Is Solar Still Worth It Under NEM 3.0 in California? (2026 Guide)

When California's Net Billing tariff — commonly called NEM 3.0 — took effect in April 2023, it fundamentally changed the economics of rooftop solar. Export credits dropped roughly 75%, and solar installations fell sharply across the state. Three years in, the dust has settled. Here's an honest look at when solar still makes sense under NEM 3.0, when it doesn't, and what the actual numbers look like.

NEM 2.0 vs. NEM 3.0: What Actually Changed

Under the old NEM 2.0 system, when your solar panels produced more than your home used, the excess was exported to the grid and you received a credit at nearly the full retail rate — around 30 to 40 cents per kWh. This made oversizing your system a smart strategy: produce as much as possible, bank the credits, and your utility bill would shrink to almost nothing.

Under NEM 3.0, export credits dropped to approximately 5 to 8 cents per kWh on average (the exact value varies by time of day, month, and utility). That means the electricity you send to the grid is now worth about one-fifth of what you pay to buy it back during peak hours.

This created an asymmetry that didn't exist before. Under NEM 2.0, a kWh exported was worth roughly the same as a kWh consumed. Under NEM 3.0, a kWh you use in your home is worth 5 to 8 times more than a kWh you export. This is the single most important thing to understand about solar in 2026.

You can review the full Net Billing tariff details on the CPUC's NEM page.

Why Battery Storage Became Essential

The NEM 3.0 export/consumption gap is why battery storage went from "nice to have" to "essential" almost overnight. The logic is straightforward: instead of sending excess solar to the grid during the day at 5 to 8 cents per kWh, store it in a battery and use it yourself in the evening when utility rates can peak at 58-74 cents per kWh (on SCE) or even higher on other utilities.

With a battery, you're keeping the full retail value of every kWh your system produces, rather than giving most of it away at the low export rate. A properly sized solar + battery system can offset 70 to 90% of a household's grid consumption. Without a battery, that drops to roughly 40 to 60% because you're forced to export during the day and buy back at night.

The trade-off: a battery adds $10,000 to $15,000 to a purchased system (before any SGIP rebates). That's a significant cost. However, with California's extreme rate differential between peak and off-peak — sometimes 30+ cents per kWh apart — the battery typically pays for itself in additional savings within 5 to 7 years. And if you go the PPA or lease route, battery storage is typically included at no additional cost to you.

The Real Numbers: A Worked Example

Let's use a specific example to make this concrete. Take a household in Riverside with SCE, using 900 kWh per month (about $310/month at current rates).

Solar only (no battery) under NEM 3.0: A 7 kW system produces about 1,000 kWh/month. Without a battery, roughly 40% is exported at an average of 6 cents/kWh (earning about $24/month in credits) and 60% is consumed directly (saving about $186/month at retail rate). Net monthly savings: roughly $185-$210. Remaining utility bill: around $100-$125/month (including the $24 fixed charge).

Solar + battery under NEM 3.0: The same 7 kW system with a 10-13 kWh battery. The battery captures most of what would have been exported and shifts it to evening use. Self-consumption rises to 80-90%. Net monthly savings: roughly $240-$280. Remaining utility bill: around $50-$80/month (including the $24 fixed charge).

The battery adds $70-$80/month in additional savings in this scenario. Whether that justifies the $10,000-$15,000 cost depends on whether you're buying (yes, over the long run) or going through a PPA (the provider handles the economics for you).

NEM 2.0 Grandfathering: Are You Already Locked In?

If you installed solar before April 15, 2023, you were grandfathered into NEM 2.0 for 20 years from your interconnection date. If that's you, none of the NEM 3.0 changes affect you — your export credits remain at the old rates. You can verify your NEM status by logging into your utility account and checking your rate schedule.

One thing to know: if you significantly expand your existing system (adding panels beyond a certain threshold), you may be moved to NEM 3.0 for the additional capacity. Check your utility's specific rules before expanding. Adding a battery to an existing NEM 2.0 system generally does not trigger a switch, but rules vary by utility — confirm before proceeding.

When Solar Doesn't Make Sense Under NEM 3.0

NEM 3.0 made the economics worse for certain situations, and it's important to be realistic about when solar may not be the right move.

Low electricity usage. If your monthly bill is under $100, the savings from solar (even with a battery) may be too small to justify the complexity. The $24 fixed charge and minimum delivery fees eat into a larger percentage of small bills.

Solar-only systems (no battery) with high export ratios. If your household is empty during the day and you can't install a battery, you'll export most of your solar at low NEM 3.0 rates. The economics still work but the savings are significantly reduced compared to the NEM 2.0 era.

Heavily shaded roofs. If your roof gets less than 4 hours of direct sun per day, solar production may be too low to justify the installation. Check your home on Google Project Sunroof for a rough estimate.

Short-term homeowners. If you plan to sell within 2-3 years, the payback math gets tight for purchased systems. PPAs and leases can transfer to the buyer, but they add a step to the sales process that some buyers find unappealing.

When Solar Still Makes Strong Financial Sense

Despite NEM 3.0's lower export credits, solar still makes solid financial sense for a large number of California homeowners. The key factors are your utility rate (higher = better savings), whether the system includes a battery (strongly recommended under NEM 3.0), your daytime and evening electricity usage patterns, and your roof's sun exposure.

If you're with SDG&E (45.7 cents/kWh), the case is strongest because the gap between the utility rate and the solar rate is widest. SCE customers (34.5 cents/kWh) and PG&E customers (41.5 cents/kWh) also see strong returns, particularly with rate increases in the pipeline through 2028.

The math is simple: if your fixed solar cost (whether purchased, leased, or PPA) plus your remaining utility charges is less than what you'd pay the utility without solar, it's a net positive. For most California homeowners paying $200+ per month, that threshold is easily met with a properly designed solar + battery system.

How to Evaluate Your Specific Situation

Here's a practical framework for figuring out if NEM 3.0 solar works for you.

1. Know your current cost. Log into your utility account and look at your average monthly bill over the last 12 months. Don't just look at summer or winter — use the annual average.

2. Check your roof. Use Google Project Sunroof or get a professional assessment. South-facing roofs with minimal shade are ideal. West-facing works well too, especially with time-of-use rates (west-facing panels produce more during afternoon peak hours).

3. Get multiple quotes. Whether you're buying or going the PPA/lease route, get at least 3 proposals. For purchases, EnergySage is a good starting point. For PPAs and leases, ask about the specific per-kWh rate, any annual escalators, battery inclusion, and warranty terms.

4. Insist on battery inclusion. Under NEM 3.0, a solar-only system leaves significant savings on the table. Whatever option you choose, make sure a battery is part of the proposal. If a provider doesn't include storage, ask why or find one who does.

5. Compare the total cost. Calculate your estimated monthly solar payment (or amortized purchase cost) + remaining utility charges (fixed charge + any grid purchases) vs. your current and projected utility-only costs for the next 10-25 years. Remember: utility rates are projected to keep rising 6-12% per year.

The Bottom Line

NEM 3.0 changed the strategy from "produce and export" to "produce, store, and consume." Solar without a battery is a weaker proposition than it was under NEM 2.0. Solar with a battery still delivers 30 to 50% savings for most California households paying $200+ per month. The key is getting the right system design — maximizing self-consumption through battery storage — and choosing the financing structure (cash, loan, lease, or PPA) that matches your financial situation and homeownership timeline.