Under California's NEM 3.0 (officially the Net Billing Tariff), exports to the grid are paid at the Avoided Cost Calculator rate — typically $0.04 to $0.08 per kWh — instead of the retail rate that NEM 2.0 customers got. Late afternoon and evening exports during the 4–9pm "peak" window pay much higher (sometimes $0.30–$2.00/kWh during summer heat waves), but midday solar exports pay barely anything. The result: solar without a battery pencils out about 35–50% worse under NEM 3.0 than under NEM 2.0. Solar with a battery still works.
What Changed Between NEM 2.0 and NEM 3.0
NEM 2.0 paid exports at the retail rate minus a small non-bypassable charge — effectively 1-to-1 net metering with a few cents shaved. NEM 3.0, which applies to all interconnection applications submitted after April 14, 2023, replaces that with the Avoided Cost Calculator (ACC). The ACC values exports based on what the utility avoids paying for marginal generation, transmission, and capacity in that hour.
The CPUC's official NEM 3.0 reference is at cpuc.ca.gov NEM page.
Avoided Cost Calculator — What It Actually Pays
The ACC is published as a 9-year forward schedule (the "ACC Plus" schedule) by the CPUC. Each hour of each year of each climate zone has its own export rate. In rough terms for 2026:
| Time period | Typical export rate |
|---|---|
| Midday spring/fall (10am–3pm, low demand) | $0.03–$0.07/kWh |
| Midday summer | $0.06–$0.12/kWh |
| Late afternoon weekday (3–6pm) | $0.10–$0.30/kWh |
| Peak evening summer (5–9pm) | $0.30–$2.50/kWh during heat events |
| Overnight | $0.04–$0.06/kWh |
The headline-grabbing rates ($1+/kWh) hit during real grid stress — typically 30–80 hours per year statewide. The rest of the year, exports pay closer to $0.05/kWh. A solar-only system that exports midday is exporting at rock-bottom rates and importing in the evening at full retail (often $0.40–$0.55/kWh). That's a 5x to 10x spread you eat unless you shift the energy.
The 9-Year ACC Plus Adder
To soften the transition, NEM 3.0 includes an "ACC Plus" adder for the first 9 years of a system's life. The adder is locked in based on the year you interconnect — earlier interconnections got bigger adders. For 2026 interconnections the adder is small (roughly $0.01–$0.03/kWh on top of the base ACC rate) and falls to zero after year 9. After that, you're paid pure ACC.
This is why "interconnect now" matters under NEM 3.0 — every year of delay shrinks the adder you'd lock in.
Why Batteries Change Everything Under NEM 3.0
Without a battery, your solar exports midday at $0.05/kWh and you import at $0.45/kWh in the evening. That's a $0.40/kWh spread you lose on every kWh time-shifted involuntarily by the sun.
With a battery, midday surplus charges the battery instead of exporting. The battery discharges 4–9pm covering your evening load. Now that kWh is offsetting full retail ($0.45/kWh) instead of selling for $0.05/kWh — a $0.40/kWh swing in your favor on every battery-cycled kWh.
For a typical California home with a 7 kW solar system and a 13.5 kWh Powerwall 3 battery, the battery captures roughly 3,500–4,500 kWh/year of arbitrage. At a $0.40/kWh value swing, that's $1,400–$1,800/year of value the battery generates beyond solar alone. That's why NEM 3.0 economics work for solar+storage but not solar-only.
Time-of-Use Becomes Mandatory
NEM 3.0 customers must take service on a TOU rate (typically the EV2-A rate or EVTOU rates from PG&E, SCE, SDG&E). Imports from the grid are charged at TOU peak ($0.45–$0.55/kWh during 4–9pm summer) versus off-peak ($0.30–$0.35/kWh). Combined with the export ACC schedule, a NEM 3.0 home is essentially playing four-quadrant arbitrage: import cheap, export expensive, self-consume during peak, charge battery during off-peak shoulder hours.
This is why solar+battery systems under NEM 3.0 need smart energy management — the battery's algorithm has to know the schedules and cycle accordingly. Most modern systems (Powerwall, Enphase, SolarEdge) handle this automatically once you set the rate plan.
Sizing a NEM 3.0 System Differently
Under NEM 2.0 the design rule was "size to 100% of annual usage." Under NEM 3.0 the rule changes to "size solar to your daytime load + battery charging needs, and size the battery to your evening load." The result is usually:
- Slightly smaller solar array than NEM 2.0 would have spec'd (maybe 10% smaller).
- One or two batteries (10–27 kWh).
- Total project cost 35–60% higher than solar-only.
- Payback period 8–11 years, similar to or slightly longer than NEM 2.0 paybacks.
I cover the California-specific design strategy on my California solar page.
What NEM 3.0 Does Not Change
- The 30% federal Investment Tax Credit still applies to both solar and battery — including standalone batteries added to an existing solar system.
- California's property tax exclusion for solar (no reassessment) still applies.
- Sales tax exemptions for solar-attached batteries still apply.
- Existing NEM 2.0 customers are grandfathered for 20 years from their original interconnection date.
- Self-consumed solar (energy used in real time inside the house) still offsets full retail rate — no change.
Common NEM 3.0 Misconceptions
- "NEM 3.0 killed solar in California." No — it changed the math. Solar without storage doesn't pencil out as well as it did. Solar with storage still works and is the default install in 2026.
- "You only get paid the ACC during summer." No — exports get paid every hour of the year. The headline numbers ($1+/kWh) hit only during peak summer evening hours, but every export earns something.
- "You can't oversize a NEM 3.0 system." You can, but it's worse value than under NEM 2.0. Excess production paid at ACC rates instead of retail. Right-size more aggressively.
- "NEM 3.0 only affects new homes." No — it affects any new interconnection application, including additions to existing solar systems. If you add panels to a NEM 2.0 system you may trigger a switch to NEM 3.0 for the whole array. Check before expanding.
Real-World Example: 2,200 Sq Ft Sacramento Home
SMUD service area, 11,500 kWh/year usage, EV at home, summer AC load. Pre-NEM 3.0 design would have been a 7.5 kW solar array, no battery, 7-year payback. Post-NEM 3.0 design:
- 6.4 kW solar array (sized for daytime self-consumption + battery charging).
- One Powerwall 3 (13.5 kWh).
- Project cost: $33,800 before federal ITC.
- After 30% ITC: $23,660.
- Year-1 utility bill savings: $2,650 (vs. $3,180 pre-rate-change).
- Payback: ~9 years.
For PG&E and SCE territories — where retail rates are higher and TOU peaks are more punishing than SMUD — battery payback is faster. SDG&E territory is the most punishing retail rate environment in the state and also the strongest case for solar+storage.
Standalone Battery Adders — A NEM 3.0 Adjacent Trick
If you already have NEM 2.0 solar and want to add storage without losing your grandfathering, install the battery as a standalone, AC-coupled system without modifying your solar interconnection. You keep your NEM 2.0 status and gain the federal ITC on the battery (30%). The battery uses your existing grid connection but doesn't change your solar export tariff. This is one of the cleanest moves available to existing California solar homeowners in 2026.
The Bottom Line
NEM 3.0 is workable. It rewards solar+storage and punishes solar-only. The headline export rates are misleading — most exports pay $0.05–$0.10/kWh, not the dramatic peak numbers — so design your system around self-consumption and battery time-shift, not around chasing export revenue. Want me to model a NEM 3.0 system for your home? Send me a year of bills and your TOU rate plan and I'll come back with three options.