Excess electricity sent to the grid earns time-varying export credits based on grid value, usually below retail prices but potentially higher during limited high-value hours.
How it differs from NEM 2.0
NEM 2.0 generally credited exports at retail rates after certain charges. Under net billing, imported electricity is charged under the customer's time-of-use rate while exports receive separate hourly values. Credits can roll forward under tariff rules, and customers still pay applicable monthly charges.
This is not a ban on solar. It is a different economic framework that rewards matching production or stored energy with valuable household and grid hours.
Why self-consumption matters
Using solar while it is generated can avoid buying electricity at the applicable retail rate. Exporting that same kWh may earn a lower credit. A design should therefore model when the household uses power, not merely whether yearly production equals yearly consumption.
Practical strategies include daytime EV charging, running major appliances during solar hours, west-facing production where site conditions support it, and storing excess energy for evening use.
What a battery can and cannot do
A battery can charge from midday solar and discharge later, increasing self-consumption and potentially targeting higher-value periods. It can also provide backup power when configured with the required equipment.
It cannot guarantee savings. Added price, usable capacity, efficiency losses, warranty limits, reserve settings, and replacement risk must be compared with the bill value and resilience it provides.
How to review an NEM 3.0 proposal
Ask for hourly or interval-based modeling, the assumed utility rate, estimated direct solar use, battery charging and discharge, exports by time, remaining purchases, export-credit source, and annual changes. Request solar-only and solar-plus-storage scenarios.
Verify the current tariff with the utility or CPUC because rates, adders, and program details can change. Municipal utilities may follow different rules.
Frequently asked questions
Is NEM 3.0 the same everywhere in California?
No. The statewide investor-owned utilities use the Net Billing Tariff, while municipal and smaller utilities may have different programs.
Are all export credits low?
Values vary by hour and season. They are usually below retail rates, with some higher-value periods.
Do I need a battery under NEM 3.0?
No, but storage can improve energy timing and backup capability. Its added value must justify its cost.
Sources and methodology
This article is general educational information, not engineering, legal, tax, or financial advice. Policies, rates, products, and contracts change; verify current rules and a property-specific proposal before deciding.