The Great Solar Recalibration
California’s new NEM 3.0 policy has fundamentally changed the value of solar energy. The biggest change? A massive drop in what utilities pay you for your excess power.
Avg. Export Credit Value vs. NEM 2.0
~75%
LOWER
A Tale of Three Policies: The NEM Timeline
1996 – 2017
NEM 1.0: The Spark
A simple 1-to-1 credit system. For every kWh you exported, you got a credit for one kWh. This ignited California’s solar market.
2017 – 2023
NEM 2.0: The Adjustment
Kept near-retail credits but required Time-of-Use (TOU) rates and added small non-bypassable charges. Growth continued at a rapid pace.
April 15, 2023
NEM 3.0: The Paradigm Shift
A move to “Net Billing.” Export credits are no longer based on retail rates, but on the grid’s real-time needs, making them much lower on average.
Why the Drastic Change?
The “Duck Curve” Problem
During the day, massive solar generation flooded the grid when demand was low. In the evening, as the sun set, demand spiked, straining the grid. NEM 3.0 aims to incentivize storing midday energy for evening use.
The “Cost-Shift” Argument
Regulators argued that under NEM 2.0, non-solar customers were subsidizing solar owners. This shift was projected to cost the general body of ratepayers:
$8.5 Billion
Annually by the end of 2024
The New Economics: Solar-Only vs. Solar + Storage
NEM 3.0 significantly changes the return on investment. While solar-only systems take longer to pay off, adding a battery can dramatically improve the economics, making it the financially optimal choice.
Estimated Payback Period (in Years)
Estimated 25-Year Net Savings
The Battery Imperative: Self-Consumption is King
Under NEM 3.0, the most valuable thing you can do with your solar energy is use it yourself. A battery lets you do this even when the sun isn’t shining.
1. Generate Solar Energy
Your panels produce energy during the day.
HIGHEST VALUE
🏠
Self-Consume
Use energy in real-time to power your home and avoid high utility rates.
HIGH VALUE
🔋
Store in Battery
Save excess daytime energy to use during expensive evening peak hours.
LOWEST VALUE
⚡️
Export to Grid
Sell leftover energy to the utility for a very low credit.
Making It Affordable: Key Incentives
The higher cost of a solar + storage system is offset by powerful federal and state incentives, drastically reducing your net cost.
Federal Residential Clean Energy Credit
A dollar-for-dollar tax credit for 30% of the total project cost, including both solar and battery storage.
CA Self-Generation Incentive Program (SGIP)
A tiered cash rebate for batteries. Rebates are largest for low-income and medically vulnerable households in high fire-threat areas.
The Verdict: Is Solar Still a Good Investment?
Yes, but the strategy has changed.
The era of simple solar is over. In the NEM 3.0 world, a solar-plus-storage system is no longer just an upgrade—it’s the foundation of a smart investment. By generating, storing, and managing your own energy, you can still achieve significant long-term savings and gain invaluable energy independence from an expensive and volatile grid.