NEM 3.0 Explained: What California Solar Homeowners Need to Know in 2026
NEM stands for Net Energy Metering, and it’s the policy that determines how much your utility company pays you for the extra solar energy you send back to the grid. For years, California’s original net metering program (NEM 1.0 and 2.0) gave homeowners a nearly dollar-for-dollar credit for every kilowatt-hour they exported. It was a fair deal. But in April 2023, the California Public Utilities Commission rolled out NEM 3.0—and the rules changed dramatically.
Whether you’re still on NEM 2.0 and wondering what’s coming, or you’ve already been switched to the new billing structure and are staring at a confusing true-up statement, this guide breaks down what’s actually happening—and what you can do about it.
What Is NEM 3.0 (and Why Should You Care)?
NEM 3.0—also called the Net Billing Tariff—is California’s updated policy for how solar homeowners are compensated for excess energy they send to the grid. Under the old rules, you’d get roughly retail-rate credits for your exported power. If you paid 30 cents per kWh to buy electricity, you’d get close to 30 cents back for every kWh you sent to the grid.
Under NEM 3.0, that’s no longer the case. Export credits are now based on what’s called “avoided cost”—essentially, the wholesale value of energy at the time you export it. In practice, that means you’re now getting somewhere between 5 and 8 cents per kWh for your exported solar, instead of 25 to 35 cents. That’s a roughly 75% reduction in the value of your excess energy.
The bottom line: sending solar power to the grid just isn’t worth what it used to be.
How NEM 3.0 Affects Your Solar Bill
Here’s where it gets real. If your solar system was designed to overproduce during the day and bank credits for the evening, NEM 3.0 significantly changes the math. You’re still generating plenty of clean energy—but the credits you earn during peak sun hours are now worth a fraction of what you’re charged when you pull power from the grid in the evening.
For example, under California’s Time-of-Use rate plans, you might pay 45 to 70 cents per kWh during evening peak hours. But the energy you exported at midday? That only earned you 5 to 8 cents. So even if your panels produce as much total energy as you consume, your bill can still be surprisingly high—because of the gap between what you earn exporting and what you pay importing.
This is why so many solar homeowners are asking, “Why is my electric bill so high with solar panels?” The answer isn’t that your panels stopped working—it’s that the rules changed underneath you.
NEM 2.0 vs. NEM 3.0: Key Differences
| Factor | NEM 2.0 | NEM 3.0 |
|---|---|---|
| Export credit value | ~25–35¢/kWh (near retail) | 5–8¢/kWh (avoided cost) |
| Solar-only payback period | 5–6 years | 9–13 years |
| Battery storage incentive | Moderate | Very strong |
| True-up bill impact | Lower annual balance | Higher than expected |
| Grandfathering | Protected for 20 years from PTO date | New enrollments only |
What You Can Do About It
The good news? You’re not stuck. There are real, practical steps you can take to get more out of your solar investment—even under NEM 3.0.
- Maximize Self-Consumption
The single most impactful change you can make is to use more of your solar energy while it’s being generated. Run your dishwasher, laundry, and pool pump during the day. Charge your EV when the sun is out. The less energy you export, the less you lose to the reduced NEM 3.0 credits. - Consider Battery Storage
A home battery lets you store midday solar production and use it during expensive evening peak hours. Under NEM 3.0, the economics of batteries improved significantly—instead of exporting at 5–8¢/kWh, you’re avoiding buying grid power at 45–70¢/kWh. Solar-plus-storage systems under NEM 3.0 typically achieve 7- to 8-year payback periods. - Review Your Rate Plan
Not all Time-of-Use plans are created equal. Depending on your utility (PG&E, SCE, or SDG&E), there may be a rate plan that better aligns with your solar production and usage patterns. The wrong rate plan can cost you hundreds of dollars a year. - Get an Independent Solar Analysis
Most solar companies designed your system to sell—not necessarily to maximize your long-term savings under changing policies. An independent analysis looks at your actual production data, your real energy usage patterns, and your specific rate plan to find where you’re losing money and how to fix it. That’s exactly what we do at PowerMy.
The Silver Lining: Solar Still Saves You Money
Despite all the changes, solar remains one of the best investments a California homeowner can make. Utility rates are climbing fast—SDG&E residential rates jumped 11.6% in January 2026 alone—and the long-term trend shows no sign of slowing down. Every kilowatt-hour your panels produce is a kilowatt-hour you don’t have to buy at increasingly expensive rates.
The key is optimizing your system for the new reality. The homeowners who are saving the most under NEM 3.0 are the ones who’ve adapted: shifting energy usage to daytime, adding battery storage, and making sure they’re on the right rate plan.
Ready to Find Out Where Your Solar Savings Are Going?
If your solar bill doesn’t add up, you’re not alone—and you don’t have to figure it out yourself. Our free solar analysis looks at your system’s actual performance and gives you a clear, unbiased picture of how to maximize your investment.
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