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What is the Net Billing Tariff or NEM 3.0?

The Net Billing Tariff or NEM 3.0 is California’s updated solar compensation policy. It went into effect on April 15, 2023 and replaced the previous NEM 2.0 program, significantly lowering how much new solar customers earn for exporting electricity to the grid.

What changed under NEM 3.0?
If your solar interconnection application was submitted after April 14, 2023, your system is covered by NEM 3.0. Under this policy:

  • Exported solar electricity is credited based on the avoided cost rate, not the retail rate
  • The average export rate is now about $0.05 to $0.08 per kWh, depending on the month and time of day
  • Compared to NEM 2.0, new customers could see $30,000 to $40,000 less value over the life of their system

Existing customers are grandfathered in
If your solar system was approved under NEM 1.0 or NEM 2.0, you’re grandfathered in under that policy for 20 years from your interconnection date. You’ll continue to receive the more favorable compensation rates the previous programs offered.

Why did California introduce NEM 3.0?
California leads the nation in residential solar adoption, but solar production happens during daylight hours – while demand peaks in the evening, after the sun goes down. That mismatch forces utilities to rely on fossil fuel-powered "peaker" plants  to meet peak demand.

Under NEM 3.0, the state hopes to:

  • Reduce grid stress during evening hours
  • Encourage homeowners to install batteries so energy generated during the day can be stored and used at night.
  • Support California’s goal of a cleaner, more reliable energy system.

How will adding a home battery system help me save money?
With lower export rates, battery storage is essential for homeowners under NEM 3.0. A battery allows you to:

  • Store excess solar power when it’s abundant
  • Use that power later, when electricity rates are most expensive
  • Avoid drawing power from the grid during peak times

While NEM 3.0 has changed the economics of solar in California, it still offers strong long-term savings, especially if you install both solar and battery backup.