Executive Summary
Solar remains economically viable in California under NEM 3.0, but the payback period has lengthened substantially from the NEM 2.0 era. Under NEM 3.0 the CPUC's Avoided Cost Calculator values exported power hour by hour, where NEM 2.0 credited exports at the retail rate, so payback now turns on how much of a system's output the home uses itself. We do not print a payback band until the utilities' published tariffs are in our rate snapshot. Battery storage improves the economics by capturing daytime excess for high-value peak consumption (4–9pm, when time-of-use grid rates are highest).
The share of new California residential solar systems installed with a battery rose from 14% in 2023 to 58% in 2024 and 74% in 2025 (Lawrence Berkeley National Laboratory; Table 4). This structural shift is effectively converting California's solar market from export-oriented to self-consumption-oriented. SDG&E publishes no single residential price: its standard TOU-DR1 schedule runs 37.4–69.1¢/kWh by season and time of day (total rates effective August 1, 2026), before a credit of up to 10.7¢/kWh on usage up to 1.3 times the baseline allowance — so every self-consumed kilowatt-hour there is worth several times a NEM 3.0 export credit.
How NEM 3.0 Export Credits Are Set by IOU Territory
Export credits under NEM 3.0 are set by the CPUC's Avoided Cost Calculator (ACC), which the CPUC updates every two years under the biennial process of D.19-05-019 (the current 2024 ACC follows D.24-08-007). The ACC uses time-varying marginal costs — credits are highest during peak demand hours when grid generation is most expensive and lowest during off-peak periods with surplus renewable generation. Data from CPUC NEM 3.0 proceedings and published ACC rate schedules.
| IOU Territory | NEM 3.0 export credit | NEM 2.0 (reference) |
|---|---|---|
| PG&E | Hourly ACC export value† | Retail rate¶ |
| SCE (Southern California Edison) | Hourly ACC export value† | Retail rate¶ |
| SDG&E (San Diego Gas & Electric) | Hourly ACC export value† | Retail rate¶ |
| † Under the Net Billing Tariff each utility credits exported energy at the Avoided Cost Calculator’s value for that hour, which varies by month, day type and hour. An earlier version printed off-peak, peak and super-off-peak cent ranges here with no CPUC or utility source; they are withdrawn until each utility’s published export-rate schedule is in our rate snapshot. Source: CPUC Decision D.22-12-056; 2024 ACC (D.24-08-007). ¶ NEM 2.0 credited exported energy at the customer’s retail rate (less non-bypassable charges), so its credit was the retail rate itself. An earlier version printed a ~28–30¢/kWh “average” here with no source; no NEM 2.0-era tariff is in our rate snapshot, so the figure is withdrawn. | ||
NEM 3.0 vs NEM 2.0 Economics Comparison
NEM 3.0 took effect April 15, 2023 per CPUC Decision D.22-12-056. Homeowners who interconnected before that date under NEM 2.0 are grandfathered for 20 years from their interconnection date. All new solar applications receive NEM 3.0 export rates.
| Metric | NEM 2.0 (pre-April 2023) | NEM 3.0 — No Battery | NEM 3.0 — With Battery |
|---|---|---|---|
| Export credit | Retail rate¶ | Hourly ACC value† | Mostly avoided (self-consumed) |
| Share of new residential systems with a battery | 11% (Q1 2023, PG&E and SCE; CEC) | 58% in 2024, 74% in 2025 (California; LBNL) | |
| Avg payback period | Not re-derived§ | Not re-derived§ | Not re-derived§ |
| 25-year net savings | Not re-derived§ | Not re-derived§ | Not re-derived§ |
| Self-consumption priority | Low (excess exported) | High | Very high |
| Key design strategy | Maximize production | Right-size for consumption | Right-size + peak shifting |
| ¶ NEM 2.0 credited exports at the retail rate (see the note under Table 1). † NEM 3.0 export credits are the ACC’s hourly values (see the note under Table 1). § The payback and 25-year savings figures an earlier version printed were computed from that same unsourced average rate; they are withdrawn with it (see Table 3) rather than re-estimated. | |||
Residential Electricity Rates by IOU Territory (2026)
What a self-consumed kilowatt-hour saves varies by IOU territory because residential electricity rates differ. SDG&E’s standard residential schedule, TOU-DR1, runs 37.4–69.1¢/kWh by season and time of day (total rates effective August 1, 2026, SDG&E tariff table), so there is no single SDG&E rate to price a payback at.
| IOU Territory | Residential rate (¢/kWh) | Rate source |
|---|---|---|
| SDG&E (San Diego) | 37.4–69.1¢ (TOU-DR1, August 1, 2026)‡ | SDG&E published tariff table |
| SCE (Los Angeles area) | Not sourced§ | Not yet in our rate snapshot |
| PG&E (Bay Area / Central Valley) | Not sourced§ | Not yet in our rate snapshot |
| ‡ SDG&E: the rate is Schedule TOU-DR1’s total electric rate, 37.43¢ (summer super off-peak) to 69.14¢/kWh (summer on-peak), bundled, effective August 1, 2026, before a credit of up to 10.7¢/kWh on usage up to 1.3 times the baseline allowance and a $0.79343/day base services charge (SDG&E, checked 2026-09-26). An earlier version of this table printed payback bands and 25-year savings for each territory from a modelled rate and production assumptions; they are withdrawn rather than estimated. § SCE and PG&E: an earlier version priced both at an unsourced ~28¢/kWh average and derived its payback bands and savings from it. Neither utility’s published residential tariff is in our rate snapshot yet, so the rate and every figure built on it are withdrawn rather than guessed. | ||
California Battery Attachment Since NEM 3.0
NEM 3.0 took effect April 15, 2023. Since then the share of new California residential solar systems installed with a battery has risen sharply. Data: Lawrence Berkeley National Laboratory, U.S. Distributed Solar and Storage (2025 and 2026 Data Updates) and the California Energy Commission (analysis of CPUC interconnection application data, August 2025).
| Period | Share with a battery | Source |
|---|---|---|
| Q1 2023 (PG&E and SCE, before NEM 3.0) | 11% | CEC (Aug 2025) |
| 2023 | 14% | LBNL 2025 Data Update |
| 2024 | 58% | LBNL 2026 Data Update |
| December 2024 (PG&E and SCE) | 80% | CEC (Aug 2025) |
| 2025 | 74% | LBNL 2026 Data Update |
| LBNL: share of new residential PV systems installed in California in the year that were paired with storage; it excludes batteries added to existing systems (LBNL first published 57% for 2024 and revised it to 58%). CEC: residential interconnection applications in PG&E and SCE territory. The installation-volume (MW) column, year-over-year changes and the 2025–2026 estimates an earlier version printed had no table source and are withdrawn. | ||
How to Maximize Solar ROI Under NEM 3.0
The NEM 3.0 paradigm shift requires a fundamentally different installation design philosophy compared to NEM 2.0:
- Right-size the system for self-consumption, not production. Oversizing under NEM 2.0 was free money — every extra kWh exported earned full retail credit. Under NEM 3.0, excess daytime export earns only the ACC's hourly export value, not the retail rate. Size for 80–90% of your annual consumption and plan to self-consume nearly all production.
- Add a battery. A 13.5 kWh battery (e.g., one Tesla Powerwall 3, or three 5.0 kWh Enphase IQ Battery 5P units at 15 kWh) charged from peak daytime production and discharged during the 4–9pm peak window avoids buying grid power at the peak retail rate instead of exporting that energy for the lower NEM 3.0 export credit. Note: the federal residential Section 25D credit (IRS) expired for homeowner-purchased systems installed after December 31, 2025, so a 2026 cash purchase no longer qualifies. Homeowners using a solar lease or PPA may still benefit indirectly, as installers/owners can claim the 30% commercial Section 48E credit (IRS) and often pass savings through as a lower rate, provided the system is placed in service by December 31, 2027 or construction began by July 4, 2026.
- Time heavy loads during solar hours. EV charging, dishwashers, and laundry running between 9am–3pm consume solar production at full retail rate rather than drawing from the grid at peak pricing.
- Compare quotes from NEM 3.0-certified installers. Installers who are still designing NEM 2.0-style oversized systems without battery are building economically suboptimal systems for their customers. Ask any installer to show you the expected self-consumption percentage and export volume under NEM 3.0 rates.
Frequently Asked Questions
What is the NEM 3.0 export credit rate in California?
NEM 3.0 export credits are set by the CPUC's Avoided Cost Calculator (ACC): each utility credits exported power at the ACC's value for that hour, which varies by IOU, month, day type and hour. We print no cents-per-kWh range until the utilities' published export-rate schedules are in our rate snapshot. Under NEM 2.0, exports were credited at the retail rate.
What percentage of California solar installations include battery storage under NEM 3.0?
Lawrence Berkeley National Laboratory counts 58% of new California residential solar systems paired with a battery in 2024 and 74% in 2025, up from 14% in 2023 (Table 4). In PG&E and SCE territory the California Energy Commission counted 11% in Q1 2023, before NEM 3.0 took effect. The rise follows NEM 3.0's lower export credits, which make self-consuming solar output worth more than exporting it.
Is solar worth it in California under NEM 3.0?
Yes — solar remains worthwhile, but the economics are different. Payback is longer than under NEM 2.0, and a battery shortens it by shifting daytime output to the evening peak; we do not print a payback band until the utilities' published tariffs are in our rate snapshot. California's high electricity rates mean self-consumed solar still delivers strong value (SDG&E's standard TOU-DR1 schedule, for example, runs 37.4 to 69.1 cents per kWh by season and time of day, effective August 1, 2026). The key shift: designing for self-consumption and peak shifting rather than grid export.
What is the NEM 3.0 export credit rate?
NEM 3.0 export credits vary by IOU, month, day type and hour: they are the hourly values of the CPUC's Avoided Cost Calculator, which the CPUC updates every two years. For comparison, NEM 2.0 credited all exports at the retail rate, regardless of time of day. The practical result: a NEM 3.0 system exporting mostly at mid-day off-peak hours earns far less credit than a NEM 2.0 system did for the same exports.
When did NEM 3.0 take effect?
NEM 3.0 took effect April 15, 2023 per CPUC Decision D.22-12-056 (December 2022). Homeowners who submitted a complete interconnection application and were approved before April 15, 2023 are grandfathered under NEM 2.0 rates for 20 years from their original interconnection date. All new applications after that date use NEM 3.0 Avoided Cost Calculator export rates.
Does a battery make solar worth it under NEM 3.0?
Yes, significantly. A 13.5 kWh battery capturing peak production and discharging at the 4–9pm peak window converts solar output that would earn the lower NEM 3.0 export credit into avoided grid electricity bought at the peak retail rate, the most valuable use of a stored kilowatt-hour. A battery adds to system cost (get it quoted separately); however, the federal residential Section 25D credit (IRS) expired for homeowner-purchased systems installed after December 31, 2025, so a 2026 cash purchase earns no federal credit. Homeowners who choose a solar lease or PPA may still benefit indirectly: installers/owners can claim the 30% commercial Section 48E credit (IRS) (for systems placed in service by December 31, 2027) and often pass savings through as a lower rate, provided eligibility requirements are met. State and utility incentives remain unaffected. This is general information, not tax advice.
I'm grandfathered on NEM 2.0 — what happens if I add battery or more panels?
Adding battery storage to an existing NEM 2.0 system typically does not change your NEM 2.0 tariff, per CPUC rules — the battery is treated as load management, not a new generator. However, adding additional solar panels beyond a 10% production increase may trigger a tariff re-evaluation. Confirm with your IOU and installer before making any modifications to a grandfathered NEM 2.0 system, as this is an active area of CPUC interpretation.
Related research & tools
Sources
- CPUC — Net Energy Metering Program and Decision D.22-12-056
- Lawrence Berkeley National Laboratory — U.S. Distributed Solar and Storage, 2025 and 2026 Data Updates
- California Energy Commission — Electricity Data
- California Energy Commission — Historical Behind-the-Meter Distributed Generation Insights (Aug 2025)
- CPUC — Decision D.24-08-007 (2024 Avoided Cost Calculator)
- DSIRE — California Solar Incentive Database