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NEM 3.0: What You Need to Know About California’s New Solar Net Billing Program

If you are a homeowner in California who is interested in installing solar panels on your roof, you may have heard of the term NEM 3.0. But what does it mean and how will it affect your solar savings?

NEM stands for Net Energy Metering, which is a policy that allows solar customers to receive credits for the excess electricity they generate and send back to the grid. NEM 3.0 is the latest version of this policy, which took effect on April 15, 2023, and applies to customers of the three major utilities in California: PG&E, SCE, and SDG&E.

NEM 3.0 is different from the previous versions of NEM in several ways. The most significant change is that it reduces the value of the credits you receive for your solar exports by about 75%. This means that you will get less money back from your utility for the extra solar energy you produce.

How does NEM 3.0 work?

Under NEM 3.0, the credits you receive for your solar exports are based on the avoided cost rates, which are calculated separately from your typical electricity rates. The avoided cost rates reflect the cost that the utility would have incurred to buy or generate the electricity that you exported to the grid.

The avoided cost rates vary depending on the time of day, season, and location. They are generally lower than the retail rates that you pay for electricity from the grid, especially during peak hours (4 to 9 p.m.), when the demand and prices are highest.

For example, if you pay 25 cents per kilowatt-hour (kWh) for electricity from the grid during peak hours, but the avoided cost rate for your solar exports is only 10 cents per kWh, you will only receive a credit of 10 cents per kWh for your excess solar energy.

In addition, under NEM 3.0, you will have to pay a one-time interconnection fee and a monthly non-bypassable charge (NBC) for each kWh of electricity you consume from the grid. The interconnection fee covers the cost of connecting your solar system to the grid, while the NBC covers the cost of public programs and services that benefit all utility customers.

The interconnection fee ranges from $75 to $150, depending on your system size and utility. The NBC ranges from 2 to 3 cents per kWh, depending on your utility and rate schedule.

How can you maximize your solar savings under NEM 3.0?

Even though NEM 3.0 reduces the value of your solar credits, going solar is still a smart investment in California. You can still save money on your electricity bills by following these tips:

  • Consume as much of your solar energy as possible in your home rather than exporting it to the grid. This way, you can avoid paying high rates for electricity from the grid and reduce your NBCs.

  • Avoid using electricity from the grid during peak hours (4 to 9 p.m.), when the rates are highest. You can shift some of your energy usage to off-peak hours (before 4 p.m. or after 9 p.m.), when the rates are lower.

  • Add a battery storage system to your solar installation, which can store your excess solar energy for later use or sell it back to the grid at a higher price. A battery can also provide backup power in case of a blackout or a public safety power shutoff (PSPS).

Why did California adopt NEM 3.0?

NEM 3.0 is part of California’s efforts to promote renewable energy and reduce greenhouse gas emissions. By going solar, you can not only save money on your electricity bills, but also contribute to a cleaner and greener future for yourself and your community.

However, NEM 3.0 also aims to address some of the concerns raised by the utilities and other stakeholders regarding the fairness and sustainability of the previous net metering policies.

According to the utilities, net metering customers do not pay their fair share of the costs of maintaining and operating the grid, which shifts the burden to non-solar customers who pay higher rates. They also claim that net metering overcompensates solar customers for their exports, which reduces their incentive to use energy efficiently and participate in demand response programs.

According to the California Public Utilities Commission (CPUC), which approved NEM 3.0, the new policy is designed to balance the interests of solar customers, non-solar customers, and the utilities, while ensuring that solar remains affordable and accessible to all Californians.

The CPUC also stated that NEM 3.0 will help achieve the state’s goals of reaching 100% clean energy by 2045 and reducing greenhouse gas emissions by 40% below 1990 levels by 2030.

How can you learn more about NEM 3.0 and your solar options?

If you want to learn more about NEM 3.0 and how it affects your solar options, visit our website at or contact us today for a free consultation and quote.

We are a trusted and experienced solar company that can help you design, install, and maintain a high-quality solar system that meets your needs and budget. We can also help you find the best financing options and incentives for your solar project.


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