Key takeaways
- NEM 3.0, officially the Net Billing Tariff, cut export compensation by about 75 percent compared to the old NEM 2.0 rules, from roughly $0.30 to $0.35 per kWh down to around $0.08 per kWh.
- Power you use the instant your panels make it still offsets the full retail rate. Only exported power loses value, which is why self-consumption now drives most of your savings.
- A home battery typically lifts a solar-only savings estimate by 30 percent or more by shifting midday surplus into expensive evening hours instead of exporting it cheaply.
- NEM 3.0 only applies to customers of California’s three investor-owned utilities: PG&E, SCE, and SDG&E. Municipal utilities like LADWP are not on NEM 3.0.
- Systems that applied for interconnection before April 15, 2023 are grandfathered onto NEM 2.0 for 20 years from their permission-to-operate date.
If you priced solar in California a few years ago and are looking again now, the savings estimate probably reads differently. The panels cost about the same. Your roof is the same. Yet the projected monthly savings, the payback timeline, and the twenty-five-year total can all land lower than you expected. The reason is usually not the equipment or the installer. It is NEM 3.0, the net billing rules that changed how the grid pays you for the power your panels send back.
This guide walks through exactly what changed, why your estimate looks the way it does, and how to read it so the figure you see reflects what you will actually keep.
What NEM 3.0 Actually Is
NEM 3.0’s official name is the Net Billing Tariff. California’s Public Utilities Commission approved it under Decision D.22-12-056 on December 15, 2022, and it took effect on April 15, 2023, for the state’s three investor-owned utilities.
Who Falls Under NEM 3.0
| Interconnection Application | Billing Policy | Duration |
|---|---|---|
| Submitted before April 15, 2023 | Grandfathered onto NEM 2.0 | 20 years from permission-to-operate date |
| Submitted April 15, 2023 or later | Net Billing Tariff (NEM 3.0) | Current and ongoing |
One detail most guides skip: NEM 3.0 only applies to PG&E, SCE, and SDG&E customers. If you are served by a municipal utility such as LADWP or SMUD, NEM 3.0 does not apply to you directly, though those utilities often set their own, separately evolving solar billing terms.
What Changed From the Old Rules
Under the older net metering rules, exporting a kilowatt-hour to the grid earned you close to the full retail rate you would have paid to buy it. Send one unit out at midday, pull one unit back at night, and the two roughly cancel.
NEM 3.0 breaks that one-to-one deal. Exported power is now credited at the utility’s avoided-cost value, an estimate of what the grid saved by not producing that electricity itself. For most hours, that credit is a small fraction of the retail rate. The power you use inside the house, the instant your panels make it, still offsets the full retail rate. Power you push to the grid does not. That single split is the engine behind every change you see in a NEM 3.0 estimate.
Why Your Estimate Looks Smaller Under NEM 3.0
The most visible effect is that the headline savings number shrinks for the same size system. Take a household whose panels produce more than the home uses during the day, which describes most rooftop arrays. Under the old rules, the surplus was banked at retail value and erased evening usage almost dollar for dollar. Under net billing, that same surplus earns the low export credit, so the evening electricity you buy back is no longer covered by the daytime power you sold.
That gap flows straight into the rest of the estimate. Lower effective credit for exports means a smaller monthly bill reduction, which means a longer time to recoup the upfront cost. A system that once modeled a payback in the six to eight year range can move toward nine or eleven years on paper, so it is worth understanding how long your payback period stretches before the numbers surprise you.
Export Credit Value
This is the price the estimate assigns to every exported kilowatt-hour. Under net billing, it is not a flat number. It follows an hourly schedule that swings with the season and time of day, with the highest values landing on late summer evenings when the grid is stressed. A credible estimate models these varying credits rather than plugging in one blended rate.
Self-Consumption Share
This is the percentage of your solar production you use on-site instead of exporting. It is now one of the most powerful levers in the whole estimate. Move self-consumption from forty percent to seventy percent, and projected savings can jump substantially, because each of those newly self-used kilowatt-hours flips from the low export credit to the full retail offset.
Time-of-Use Timing
California residential solar sits on time-of-use rates, where electricity costs the most in the late afternoon and evening. Net billing makes that timing matter more, because the goal shifts from selling cheap daytime power to covering expensive evening power. See how time-of-use pricing reshapes a savings estimate on its own for the full mechanics.
NEM 2.0 vs NEM 3.0: Side-by-Side
| Factor | NEM 2.0 | NEM 3.0 (Net Billing Tariff) |
|---|---|---|
| Export compensation | Near full retail rate ($0.30 to $0.35/kWh) | Avoided-cost rate (around $0.08/kWh average) |
| Self-consumed power | Offsets retail rate | Still offsets full retail rate, unchanged |
| Battery value | Mostly backup power | Primary savings lever, 4 to 5 times more valuable than exporting |
| Typical payback (cash purchase) | Roughly 5 to 7 years | Roughly 7 to 11 years for solar-only, shorter with storage |
| Who qualifies today | Applications before April 15, 2023 only | All new interconnection applications |
How a Battery Rebuilds the Estimate
Because net billing pays little for exports and charges full price for evening electricity, the obvious fix is to stop exporting the surplus and store it instead. A home battery soaks up midday production and releases it after sunset, turning power that would have earned a few cents of export credit into power that offsets the full evening retail rate.
Why Storage Captures So Much More Value
- Avoiding a $0.30 to $0.35 per kWh retail purchase is worth far more than earning a $0.08 per kWh export credit for the same unit of energy.
- Raising self-consumption from roughly 40 percent to 70 percent or more is the single biggest lever a battery pulls in a NEM 3.0 estimate.
- For many California homes, pairing the system with a home battery is what restores the savings that NEM 2.0 used to hand out automatically.
This is the single biggest reason a NEM 3.0 estimate and a NEM 2.0 estimate for the same house can look so different. One assumes you can lean on the grid as a free battery, and the other assumes you cannot.
How to Read a NEM 3.0 Estimate Without Getting Fooled
Two estimates for the same roof can differ by thousands of dollars purely because of the assumptions behind them. A few checks tell you which one to trust, building on the general idea of knowing what a savings calculator’s numbers actually mean.
Check the Export Rate Assumption
Ask, or look, for the value the estimate places on exported power. If it is close to your full retail rate, the model is out of date, and the savings are inflated. A current estimate uses the utility’s avoided-cost export schedule, and the number will be noticeably lower, typically in the $0.06 to $0.10 per kWh range.
Check the Utility Rate Escalator
Estimates project decades forward and assume your utility rate keeps climbing. A modest, defensible escalator of 3 to 5 percent per year is reasonable. An escalator above 6 percent can make the twenty-five-year savings look enormous on assumptions that may not hold.
Check Whether a Battery Is Included
Because storage changes the outcome so much under net billing, always confirm whether the estimate includes one. Comparing a battery estimate against a panels-only estimate is not a fair fight, and it is an easy way to be misled about which offer is actually better.
Common Mistakes That Shrink or Inflate a NEM 3.0 Estimate
| Mistake | Effect on the Estimate |
|---|---|
| Using retail rates for exports instead of avoided-cost rates | Inflates projected savings by 200 to 300 percent |
| Oversizing the system beyond annual usage | Creates surplus credits that expire worthless at true-up |
| Ignoring panel degradation | Overstates long-term production and savings |
| Comparing a battery quote to a panels-only quote | Makes the panels-only quote look artificially cheaper |
How Rising Utility Rates Offset the NEM 3.0 Hit
It is easy to read all of this as bad news, but net billing did not land in a vacuum. California utility rates have been climbing well above the national pace, and every rate increase raises the value of the retail electricity your panels let you avoid buying. The lower export credit hurts, yet the rising cost of grid power pushes in the other direction, and for a home that self-consumes well, the second force can outweigh the first over time.
That is why the long-run picture in a NEM 3.0 estimate often looks stronger than the first year suggests. Seen across the full system life, rising utility rates keep pushing your ROI back up, even under the tighter net billing rules.
Getting an Estimate Built for NEM 3.0
The practical takeaway is that a solar savings estimate is only as good as the rules it models. An estimate that still assumes retail-rate exports belongs to a version of California that no longer exists, and it will promise savings you will not see.
At Axia Estimate, we build every projection on the current NEM 3.0 rules for your utility and your usage pattern, so the figure you see is the figure you can hold us to. That means modeling your self-consumption honestly, valuing exports at the real avoided-cost schedule, testing the estimate with and without a battery, and using a defensible rate escalator rather than a flattering one. If you want the full context behind the number, our guide to how much you can realistically save with solar in 2026 walks through where the savings come from once net billing is in the picture.
Putting Your NEM 3.0 Estimate in Perspective
NEM 3.0 did not end solar savings in California. It moved them. The value now lives in the power you use rather than the power you sell, which rewards right-sized systems, smart timing, and storage over simply covering a roof in panels.
Read your estimate with that lens, and the numbers make sense. If you are still weighing the bigger question, our post on whether solar is still worth it in California after NEM 3.0 tackles the decision directly. When you are ready to see a projection built on today’s rules, you can get your personalized solar savings estimate and plan from a number you can trust.
Frequently Asked Questions
Does NEM 3.0 mean solar is no longer worth it in California?
No. It means savings come from using your own solar power rather than selling the surplus to the grid. Systems sized to your usage, and especially systems paired with a battery, still deliver strong long-term savings, particularly as utility rates keep rising.
Why is my NEM 3.0 savings estimate lower than an older quote?
Because exported power now earns the utility’s avoided-cost credit instead of the full retail rate. Any surplus your panels send to the grid is worth far less than it was under the old net metering rules, which lowers the projected monthly savings for the same size system.
Do I need a battery to save money under NEM 3.0?
You do not strictly need one, but a battery makes a large difference. It stores your midday surplus and lets you use it during expensive evening hours instead of exporting it cheaply, which raises your self-consumption and shortens your payback under net billing.
How can I tell if a savings estimate uses the correct NEM 3.0 rules?
Check the value it assigns to exported electricity. If exports are credited near your full retail rate, the estimate is using outdated net metering assumptions. A correct net billing estimate values exports at the lower avoided-cost schedule and models your usage timing.
What is the difference between NEM 2.0 and NEM 3.0 for savings?
Under NEM 2.0, exported power earned close to retail value, so a savings estimate treated every kilowatt-hour equally. Under NEM 3.0, exports earn a much smaller credit while self-used power still offsets the full retail rate, so estimates now favor self-consumption and battery storage.
Does NEM 3.0 apply to LADWP customers?
No. NEM 3.0 only applies to customers of California’s three investor-owned utilities: PG&E, SCE, and SDG&E. LADWP and other municipal utilities are not subject to the Net Billing Tariff. However, their own solar billing terms can still change independently.
Will rising utility rates make up for the lower NEM 3.0 export credits?
Over time, they help considerably. Every California rate increase raises the value of the grid electricity your panels let you avoid buying. For a home that self-consumes well or uses a battery, that rising retail offset can outweigh the lower export credit over the system’s life.