NEM 3.0 Explained: What California Homeowners Need to Know

On April 15, 2023, California's Public Utilities Commission implemented NEM 3.0 — the third version of the state's net energy metering rules. For homeowners going solar, this is the most important policy change in a decade.

What Changed Under NEM 3.0

Under the old NEM 2.0 rules, excess solar energy you sent to the grid was credited at roughly the retail rate — about $0.30–0.40/kWh. Under NEM 3.0, that export rate dropped dramatically — to about $0.05–0.08/kWh during most hours.

In plain terms: the grid is no longer a good "battery." Sending electricity to SCE during the day and buying it back at night is now a losing trade.

Why Battery Storage Is Now Essential

Under NEM 2.0, you could install solar without a battery and still save significantly. Under NEM 3.0, the math changes:

• Solar produces most electricity between 10 AM and 3 PM
• SCE's highest rates (Time-of-Use peak) are from 4–9 PM
• Without a battery, you sell cheap daytime energy and buy expensive evening energy
• With a battery, you store daytime energy and use it during the 4–9 PM peak window

A Tesla Powerwall 3 stores 13.5 kWh — enough to power most homes through the entire 4–9 PM peak period and into the night.

NEM 3.0 Payback Period

Under NEM 2.0, solar-only systems typically paid back in 5–7 years. Under NEM 3.0, solar-only systems may take 9–12 years. But solar + battery systems under NEM 3.0 can pay back in 6–9 years — because the battery captures the full value of your solar production.

Who Is Affected

NEM 3.0 applies to new solar applications submitted after April 15, 2023. If you already have solar under NEM 2.0, you're grandfathered in for 20 years from your original interconnection date.

If you're considering solar now, you'll be on NEM 3.0 — which means a battery is strongly recommended.

The Virtual Power Plant Opportunity

NEM 3.0 introduced a new opportunity: the Virtual Power Plant (VPP) program. SCE pays Tesla Powerwall owners to dispatch stored energy back to the grid during peak demand events. Participants earn $2–4 per kWh dispatched — far more than the standard export rate.

This turns your battery into an income-generating asset during the summer months when grid demand is highest.

What This Means for Your Decision

Solar still makes excellent financial sense under NEM 3.0 — you just need to pair it with a battery. The combination of solar + Powerwall under NEM 3.0 can still eliminate your SCE bill and provide backup power during outages.

Pell Solar designs every system under NEM 3.0 rules, optimizing panel placement and battery sizing to maximize your savings under the new rate structure.

Get a free NEM 3.0 analysis for your home →