What Is NEM 3.0?

NEM 3.0 is the common name for California’s newer Net Billing Tariff. PG&E generally refers to its version of this program as the Solar Billing Plan.

Under older net energy metering programs, excess electricity exported by a solar system could offset electricity imported from the grid at or near the customer’s retail electricity rate.

This allowed homeowners to export excess solar production during the afternoon and receive substantial credit toward electricity consumed later in the evening.

Under NEM 3.0, imported electricity and exported electricity are valued differently. Electricity purchased from PG&E is charged according to the customer’s applicable time-of-use rate, while exported electricity receives a separate Energy Export Credit.

Export-credit values can vary based on the time of day and season. In many cases, electricity exported during the middle of the day is worth considerably less than the retail rate charged for electricity imported during the evening.

Who Is Subject to NEM 3.0?

The Net Billing Tariff generally applies to newer PG&E solar customers whose interconnection applications were submitted after the transition from NEM 2.0.

Older solar systems may remain under NEM 1.0 or NEM 2.0 during their applicable legacy periods, provided the systems continue to comply with the utility’s rules.

A homeowner should not determine the applicable solar program based only on the year the equipment was installed. Relevant information can include:

• The interconnection application date
• The date the application was deemed complete
• The Permission to Operate date
• Whether the project changed after the original application
• Whether panels or generating capacity were added later
• The rate or tariff listed on the current utility bill

If you purchased a home with an existing solar system, the original interconnection records and current utility statements are usually the best places to begin.

NEM 2.0 vs. NEM 3.0: What Changed?

The solar panels themselves do not operate differently under NEM 3.0. The major change is how the utility calculates the financial value of electricity sent back to the grid.

How Does NEM 3.0 Affect My PG&E Electric Bill?

A PG&E customer on the Solar Billing Plan may see several different types of charges and credits on the electric bill. These can include:

• Charges for electricity imported from PG&E
• Energy Export Credits for electricity sent to the grid
• Non-bypassable charges
• Monthly service or base charges
• Taxes, fees and applicable adjustments
• Gas charges when the property also has natural gas service

The amount of electricity produced by the solar system is not enough, by itself, to predict the final bill. The timing of production, consumption, grid imports and exports also matters.

The 2 kilowatts used directly by the home reduce the amount of full-price electricity that must be purchased from PG&E.

If the remaining 3 kilowatts are exported, they receive the applicable export credit rather than the full retail electricity rate. If the home has a battery, some or all of that excess energy may instead be stored for use later.

Why Can My Bill Be High Even If My Solar Produced More Energy Than I Used?

This is one of the most common points of confusion under NEM 3.0. Annual solar production and annual household consumption cannot always be compared on a simple one-for-one kilowatt-hour basis.

A home may export a large amount of solar electricity during lower-value afternoon periods and then purchase more expensive electricity during the evening.

The total number of exported kilowatt-hours may look similar to the number of imported kilowatt-hours, but their financial values may be significantly different.

Fixed utility charges, non-bypassable charges and other fees may also remain due even when the solar system is operating correctly.

Why Self-Consumption Matters Under NEM 3.0

Self-consumption means using solar electricity inside the home at the same time the system is producing it.

Electricity consumed directly by the home offsets electricity that would otherwise have been purchased at the utility’s retail rate. Electricity exported to the grid receives only the applicable export credit.

Depending on the household and rate plan, homeowners may be able to increase self-consumption by scheduling flexible loads during solar-production hours.

• Run the dishwasher during the late morning or afternoon
• Schedule laundry during daylight hours
• Operate a pool pump while solar production is available
• Charge an electric vehicle when excess solar is available
• Pre-cool the home before higher-priced evening periods
• Charge a home battery using excess solar production

Load shifting should be based on actual system and consumption data. Moving every large load into the afternoon can prevent the battery from charging fully or create other unintended problems.

Why Batteries Matter More Under NEM 3.0

A battery can store solar electricity that otherwise would have been exported during a lower-value daytime period. The stored energy can then be used later, after solar production declines and utility electricity becomes more expensive.

1. Solar production supplies the home’s active electrical loads during the day.
2. Excess solar production charges the battery.
3. Additional solar energy may be exported after the battery is fully charged.
4. The battery discharges during the evening to reduce electricity imported from the grid.
5. The home returns to utility power when the battery reaches its programmed reserve level or discharge limit.

The battery is not creating additional energy. It is shifting energy from one part of the day to another, where that energy may have greater value.

Backup Reserve vs. Daily Bill Savings

Battery settings usually require a tradeoff between backup protection and daily energy savings.

A battery programmed with a high backup reserve keeps more stored energy available for an outage but leaves less capacity available for daily cycling.

A lower reserve may allow the battery to reduce more evening utility consumption but leaves less energy available if an outage occurs unexpectedly.

The appropriate setting depends on the homeowner’s priorities, battery capacity, outage concerns, evening consumption and utility rate plan.

Can a Battery Eliminate My Electric Bill?

Usually not completely. A properly configured battery can reduce grid imports during higher-cost periods, but it cannot eliminate every utility charge.

Battery performance and bill savings are also limited by:

• The usable storage capacity of the battery
• The home’s evening and overnight electricity consumption
• The amount of available solar energy during the day
• Seasonal changes in solar production
• Battery charge and discharge limits
• The programmed backup reserve
• Battery efficiency losses
• The utility rate and export-credit structure

A battery that carries a home through the evening in spring may run out much earlier during a hot Sacramento summer when air-conditioning loads remain high after sunset.

Does NEM 3.0 Apply to SMUD Customers?

No. SMUD is not governed by the same solar tariff that applies to PG&E and California’s other investor-owned electric utilities.

Newer SMUD solar customers are generally served under SMUD’s Solar and Storage Rate. Solar electricity used directly by the home reduces the amount purchased from SMUD, while excess electricity exported to the grid receives SMUD’s applicable export compensation.

Older SMUD solar systems may receive different billing treatment. The original system approval date, ownership changes and later system modifications may all be relevant.

A Sacramento-area homeowner should therefore avoid using PG&E NEM information to evaluate a SMUD bill, or vice versa.

Common Reasons for a High Electric Bill With Solar and Battery Storage

1. The Battery Is Not Discharging During Peak Hours

The battery may be configured for Backup-Only operation, have an unusually high reserve percentage or be using an operating mode that does not match the homeowner’s rate plan.

2. The Battery Runs Out Too Early

The battery may discharge correctly but become depleted before the higher-cost period ends. This can happen when the battery is undersized for the evening load or when air conditioning, cooking, EV charging or other large loads are operating.

3. The Solar System Is Producing Less Than Expected

Inverter faults, failed optimizers, string failures, communication problems, equipment shutdowns or increased shading can reduce solar production. Some failures are not immediately obvious to the homeowner.

For more information, read Solar System Not Producing? 7 Common Causes in Sacramento Homes .

4. The Consumption Monitoring Is Incorrect

Reversed current transformers, incorrect phase assignments, missing loads or improper commissioning can cause a solar or battery application to display inaccurate power-flow information.

Incorrect app data does not automatically mean the utility meter is billing incorrectly. However, bad monitoring data can make the battery operate improperly and make bill problems much harder to diagnose.

5. Household Electricity Use Has Increased

Electric vehicles, pool equipment, additional occupants, work-from-home schedules, electric water heating and air-conditioning use can increase consumption beyond what the original solar system was designed to offset.

6. Large Loads Are Running After Sunset

A home may have strong solar production during the day but still import substantial electricity at night. EV charging, air conditioning, electric cooking and pool equipment can quickly exceed the capacity or output of a residential battery.

7. The Utility Rate Is Not Fully Understood

Some homeowners believe they are on NEM 2.0 when they have actually been placed on the Solar Billing Plan. Others purchase a home without knowing the property’s current solar tariff or annual settlement arrangement.

8. The Utility Bill and Solar App Are Being Compared Incorrectly

A solar application may display total production, direct household consumption and battery activity. The utility meter generally measures only electricity that crosses between the property and the grid.

Solar electricity consumed directly inside the home may never appear as an export on the utility bill.

For a more detailed explanation, see Why Is My Electric Bill Still High After Going Solar? .

How Can I Get More Value From My System Under NEM 3.0?

The goal is generally to reduce expensive grid imports while avoiding unnecessary lower-value exports. Depending on the home and utility rate, useful strategies may include:

• Charging the battery with excess solar production
• Discharging the battery during higher-cost evening periods
• Running flexible household loads during solar-production hours
• Scheduling EV charging when excess solar is available
• Running pool equipment during daytime production
• Pre-cooling the home before peak-rate periods
• Adjusting the battery reserve to match the homeowner’s priorities
• Verifying that production and consumption monitoring are accurate
• Reviewing whether the solar array and battery are properly sized

McKnight Solar Diagnostics provides solar system optimization and utility-bill analysis for existing solar and battery systems throughout the Sacramento area.

How Do I Know Whether I Have NEM 1.0, NEM 2.0 or NEM 3.0?

Review the current utility bill, Permission to Operate documentation and original interconnection records. Useful terms and dates to look for include:

• NEM 1.0
• NEM 2.0
• Net Billing Tariff
• Solar Billing Plan
• Solar and Storage Rate
• Interconnection application date
• Permission to Operate date
• Annual True-Up or settlement date
• Current time-of-use rate schedule

If the system was already installed when you purchased the property, request any available records from the previous owner, utility or original installer.

Can I Add a Battery Without Losing NEM 2.0?

In many situations, battery storage can be added to an existing legacy NEM system without automatically eliminating its NEM 2.0 status. However, the interconnection application, equipment configuration and charging arrangement must comply with the utility’s requirements.

Expanding the solar array is a separate issue. Increasing the system’s generating capacity beyond the allowances of the legacy tariff could affect its eligibility.

How to Properly Evaluate a Solar and Battery Electric Bill

A useful evaluation should review more than a single monthly bill or the solar system’s annual production total. Relevant information can include:

• Hourly or 15-minute solar-production data
• Household electricity-consumption data
• Utility import and export data
• Battery charging and discharging history
• Battery operating mode and reserve percentage
• The current utility rate schedule
• Monthly bills and annual True-Up statements
• Solar inverter faults or system alerts
• Communication and monitoring-system errors

This information can help determine whether the problem is related to solar production, battery programming, monitoring accuracy, increased household consumption or the utility rate itself.

A system can be producing correctly but still deliver disappointing financial results because too much energy is exported during lower-value periods.

Conversely, a homeowner may blame NEM 3.0 when the real problem is a failed inverter, incorrect consumption monitoring or a battery that is not operating as intended.

Is Solar Still Worth It Under NEM 3.0?

Solar can still reduce electricity costs under NEM 3.0, but the system must be designed and operated differently from many older solar-only installations.

A system may perform better financially when the home has:

• Meaningful daytime electricity consumption
• Flexible loads that can be shifted into solar-production hours
• A properly sized and configured battery
• Evening electricity usage that the battery can offset
• Accurate production and consumption monitoring
• A design based on interval data instead of annual totals alone

Results may be less favorable when the solar array is heavily oversized, most production is exported during lower-value periods or the battery is too small to cover the home’s higher-cost evening consumption.

The answer is not simply that solar does or does not work under NEM 3.0. The outcome depends heavily on system design, household consumption, battery operation and the applicable utility rates.

When Should I Have My Solar and Battery System Evaluated?

A professional evaluation may be worthwhile when:

• Your electric bill is considerably higher than expected
• Your annual True-Up increased unexpectedly
• The solar application does not appear to match the utility bill
• Your battery remains full or empty at unusual times
• The battery does not discharge during higher-cost periods
• Your home imports power while substantial solar production is available
• You recently purchased a home with an existing solar system
• Your original installer is no longer in business
• You are considering adding or replacing a battery
• You do not know which solar billing program applies to the property

McKnight Solar Diagnostics provides solar and battery system inspections for homeowners, homebuyers, sellers and real estate professionals throughout the Sacramento area.

Utility tariffs, electricity rates, export-credit values and interconnection requirements can change. This article is provided for general educational purposes and is not a guarantee of future energy production or utility-bill savings. Homeowners should verify their current rate and tariff directly with their electric utility.