Net Energy Metering (NEM) 3.0: What It Means for Homeowners in California

Net metering 3.0

Welcome to our comprehensive guide on Net Energy Metering 3.0 (NEM 3.0) and its implications for homeowners like yourself. If you’re considering making the switch to solar energy, understanding NEM 3.0 is essential. In this blog post, we’ll delve into the intricacies of NEM 3.0, shedding light on its key features, evolution, and how it stands apart from earlier versions. 

Understanding Net Metering 

Before we dive into the specifics of NEM 3.0, let’s take a moment to understand how net metering works. Net metering—and its newer counterpart, net billing—offers compensation to solar power producers for the surplus energy they contribute to the electricity grid. Here’s how it works: if your solar panels generate more electricity than your home consumes at any given moment, the excess power is fed back into the grid. In return, you receive credits on your next utility bill for the energy you export. This arrangement not only promotes the use of solar energy but also provides homeowners with an opportunity to save on their energy costs while contributing to a cleaner, more sustainable energy grid. 

How Net Metering Works 

Net metering operates on a simple premise: when your solar panels produce more electricity than your home consumes, the surplus energy flows back into the grid, essentially running your electricity meter in reverse. This means you’re credited for the excess electricity you generate, offsetting the costs of the electricity you consume from the grid during times when your solar panels aren’t producing enough power to meet your needs. It’s a symbiotic relationship between your solar installation and the grid, fostering a more balanced and sustainable energy ecosystem. 

Net metering has been a game-changer for solar power producers, providing a financial incentive to invest in renewable energy systems. Beyond the financial benefits, net metering also contributes to the stability and reliability of the grid by reducing strain during peak demand periods and promoting distributed energy generation. In California, net metering has been instrumental in driving the adoption of residential and commercial solar power, complementing other incentives such as solar financing, rebates, and tax credits. 

Evolution of California Net Energy Metering 

As a pioneer in renewable energy initiatives, California has continually refined its net metering policies over the years. From the inception of NEM 1.0 in 1996 to the advancements of NEM 2.0 in 2016, these policies have paved the way for the latest iteration, NEM 3.0 in April 2023, which offers enhanced benefits and flexibility for homeowners. 

Key Features of NEM 3.0 

Now that we’ve laid the groundwork, let’s explore some of the key features of NEM 3.0 that directly impact new solar customers: 

1. Switch to a net billing tariff: Under NEM 3.0, excess solar energy sent to the utility grid will be credited to the system owner’s electricity bills at a rate based on avoided costs, rather than on retail energy prices. This shift aims to provide fair compensation to solar energy producers while ensuring the stability and affordability of the grid. 

2. New time-of-use (TOU) rates: NEM 3.0 introduces a new electrification time-of-use (TOU) rate structure for customers importing electricity from the grid. This structure encourages homeowners to shift major power consumption habits, such as electric vehicle (EV) charging, to off-peak, low-demand hours. By aligning energy usage with times of lower demand, homeowners can optimize their energy costs and reduce strain on the grid during peak periods. 

3. Grandfathering NEM 1.0 and NEM 2.0 customers: If your solar energy system was installed in California before NEM 3.0 took effect in April 2023, you will remain enrolled in either NEM 1.0 or NEM 2.0 for the duration of your original net metering agreement. This provision ensures continuity and stability for existing solar customers while enabling them to reap the benefits of their initial net metering arrangements. 

These key features highlight the innovative approach of NEM 3.0 in balancing the interests of solar energy producers, utility companies, and the broader community. By embracing these features, new solar customers can navigate the evolving energy landscape with confidence and maximize the benefits of renewable energy adoption. 

How is NEM 3.0 different from NEM 1 and NEM 2 

As we delve into the nuances of NEM 3.0, it’s crucial to understand how it differs from its predecessors, NEM 1.0 and NEM 2.0. One significant departure lies in how utilities calculate the value of solar exports. 

In both NEM 1.0 and NEM 2.0, utilities credited solar exports based on retail electricity rates. However, NEM 3.0 introduces a paradigm shift: the value of bill credits for solar exports is now determined by the price that the utility would need to pay elsewhere to supply the electricity. This adjustment means that the value of exporting excess solar power to the grid is lower under NEM 3.0 compared to NEM 2.0. 

Under NEM 3.0’s net billing structure, California’s utilities employ an adopted avoided cost calculator (ACC) to determine the value of solar exports based on local energy demand. The exact dollar amount of credits varies significantly, as it is tied to the utilities’ avoided costs rather than retail prices. This variability is further compounded by factors such as the exact hours of solar exports, time of day, day of the week, season, and more. 

To facilitate the transition from NEM 2.0 to NEM 3.0 in California, residential customers of Pacific Gas and Electric (PG&E) or Southern California Edison (SCE) may be eligible for slightly higher solar export rates through the ACC Plus program. This program, available for the first five years of net billing (through April 2028), incorporates a small adder (less than $0.01 per kWh) to enhance the value of exports, with additional adders available for low-income customers. 

These differences underscore the evolving landscape of net energy metering in California and highlight the need for homeowners to stay informed about the intricacies of NEM 3.0 to make informed decisions about their solar investments. 

Incentives for Solar System with Battery Storage 

With the introduction of the new net billing tariff and electrification time-of-use (TOU) rate structure in NEM 3.0, there’s a heightened incentive for homeowners to consider installing solar battery storage systems. Here’s why: 

1. Minimize Costs: Incorporating a solar battery can significantly reduce your overall electricity expenses by allowing you to utilize stored energy during peak demand periods when utility import rates are higher. For instance, leveraging your solar battery to power essential appliances during the early evening can help you avoid peak utility electricity prices, particularly in TOU rate structures. Additionally, the alignment of solar energy production with peak export rates during the summer months can further enhance cost savings. 

2. Receive More Credits: Under NEM 3.0, you have the flexibility to strategically export excess solar power to the grid during periods of peak local energy demand, maximizing the value of your bill credits. By storing surplus energy in your battery during low-demand periods and releasing it when export rates are more favorable, you can optimize your solar investment and maximize financial returns. 

3. Increase Energy Resilience: Solar storage batteries not only help lower electricity bills but also enhance your property’s energy resilience. With backup capability, these batteries enable you to power your home independently of the grid during grid outages, ensuring continued access to solar-generated electricity when it’s needed most. 

For homeowners currently enrolled in NEM 1.0 or NEM 2.0 and exporting solar energy to the grid, incorporating battery storage will not impact your enrollment status. Despite potential reductions in the value of residential power exports under NEM 3.0 compared to previous net metering policies, going solar remains a financially and environmentally beneficial choice, offering increased access to renewable energy and greater control over energy expenses. 


In conclusion, Net Energy Metering 3.0 (NEM 3.0) represents a significant step forward in the realm of renewable energy policy, particularly for homeowners looking to embrace solar power. By understanding the workings of net metering and the evolution of California’s net metering policies, homeowners can make informed decisions about adopting solar energy and leveraging NEM 3.0 to their advantage. 

Whether you’re considering going solar for the first time or looking to upgrade your existing solar installation, NEM 3.0 offers opportunities to take control of your energy usage and make a positive impact on the environment. 

Ready to take the next step towards solar energy? Reach out to expert solar installers of your area to explore your options under NEM 3.0 and embark on your journey towards a cleaner, brighter future. 

Frequently Asked Questions (FAQs) About NEM 3.0

Let’s address some common queries you might have about NEM 3.0: 

Is NEM 3.0 retroactive? 

No, NEM 3.0 is not retroactive. It applies to new solar customers who install solar energy systems after the implementation date of NEM 3.0. Existing solar customers enrolled under NEM 1.0 or NEM 2.0 will remain under their respective net metering agreements. 

What are the eligibility criteria for NEM 3.0? 

To be eligible for NEM 3.0, homeowners must meet certain criteria, which typically include having a solar energy system installed on their property and being a customer of one of the California’s three largest electric utilities—Pacific Gas and Electric (PG&E), San Diego Gas and Electric (SDG&E), and Southern California Edison (SCE). Specific eligibility requirements may vary depending on the utility and jurisdiction, so it’s advisable to consult with your local utility or a qualified solar installer for detailed information. 

How does NEM 3.0 impact existing solar customers? 

Existing solar customers enrolled under NEM 1.0 or NEM 2.0 are generally unaffected by the introduction of NEM 3.0. They will continue to operate under their existing net metering agreements until the expiration of their contract terms. However, they may have the option to transition to NEM 3.0 if they wish to take advantage of its updated provisions and incentives. 

Can I install a battery and keep NEM 2.0? 

Yes, you can install a battery storage system while remaining enrolled in NEM 2.0. Adding battery storage to your solar energy system can provide additional benefits such as energy resilience and increased control over your energy usage. However, it’s essential to consult with your utility provider and understand any potential impacts on your net metering agreement before making any changes. 

Do NEM 3.0 bill credits roll over? 

Yes, under NEM 3.0, bill credits for excess solar generation typically roll over from month to month. Any unused credits accrued during a billing cycle will typically be carried forward to subsequent months, allowing you to offset future electricity charges. However, specific rollover policies may vary depending on the utility and jurisdiction, so it’s advisable to review the terms of your net metering agreement for clarification.