NEM 2.0 is the previous version of California’s Net Energy Metering (NEM) program, designed to reward solar customers for generating excess energy and sending it back to the utility grid.
Under NEM 2.0, homeowners and businesses benefited from:
- Full retail energy credits for excess solar power sent back to the grid
- No monthly minimum charges for participation
- No strict limits on how much energy could be exported
This structure made solar extremely attractive, allowing customers to significantly reduce or even eliminate their electric bills over time.
What is NEM 3.0 and How Has It Changed?
NEM 3.0 (also known as the Net Billing Tariff) introduces major changes that impact how solar savings are calculated in California.
Key updates under NEM 3.0 include:
- Mandatory Time-of-Use (TOU) rates, meaning electricity costs vary depending on time of day
- Lower compensation rates for excess solar energy sent to the grid
- New monthly charges for solar customers
- Export limitations, reducing how much energy can be credited
These changes shift the value of solar toward self-consumption rather than exporting energy, making battery storage systems more important than ever.
NEM 2.0 vs. NEM 3.0: Key Differences
Understanding the difference between NEM 2.0 and NEM 3.0 is critical when evaluating solar in California.
- Energy Credits:
NEM 2.0 offered full retail rates, while NEM 3.0 significantly reduces export compensation - Monthly Costs:
NEM 2.0 had no minimum charges; NEM 3.0 introduces ongoing fees - Energy Strategy:
NEM 2.0 rewarded exporting energy, while NEM 3.0 rewards using your solar power in real-time - Return on Investment (ROI):
NEM 2.0 systems typically deliver faster payback and higher long-term savings
Rising Electricity Costs in California
Over the past decade, electricity prices in California have steadily increased, making solar energy a more valuable investment.
According to the U.S. Energy Information Administration, the average retail electricity rate rose from about 20¢ per kWh in 2010 to around 28¢ per kWh in 2020—and rates have continued climbing.
This upward trend means homeowners are paying more each year, strengthening the long-term financial benefits of switching to solar.
Is Solar Still Worth It Under NEM 3.0?
Yes—solar is still a smart investment in California, but the strategy has changed.
While NEM 3.0 reduces export credits, homeowners can still save significantly by:
- Using more of their solar energy during peak hours
- Installing battery storage to store excess energy
- Locking in long-term energy savings and protection from rising utility rates
That said, customers who secured NEM 2.0 were able to maximize their return, making timing an important factor when going solar.
Get a Custom Solar Savings Estimate
If you’re considering solar, the best way to understand your savings is with a personalized analysis based on your home, usage, and goals.
Call 562-852-5626 today to see how going solar can work for you and start taking control of your energy costs.
