NEM 3.0 Explained: Why Battery Storage Matters More Than Ever

NEM 3.0 (Net Billing) is California's current solar net metering policy. Effective since April 2023, it reduced the value of solar energy exported to the grid by approximately 75%. For homeowners considering solar in 2026, this means one thing: battery storage is no longer optional — it's how you make the economics work.

What Is NEM 3.0 (Net Billing) in California?

NEM 3.0 is California's current solar net metering policy that replaced NEM 2.0 on April 15, 2023. It reduced the value of exported solar energy by approximately 75%, from near-retail rates of 25-35 cents/kWh down to 5-8 cents/kWh. NEM 3.0 applies to PG&E customers, including those in parts of Sacramento County, but does not apply to SMUD customers.

NEM 3.0 — officially called the Net Billing Tariff — is the California Public Utilities Commission's (CPUC) replacement for the previous NEM 2.0 net metering program. It took effect on April 15, 2023 and applies to all new solar installations connected to PG&E, SCE (Southern California Edison), and SDG&E (San Diego Gas & Electric).

Under the old NEM 2.0, excess solar energy you sent back to the grid was credited at near-retail rates — roughly 25-35 cents per kilowatt-hour. You essentially used the grid as a free battery: generate during the day, export the excess, and pull it back at night at close to the same rate.

Under NEM 3.0, export credits are based on the "avoided cost" of energy — what it would cost the utility to generate that power from another source. In practice, this means exports are worth approximately 5-8 cents per kilowatt-hour, varying by time of day and season. That's a 75-80% reduction in the value of exported solar.

How Did NEM 3.0 Change Solar Economics?

NEM 3.0 extended solar-only payback periods from 5-7 years to 9-12 years because exported energy is now worth 75% less. However, solar paired with battery storage actually provides better returns than solar alone ever did under NEM 2.0, with payback periods of 6-9 years by capturing peak-rate value instead of exporting at a discount.

The impact is straightforward: solar energy you can't use immediately is now worth much less. Here's a comparison:

The critical shift: under NEM 2.0, the best strategy was to generate as much solar as possible and export the excess. Under NEM 3.0, the best strategy is to consume every kilowatt-hour you generate — and battery storage makes that possible.

Does NEM 3.0 Apply to SMUD Customers in Sacramento?

No, NEM 3.0 does not apply to SMUD customers. SMUD is a municipal utility with its own net metering program. However, PG&E covers parts of Sacramento County including Arden-Arcade, Carmichael, and Fair Oaks, and those PG&E customers are affected by NEM 3.0. Both SMUD and PG&E customers benefit from battery storage for TOU optimization.

No. NEM 3.0 only applies to the three investor-owned utilities regulated by the CPUC: PG&E, SCE, and SDG&E. SMUD (Sacramento Municipal Utility District) is a publicly owned municipal utility with its own solar programs and rate structures.

However, SMUD has its own evolving rate plans that increasingly favor battery storage. SMUD's Time-of-Use rates create significant peak-to-off-peak price differentials, especially during summer. Even without NEM 3.0 applying directly, Sacramento SMUD customers benefit from battery storage for TOU optimization and backup power.

PG&E customers in parts of Sacramento County (Arden-Arcade, Carmichael, Fair Oaks, and unincorporated areas) ARE affected by NEM 3.0. If you're unsure which utility serves your home, check your electricity bill — it will say either SMUD or PG&E.

Why Does Battery Storage Fix the NEM 3.0 Problem?

Battery storage solves the NEM 3.0 problem by storing excess solar energy instead of exporting it at 5-8 cents/kWh. You then use that stored energy during peak hours when PG&E charges 40-55 cents/kWh, saving 35-50 cents per kWh. This peak-rate avoidance is dramatically more valuable than the reduced export credits under NEM 3.0.

The math is simple. Without a battery, your excess solar goes to the grid at 5-8 cents/kWh. With a battery, you store that same energy and use it at 4-9 PM when PG&E charges 40-55 cents/kWh. The difference — 35-50 cents per kWh saved — is dramatically more valuable than the 5-8 cents you'd get from exporting.

A typical Sacramento-area home with solar generates the most energy between 10 AM and 3 PM, but uses the most energy between 4 PM and 9 PM (when everyone comes home, turns on AC, cooks dinner, and watches TV). Battery storage bridges this gap by shifting your free solar energy to the hours when electricity is most expensive.

What About Existing NEM 2.0 Customers?

Existing NEM 2.0 customers are grandfathered for 20 years from their interconnection date. Your higher export credits remain locked in for that entire period. However, adding a battery to an existing NEM 2.0 system may trigger reclassification to NEM 3.0 depending on your installation specifics — consult with an installer before making changes.

If you interconnected your solar system before April 15, 2023, you are grandfathered under NEM 2.0 for 20 years from your interconnection date. Your export credits remain at the higher NEM 2.0 rates for that entire period.

However, adding a battery to an existing NEM 2.0 system may or may not trigger reclassification to NEM 3.0 — the rules depend on the specifics of your installation. If you're an existing solar customer considering adding battery storage, we'll evaluate your situation during the assessment and advise on the best approach to preserve your NEM 2.0 status.

Is Solar Still Worth It Under NEM 3.0?

Yes, solar is still worth it under NEM 3.0, especially when paired with battery storage. Solar-only systems remain financially positive with 9-12 year payback periods, but solar plus battery provides better returns than solar alone ever did under NEM 2.0 by capturing peak-rate value of every kilowatt-hour generated.

Yes — but the strategy has changed. Solar-only systems are still financially positive under NEM 3.0, just with longer payback periods (9-12 years instead of 5-7). Solar paired with battery storage actually provides better returns than solar alone ever did under NEM 2.0, because you capture the full peak-rate value of every kilowatt-hour instead of exporting at a discount.

The bottom line: if you're a PG&E customer considering solar in 2026, adding battery storage from day one is the smart financial move. If you're a SMUD customer, battery storage optimizes your TOU savings regardless of net metering policy.

How STORPWR Designs for NEM 3.0

Stor Power designs every solar-plus-battery system to maximize self-consumption under NEM 3.0. We optimize for peak-rate avoidance over export, right-size your battery to capture maximum TOU arbitrage value, and model your specific usage data against current utility rates to project your exact savings before you commit.

Every system we design accounts for NEM 3.0 economics. We optimize for self-consumption over export, right-size the battery to capture maximum TOU arbitrage value, and ensure you get the best return on your investment. During your assessment, we model your specific usage data against current utility rates to show you exactly what your savings will be.

Over 200 Sacramento-area homeowners have optimized their systems for NEM 3.0 with STORPWR.