In April 2023, California implemented a new policy framework for solar energy known as NEM 3.0 (Net Energy Metering). This major update sparked debate across the state, with industry experts, homeowners, and solar advocates raising concerns about its impact on solar investments. The previous policy, NEM 2.0, allowed homeowners to sell excess energy back to the grid at favorable rates, significantly enhancing the financial benefits of solar adoption.
NEM 3.0 brings several changes aimed at balancing California’s energy grid, but these adjustments also reduce the monetary returns for new solar adopters. In this article, we’ll explore the key changes introduced by NEM 3.0, assess how it affects the financial viability of solar, and suggest strategies for homeowners to still make the most of solar energy.
Key Changes Introduced by NEM 3.0
Lower Export Rates
Under NEM 3.0, the value of electricity sent back to the grid is lower than under NEM 2.0, aligning closer to wholesale energy rates. Export rates now average between 5 to 8 cents per kWh —a sharp drop from the 25 to 30 cents seen under NEM 2.0.
Time-of-Use (TOU) Rates
Homeowners will now be subject to time-of-use pricing , meaning electricity rates vary based on the time of day. Peak hours—typically late afternoon and evening—carry higher rates, while mid-day rates, when solar panels produce the most energy, are lower.
Longer Payback Periods
The reduced export rates directly affect the payback period , meaning it will take longer to recoup the initial investment in solar systems.
Financial Impact of NEM 3.0 on Solar Investments
Payback Period Comparison Under NEM 2.0, most solar systems paid for themselves within 5 to 7 years . With NEM 3.0, payback periods are expected to increase to 9 to 12 years , depending on system size and household energy consumption patterns.Effect on ROI How to Maximize Solar Value Under NEM 3.0 1. Optimize System Size
Oversizing solar systems is no longer as profitable under NEM 3.0. A system that matches the household’s typical energy consumption will provide the best value.
2. Add Battery Storage
Installing a solar battery allows homeowners to store excess energy produced during the day and use it during peak evening hours. This strategy helps avoid higher TOU rates and reduces reliance on grid power.
3. Adjust Energy Consumption Patterns
Shifting energy-intensive activities—like running appliances or charging electric vehicles—to daylight hours ensures more energy is used directly from solar, reducing the need for expensive grid power.
Why Solar Still Makes Sense Despite NEM 3.
Rising Electricity Costs
California’s utility rates continue to increase year after year. According to NRG Clean Power , the average electric bill in California has been rising steadily, with many households spending far more on electricity than the national average. These escalating costs make solar energy an attractive hedge against future utility price hikes.
Environmental and Sustainability Benefits
Solar energy helps reduce carbon footprints and aligns with California’s ambitious climate goals . Homeowners looking to make an impact will still benefit from investing in clean, renewable energy.
Incentives and Rebates
Homeowners can still take advantage of federal tax credits—currently set at 30% of the installation cost —along with other state and local incentives that offset upfront costs.
Insights from Solar Industry Experts According to NRG Clean Power , NEM 3.0 offers new opportunities for smart energy usage despite the initial skepticism. Andrew Cohen from NRG Clean Power, remarks:
“NEM 3.0 is the best thing to happen for homeowners. While many feared it would reduce solar’s value, it’s actually encouraging more thoughtful energy usage and the adoption of technologies like battery storage. This shift empowers homeowners to be even more in control of their energy consumption.”
Similarly, AMECO Solar acknowledges that NEM 3.0 introduces challenges but also pushes for smarter energy planning. Their focus is on designing systems that fit customers’ needs while maximizing long-term value.
Conclusion: Is Solar Still Worth It With NEM 3.0? While NEM 3.0 changes the financial dynamics of solar investments, it does not erase the value of going solar. Homeowners must now think more strategically—focusing on optimized system sizes, battery storage, and behavioral adjustments to maximize returns. Although the payback period is longer , the potential for savings over the system’s lifespan remains strong, especially with rising utility rates and federal incentives.
Solar energy remains a sustainable choice with environmental benefits and a hedge against increasing electricity costs. For those willing to adapt, solar power is still very much worth it in California under NEM 3.0.
