NEM 3.0 Explained — What California Homeowners Need to Know

What Was NEM 2.0

Under the old NEM 2.0 system, when your solar panels produced more electricity than your home was using, the excess flowed out to the grid and your utility credited you at close to retail rates — typically around 30 cents per kilowatt hour.

At night, when your panels were not producing, you drew from the grid and those credits offset what you owed. In effect, the grid acted like a free battery: store excess production during the day, pull it back at full value at night. That made solar very financially attractive — particularly for systems sized to produce more than the home actually used during the day.

What Changed With NEM 3.0

In April 2023, the California Public Utilities Commission replaced NEM 2.0 with what is officially called the Net Billing Tariff — most people just call it NEM 3.0. The biggest change is that export credits dropped dramatically.

PG&E, SCE, and SDG&E customers now receive only about 5 to 8 cents per kilowatt hour for excess solar exported to the grid. The same kilowatt hour bought back from the grid still costs them 30+ cents. That is roughly a 75–80% reduction in the value of every kilowatt hour you export.

A California appellate court upheld NEM 3.0 in March 2026. This is now the permanent framework for new solar customers in the state — it is not going back.

How NEM 3.0 Changes the Solar Math

Under NEM 2.0, oversizing your solar array often made sense. Every extra kilowatt hour you sent to the grid earned you a near-retail credit, so building a bigger system to overproduce was a straightforward win.

Under NEM 3.0, that strategy actively backfires. Exporting power at 5 to 8 cents and buying it back at 30+ cents is a losing exchange. An oversized solar-only system designed for the old rules can leave a lot of value on the table under the new ones.

The new strategy is to size your solar system to match your actual usage and store excess midday production in a battery instead of exporting it. That stored energy then powers your home during expensive evening peak hours.

Why Batteries Changed Everything Under NEM 3.0

Under NEM 2.0, the grid acted as a free battery and paying for actual home storage rarely penciled out. Under NEM 3.0, a battery is financially essential for most California homeowners who want reasonable payback periods.

A battery stores midday solar production and discharges during PG&E peak hours from 4 PM to 9 PM, when grid electricity is at its most expensive. Instead of exporting that excess power for pennies and buying it back at premium rates, you simply use what you already produced.

For most California households, a typical setup of a 6 to 8 kW solar system paired with a roughly 13.5 kWh battery is the sweet spot. With a system designed this way, payback periods of 7 to 10 years remain realistic for many homes.

What About Homeowners Who Already Had NEM 2.0

If you installed solar before April 15, 2023, you are not affected by NEM 3.0. Existing NEM 2.0 customers were grandfathered and keep their NEM 2.0 rate structure for the full life of their system — typically 20 years from interconnection.

Even better: if you add battery storage to an existing NEM 2.0 system in most cases you can retain your NEM 2.0 status. That is one of the most valuable things existing California solar homeowners should know — especially if you’re considering adding storage for backup or to make your system more resilient.

The Bottom Line for Fresno and Madera Homeowners

NEM 3.0 made solar more complex and slightly less financially attractive for systems without batteries. There is no point pretending otherwise.

That said, with PG&E rates at 30 to 32 cents per kilowatt hour and rising, the economics of a well-designed solar-plus-battery system still make sense for many Central Valley homeowners. The key word is well-designed. A system sized for self-consumption with adequate battery storage performs very differently from an oversized solar-only system under the new rules.