NEM 3.0 vs NEM 2.0: Navigating California’s New Solar Landscape

Understanding the Shift in California Solar Policy

For years, California’s Net Energy Metering (NEM) policies were the gold standard for residential solar adoption. However, the transition from NEM 2.0 to the current NEM 3.0 framework has changed the way homeowners interact with the electrical grid. At Apollo Solar Program, we believe that an informed homeowner is a successful one, so let’s dive into what these changes mean for your potential solar project.

What was NEM 2.0?

Under NEM 2.0, solar owners were credited for the excess electricity they sent back to the grid at the full retail rate of electricity. If you generated more power than you used during the day, your utility company (PG&E, SCE, or SDG&E) would apply a 1:1 credit to your account. This made solar very simple: produce enough power to cover your usage, and your bill essentially disappears.

The New Era: NEM 3.0 Explained

Implemented in April 2023, NEM 3.0 represents a fundamental shift. While you can still export power, the value of that power has been significantly reduced—often by 75% or more compared to the retail rate. The utility companies now utilize the Avoided Cost Calculator (ACC) to determine export rates. These rates fluctuate based on the time of day, the season, and the specific needs of the grid.

Key Differences at a Glance

• Export Rates: NEM 2.0 offered 1:1 retail credits; NEM 3.0 offers time-varying export credits.
• Payback Periods: Projects under NEM 3.0 generally have longer payback periods compared to those under 2.0.
• Grid Incentives: NEM 3.0 incentivizes homeowners to use power when they generate it or store it, rather than simply dumping it back into the grid.

How to Succeed Under NEM 3.0

Just because the policy has changed doesn’t mean solar is no longer a sound investment. In fact, for many Californians, it is more important than ever. The secret to success under NEM 3.0 is self-consumption.

1. Consider Battery Storage

Instead of sending excess power to the grid for a low credit, a home battery (like the Tesla Powerwall or Enphase IQ Battery) allows you to store that energy. You can then use it during the evening hours when electricity prices are at their highest (peak rates).

2. Time-of-Use (TOU) Optimization

Align your heavy energy usage—such as running pool pumps, dishwashers, or EV charging—with the hours of peak solar production. By consuming your own power as you generate it, you bypass the need to rely on the grid entirely.

3. Load Shifting

Many modern smart home devices allow you to automate your energy consumption. By programming your appliances to run during mid-day hours, you effectively increase your solar savings without needing to add more panels to your roof.

Is Solar Still Worth It?

With rising utility rates from major providers, solar remains a powerful hedge against inflation. While the payback period might be slightly longer than it was in the NEM 2.0 era, you are still gaining energy independence and long-term protection against rate hikes. The combination of the federal 30% Investment Tax Credit (ITC) and the increased value of self-consumed electricity makes solar a resilient choice.

Next Steps for Your Home

Evaluating your unique roof orientation, average energy usage, and local rate schedule is the best way to determine your ROI. We encourage you to run the numbers before making a decision. Use our free, objective Apollo Solar Savings Calculator to see how solar could impact your specific utility bill under current rate structures.