California's Net Energy Metering program changed fundamentally on April 14, 2023, when the CPUC's NEM 3.0 (officially the "Net Billing Tariff") took effect for new installations on PG&E, SCE, and SDG&E. Understanding NEM 3.0 is essential for any CA homeowner considering solar today.
NEM 2.0 vs. NEM 3.0 — the key difference:
- NEM 2.0 (before April 2023): Exported solar earned credits at the full retail rate — $0.30–$0.50/kWh with PG&E and SDG&E. If you produced more than you used during the day, you were essentially "selling" back at retail and buying back at night at the same rate.
- NEM 3.0 (new installations after April 14, 2023): Exported solar earns the "avoided cost" rate — approximately $0.02–$0.08/kWh during most hours. Exporting excess solar is now worth 5–10x less than it was under NEM 2.0.
What this means practically:
- A solar-only system sized to maximize export (the old NEM 2.0 approach) no longer makes financial sense
- Battery storage is now essential — store what you produce, use it at night during peak rate hours, avoid exporting at low rates
- System sizing should target self-consumption — match your system to your daytime load plus battery charging, rather than maximum roof coverage
- The correct configuration under NEM 3.0 is solar + battery (typically 1–2 Tesla Powerwalls or equivalent)
Who is grandfathered under NEM 2.0? Customers who had a completed interconnection application by April 14, 2023 are grandfathered under NEM 2.0 for 20 years. If you went solar before that date, you keep your existing tariff.
LADWP and SMUD: These municipal utilities are NOT under CPUC jurisdiction and are NOT subject to NEM 3.0. City of LA (LADWP) and Sacramento (SMUD) customers have their own net metering programs — confirm current terms with your installer.