California's Net Energy Metering 3.0 (NEM 3.0) took effect April 15, 2023 for new solar customers under PG&E, SCE, and SDG&E. The new rules significantly reduced the export rate paid to homeowners for excess solar electricity sent to the grid — from near-retail rates under NEM 2.0 to avoided-cost rates under NEM 3.0 that are roughly 75% lower.
For many homeowners who were on the fence about solar, this raised a reasonable question: is solar still worth it in California?
What Changed Under NEM 3.0
Under NEM 2.0, homeowners received credit at or near retail rates (roughly $0.25–0.35/kWh) for excess solar exported to the grid. Under NEM 3.0, export rates are set at "avoided cost" — typically $0.04–0.08/kWh — a reduction of 65–80%.
This matters because most solar systems, especially on homes where occupants are away during peak solar hours, export significant electricity midday. Under NEM 2.0, that export was nearly as valuable as self-consumed electricity. Under NEM 3.0, it's worth much less.
The key shift: Under NEM 3.0, self-consumption of solar becomes far more valuable than export. The business case for solar now depends heavily on using your solar production directly — which makes battery storage a much more compelling addition.
Why Solar Is Still Worth It in California
Despite the export rate cut, solar remains one of the best home investments in California for several reasons:
- California has the highest electricity rates in the continental US. PG&E, SCE, and SDG&E customers regularly see rates of $0.30–0.55/kWh — meaning every kWh of solar you self-consume avoids a very expensive grid purchase.
- The federal 30% ITC still applies in full. On a $32,000 CA solar system, that's $9,600 back at tax time.
- SGIP battery rebate: California's Self-Generation Incentive Program (SGIP) provides rebates for battery storage — currently $150–300/kWh for residential storage in eligible territories. On a 13.5 kWh Powerwall, that's $2,025–$4,050 in additional rebates.
- TECH Clean California: Up to $3,000 in rebates for heat pump HVAC upgrades — relevant if you're also planning HVAC changes.
- Property tax exemption: CA Revenue & Taxation Code §73 exempts solar added value from property taxes.
- Wildfire outage resilience: PG&E, SCE, and SDG&E have all implemented Public Safety Power Shutoffs (PSPS) affecting hundreds of thousands of customers. Battery + solar provides independence during these events.
NEM 3.0 + Battery: The New Optimal Configuration
The CPUC designed NEM 3.0 with battery storage in mind. Under the new "Avoided Cost Calculator" rate structure, export rates are actually higher during peak demand periods (evenings, when solar production has stopped). This means a battery that stores midday solar and exports or discharges during peak evening hours can recapture significant value.
Under NEM 3.0 with a properly configured battery:
- Self-consume solar directly during the day (highest value)
- Store excess in battery
- Discharge battery during peak evening rates (up to $0.30–0.40/kWh avoided or exported)
- Draw from grid only at night during low-rate periods
What About Solar-Only Without Battery?
Solar without battery still works under NEM 3.0 for homeowners with high daytime consumption — remote workers, households with EVs charging during the day, pool pumps, or other daytime loads. If you self-consume 70%+ of your solar production, the economics remain solid.
How long is the payback period for solar in California under NEM 3.0?
With battery, payback periods of 7–12 years are typical for new CA solar installations under NEM 3.0. Without battery, payback extends to 9–14 years depending on utility and consumption pattern. 25-year savings still range from $35,000–$80,000+ depending on system size and utility rates.
What happens if I grandfathered into NEM 2.0?
Customers who received Permission to Operate (PTO) under NEM 2.0 remain on NEM 2.0 rates for 20 years from their interconnection date. If you're already on NEM 2.0, your economics are significantly better than new installations under NEM 3.0.
Ready to Get Free Quotes?
HomeRateMap connects you with licensed local contractors in minutes — no obligation, no pressure.
Get Free Quotes →