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What is net energy metering or NEM?

Net Energy Metering (NEM) is a billing policy in California that allows homeowners with rooftop solar panels to earn electric bill credits for extra energy their system sends to the grid.

How net metering works

When your solar panels generate more electricity than your home uses – usually during the middle of the day – the excess energy is automatically sent to the electric grid. In return, your utility gives you credits on your bill, which are applied to offset your usage when you're required to draw energy from the grid – at night or on a cloud day.

For example:

  • Your solar system produces 100 kWh in a day
  • You use 50 kWh, and the extra 50 kWh is exported to the grid
  • You earn credits that offset your future energy use from the grid.

How has net metering changed?

In the past, California utilities credited customers with solar panels at or near the full retail rate for their exported electricity – up to $0.36/kWh in some cases. That changed in April 2023, when the state transitioned to the Net Billing Tariff or NEM 3.0. 

Today, new solar customers receive less compensation for their exported power. Rates now vary by time of day and are generally much lower, closer to $0.05 to $0.08/kWh on average.

How do Time-of-Use (TOU) rates affect your savings under NEM 3.0?

Under NEM 3.0, customers are placed on Time-of-Use (TOU) electricity rates, which means the cost of energy varies depending on the time of day. Here's how it works:

  • Electricity is most expensive during evening "peak" hours, when demand is highest (typically 4–9pm)
  • Solar exports are less valuable during midday, when solar production is high and grid demand is low

This means when you use or export electricity can significantly impact your savings – not just how much you use.

If you're home during the day – say you work remotely or run appliances while the sun is shining – you can shift more of your usage to times when your solar system is actively producing. This helps you avoid buying expensive electricity during the peak evening hours.

Even though NEM 3.0 lowers the value of exported solar energy, solar still offers meaningful savings, especially when paired with battery storage. A battery allows you to store excess solar energy during the day and use it later – like in the evening – so you draw less power from the grid when rates are at their highest.