PG&E NEM 3.0 Explained: What Every California Solar Homeowner Needs to Know

If you've been researching solar in Northern or Central California, you've almost certainly come across the term NEM 3.0. It's one of the most misunderstood policy changes in California solar history — and it directly affects how much money you save. Here's what it actually means.

What was net metering before?

Under the original net metering rules, when your solar panels produced more electricity than your home used, the surplus went to the grid and PG&E credited you at close to the full retail rate — roughly $0.30 per kWh. It made solar economically attractive even without a battery.

What changed under NEM 3.0?

California's Net Billing Tariff — informally called NEM 3.0 — took effect on April 15, 2023 for PG&E, SCE, and SDG&E customers. Export credits dropped to an average of around $0.05–$0.08 per kWh, based on the utility's avoided cost rather than retail rates. That's roughly a 75% reduction in export compensation.

In practical terms: a 10 kW system that previously earned around $2,000 per year in net metering credits now earns closer to $500 per year from grid exports. The gap has to be made up through self-consumption and battery storage.

The battery solution

The math becomes clear when you understand PG&E's time-of-use rate structure. Off-peak rates run from midnight to 3 PM. Peak rates apply from 4 PM to 9 PM — and during those hours, electricity can cost significantly more than off-peak periods.

A properly sized home battery charges during the day when your solar panels are producing, then discharges during the expensive evening peak window. This strategy — using your own stored solar power instead of expensive grid electricity — is what makes solar plus battery the standard system design for PG&E customers in 2026. Battery attachment rates among new California solar installations climbed from roughly 11% before NEM 3.0 to nearly 70% by end of 2024.

What about existing solar owners?

If your system received Permission to Operate before April 15, 2023, you are grandfathered into NEM 2.0 for 20 years from that date. Adding battery storage to an existing NEM 2.0 system does not affect your grandfathered status — you retain your favorable export rates while gaining backup power and peak-hour flexibility.

PG&E rate trajectory

PG&E raised rates multiple times between 2024 and 2025, with further increases projected. Going solar locks in your energy cost baseline for 25+ years, shielding you from that trajectory entirely.

The conclusion: NEM 3.0 changed the optimal system design, but it didn't eliminate the financial case for solar. It shifted the winning strategy to solar plus battery. Alpha Solar CA designs every PG&E system specifically to maximize self-consumption and evening-hour battery discharge.

Contact us for a free custom savings analysis for your PG&E home.