California NEM 3.0, explained

“NEM 3.0” is the rule that decides what your rooftop solar is worth when it sends power to the grid. It reshaped the payback math for every new PG&E, SCE and SDG&E solar customer — here’s what actually changed and what it means for a Northern California home.

What NEM 3.0 is

Net Energy Metering (NEM) is how a utility credits the solar energy your panels export. Under the old NEM 2.0, exports were credited at nearly the full retail rate — a kWh you sent out roughly cancelled a kWh you later pulled back. California’s NEM 3.0, officially the Net Billing Tariff (NBT), took effect on April 15, 2023 for the three big investor-owned utilities, including PG&E. It replaced retail-rate credits with much lower export credits based on the grid’s hourly ‘avoided cost.’

How your exports are valued now

Instead of one flat rate, NEM 3.0 pays a different amount for every hour of the year, using the California Public Utilities Commission’s Avoided Cost Calculator. In practice that means exports are worth only a few cents per kWh during sunny midday hours — when everyone’s panels are producing — but can be worth much more on summer evenings, when demand peaks after the sun drops. You still pay full retail (often $0.40+/kWh on peak) for power you draw from the grid. That gap between what you’re paid to export and what you pay to import is the whole reason the strategy changed.

Why a battery is now the key

Because midday exports are worth so little, sending your extra solar to the grid barely moves your bill. A home battery flips the math: it stores your cheap midday production and discharges it during the expensive 4–9 pm peak, so you avoid buying high-priced grid power and only export during the hours when exports actually pay. It also gives you backup during outages and PSPS events. Under NEM 3.0, a well-sized solar + battery system typically beats solar alone on lifetime savings.

Does solar still pay off?

Yes — just differently. Payback stretched from the NEM 2.0 era (often 5–7 years) to roughly 8–12 years for a well-designed NEM 3.0 system, and the systems that win are sized to self-consume rather than to over-produce and dump power to the grid. With PG&E rates rising most years, the value of every kWh you avoid buying keeps climbing. If you already have NEM 2.0, note that those systems are grandfathered for 20 years from their original interconnection.

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