What Is NEM 3.0? A Guide for California Homeowners

Your electric bill keeps climbing, and rooftop solar still looks like the clearest way to take back control. But the rules that decide how much solar actually saves you changed in 2023, and many Northern California homeowners are working from outdated information.

NEM 3.0 is California's current net metering policy, and it reshaped the math on solar savings for customers of the state's largest utilities. It did not end solar. It changed how you get the most value from it.

Solectric has installed clean energy systems across Sacramento and Northern California since 2015, and founder Daniel Navarrete brings more than eighteen years in the solar industry. That experience, along with Solectric's standing among the top 1% of California contractors, informs this guide.

Here you will find NEM 3.0 explained in plain English: what it is, how it affects your solar savings, whether it even applies to your home, and how to design a system that still pays off.

What Is NEM 3.0?

NEM stands for net energy metering, the policy that decides how your utility pays you for the extra electricity your solar panels send to the grid. California has run three versions. NEM 3.0 is the latest, and it works differently from the two before it.

Its official name is the Net Billing Tariff. The California Public Utilities Commission approved it in December 2022, and it took effect on April 15, 2023. It applies to new solar customers of the state's three big investor-owned utilities: Pacific Gas and Electric (PG&E), Southern California Edison, and San Diego Gas and Electric. You can read the policy details on the CPUC's Net Energy Metering and Net Billing page.

How NEM 3.0 differs from NEM 2.0

Under the older rules, a kilowatt-hour you sent to the grid earned close to the retail rate you paid to buy power. It was nearly a one-to-one trade, and the grid acted like a free battery.

NEM 3.0 broke that link. Now your exported energy is credited at avoided cost, roughly what the utility would pay to buy that power elsewhere. On average, that dropped export credits by about 75%, from around 30 cents per kilowatt-hour to roughly 5 to 8 cents.

The credit also changes by hour and season. It runs highest on summer evenings, when solar production is winding down, and lowest at midday, when most panels export the most.

Common misconceptions

The biggest myth is that NEM 3.0 killed solar. It did not. Electricity you use in your own home the moment your panels make it still offsets the full retail rate you would otherwise pay. The change only affects the surplus you send back.

Another common mistake is assuming the rule applies to everyone in Sacramento. It does not, and that distinction can change your entire savings picture, as covered below.

One more point worth knowing: your tariff is locked in by the date your interconnection application was submitted, not the date your system switches on.

How Does NEM 3.0 Affect Your Solar Savings?

This is the question most homeowners ask, and the honest answer is that it depends on how your system is designed.

The export credit drop

Because surplus energy now earns far less, sending power to the grid at noon and buying it back at night no longer balances out. The gap is wide. You import at 30 to 55 cents per kilowatt-hour during peak hours and export for a fraction of that.

The takeaway is simple: value now comes from using your own solar power rather than selling it.

Why batteries changed the equation

A home battery stores the surplus your panels make during the day so you can use it in the evening, when rates are highest and solar has stopped producing. Instead of selling cheap and buying expensive, you keep your own energy and sidestep peak pricing.

This is why NEM 3.0 made storage central to a well-designed system. The CPUC built the policy specifically to encourage solar paired with batteries.

What this means for payback

Payback timelines stretched for solar-only systems under NEM 3.0 compared with the older net metering rules. Pairing solar with a battery generally brings that timeline back down, because you capture more of your system's value at home.

Exact numbers depend on your usage, your rates, and your system size, so treat any range as a general guideline rather than a promise. A custom design is the only way to know your real payback.

Does NEM 3.0 Apply to Your Home? Sacramento, PG&E, and SMUD

Here is where many Sacramento homeowners get tripped up. NEM 3.0 does not apply to everyone in the region, because the Sacramento area is served by two very different utilities.

If PG&E serves your home

NEM 3.0 applies to you. PG&E is one of the three investor-owned utilities regulated by the CPUC, so its solar customers fall under the Net Billing Tariff. Parts of the greater Sacramento area, including West Sacramento and other communities in the surrounding counties, sit in PG&E territory.

If SMUD serves your home

NEM 3.0 does not apply to you. The Sacramento Municipal Utility District is a community-owned utility and is not regulated by the CPUC, so it sets its own rules. Most of Sacramento County, including the city of Sacramento and Elk Grove, is SMUD territory.

SMUD replaced traditional net metering with its own Solar and Storage Rate for new solar customers. Under it, exported energy is credited at a flat rate set by SMUD rather than the CPUC's avoided-cost schedule.

Because the two utilities pay different rates and follow different rules, the smart system for a PG&E home may look different from the smart system for a SMUD home. Knowing which utility serves your address is step one. This is exactly the kind of local detail that separates net metering in California from a one-size-fits-all answer.

Your Solar Options Under NEM 3.0

There is no single right system. The best setup depends on your goals, and each option carries its own trade-offs.

Solar panels only

A solar-only system still lowers your bill by covering the power you use during daylight hours, and it carries the lowest upfront cost of the options here.

The downside under NEM 3.0 is that your evening surplus earns little, so a solar-only system can leave value on the table for a PG&E home. It still suits households that use most of their power during the day.

Solar plus battery storage

Pairing panels with a battery is the setup that makes the most of NEM 3.0. You store daytime production and use it during expensive evening hours, which protects you from peak rates and low export credits.

The trade-off is a higher upfront cost. For most homeowners on the Net Billing Tariff, the added savings and energy independence make storage worth serious consideration. Batteries also keep essential circuits running during an outage.

Solar, storage, and whole-home backup

Some homeowners want more than bill savings. Adding whole-home backup, a standby generator, or an EV charger turns your system into a complete energy hub. Solectric's generator, battery, and EV charging services round out a solar system for households that want resilience during outages or need to power a vehicle at home.

As a general guideline, solar-only systems carry the lowest price, adding a battery raises the total, and full backup with generators or EV charging sits at the top. A custom quote shows real numbers for your home, not averages.

Choosing the Right System for Your Home

A good decision starts with a few honest questions about how your household uses energy. Weigh these factors:

• Your utility: PG&E puts you under NEM 3.0; SMUD follows its own rate. This shapes everything else.

• Your energy usage: Look at when you use the most power. Heavy evening use points toward a battery.

• Your roof: Its size, angle, shading, and age affect how much you can produce.

• Your budget: Upfront cost, financing, and payback period all matter.

• Your goals: Lower energy bills, backup power, energy independence, or added home value.

  
  

A few common scenarios help illustrate the choices. A PG&E household with high evening use and central air will usually benefit most from solar paired with a battery. A SMUD household with steady daytime use might do well with a right-sized solar system. A homeowner in a wildfire-prone area who loses power often may want solar, storage, and a generator for full backup.

The point is not to buy the biggest system. It is to match the system to your home, so you are not oversold or locked into the wrong setup.

Working with Solectric

Solectric is a family company based in West Sacramento, serving Sacramento, Elk Grove, and the greater Northern California region. The process is built to be clear from the first conversation to the day your system turns on.

It runs in five straightforward steps: a consultation to understand your goals and utility, a custom design sized to your home, permitting handled on your behalf, professional installation, and final activation once the utility gives the go-ahead.

What sets the company apart is a focus on doing the job right. Solectric ranks among the top 1% of California contractors, is a SunPower Authorized Dealer, and has completed more than 3,600 solar installations. That track record reflects a simple philosophy: build lasting relationships, not one-time sales.

“I spent eighteen years watching other companies install a system, take the payment, and disappear. I started Solectric in 2015 to do the opposite. Under NEM 3.0, system design matters more than ever, and getting it right for each home is what protects a homeowner's savings for the long run.”

Daniel Navarrete, Founder, Solectric

Knowing the region, the utilities, and the local rules matters more under NEM 3.0 than it did before, and that local knowledge is built into every design.

Frequently Asked Questions

Does NEM 3.0 mean solar is no longer worth it?

No. Solar still lowers your bill by offsetting the power you use at home. NEM 3.0 changed the value of exported energy, not the value of the energy you consume yourself. With the right design, often solar paired with a battery, homeowners on the Net Billing Tariff continue to see meaningful savings.

Do I have to add a battery?

It is not required, but for most PG&E homes under NEM 3.0 a battery captures far more value. It lets you use your own power in the evening instead of selling it cheaply and buying it back at peak rates. Whether it makes sense depends on your usage and budget.

I already have solar. Am I affected?

If your interconnection application was approved before April 15, 2023, you are grandfathered on your original tariff for 20 years from your start date, and that status stays with the system. NEM 3.0 applies to new applications, not existing grandfathered ones.

How long does installation take?

The install itself is often a matter of days, but the full timeline, including design, permitting, and utility approval, usually spans several weeks. Timelines vary by jurisdiction and utility.

What about the federal solar tax credit?

The 30% federal residential solar tax credit expired at the end of 2025 for homeowners who buy their systems, so a system purchased with cash or a loan in 2026 no longer receives it.

California state and utility programs, such as battery storage incentives, may still help lower costs, so it is worth checking current options. The U.S. Department of Energy's Homeowner's Guide to Going Solar is a useful, unbiased starting point.

How much maintenance do solar panels need?

Very little. Panels have no moving parts and generally need only occasional cleaning and periodic inspection. Batteries and inverters are monitored and carry their own warranties.

How do I know which utility serves my home?

Check a recent electric bill. It will name PG&E or SMUD, which tells you whether NEM 3.0 or SMUD's own rate applies. The California Energy Commission's solar energy resources can also help you understand your options.

Solar Still Pays Off Under NEM 3.0

NEM 3.0 changed how California rewards rooftop solar, but it did not take away the reason to go solar. Your bill savings now come from using your own energy, which is why a well-designed system, often solar paired with storage, matters more than ever.

For Sacramento and Northern California homeowners, the first step is knowing whether PG&E or SMUD serves your home, then matching a system to how you actually use power. Get that right, and solar still delivers lower bills, backup power, and long-term value.

Solectric has helped thousands of Northern California families make that decision with confidence. To see what NEM 3.0 means for your home and get a custom design with real numbers, request a free quote or call (916) 719-0074.