NEM 3.0 and home batteries: how the math changed

Our NEM 3.0 glossary entry covers what the rule is and why it pushed batteries from optional to close to required on new California solar. This guide goes a level down into the mechanics: where the export credit number actually comes from, what rate plan you are forced onto, the deadline attached to the bonus credit, and how a battery and SGIP stack on top of each other.

All of the regulatory detail below comes from the California Public Utilities Commission's net energy metering and net billing page, read July 2026. Tariffs are revised regularly, and utilities publish their own current export rate tables, so treat every figure here as a starting point to verify rather than a quote for your address.

What the tariff is actually called

Almost nobody in the industry says "net billing tariff," but that is the legal name. NEM 3.0 is the informal label. The CPUC calls it the NBT, adopted in Decision 22-12-056, and the three big investor-owned utilities market it as the Solar Billing Plan. If a quote or a utility letter says Solar Billing Plan, that is the same thing.

It applies to customers who applied for interconnection on or after April 15, 2023, in PG&E, SCE, and SDG&E territory. Municipal utilities such as SMUD and LADWP are outside CPUC jurisdiction and run their own tariffs, so their customers are not on this tariff at all; the small investor-owned utilities have their own CPUC-approved versions.

Where the export credit number comes from

Under the older NEM tariffs, exported energy was credited at your import rates. Under the net billing tariff it is credited using values from the CPUC's Avoided Cost Calculator, which the Commission's own tariff comparison describes as usually lower than import rates.

Two things follow from that, and both matter more than the headline.

First, there is no single export rate. The Avoided Cost Calculator produces hourly values, which utilities publish as export rates varying by month, hour, and weekday or weekend. A number quoted as "the NEM 3.0 export rate" is an average of a curve, not a price.

Second, the curve is not uniformly bad. The CPUC states that export compensation is usually lower than the retail rate but can rise above the retail rate on late summer evenings. That is the whole reason storage changes the math: the hours when exports are worth the most are the hours a battery can choose to discharge into.

At the annual true-up, any leftover credit is cashed out at the wholesale price of energy rather than at your export rate. The CPUC's tariff comparison lists net surplus at true-up under the net billing tariff as the wholesale price of energy, without publishing a rate; your utility publishes its own current net surplus schedule. Practically, that means oversizing a system to bank a large annual surplus is a poor strategy under this tariff.

Self-consumption versus export

The behavioral shift NEM 3.0 forces is simple to state. Under the old rules, it barely mattered whether a solar kilowatt-hour was used at home or exported, because the credit was close to the retail price either way. Under net billing, using it at home is worth what you would have paid for it, and exporting it is worth the avoided-cost credit.

So the question stops being how much solar you generate and becomes how much of it you keep. A battery is the tool that moves midday surplus into the evening time-of-use peak instead of sending it out at the low-value hours. The CPUC is unusually direct about this in its own materials: it states that customer-generators can maximize bill savings under the tariff by installing battery storage alongside their generation, and reports that nearly 70 percent of net billing customers had paired batteries with their solar by the end of 2024.

That last figure is a useful sanity check on any solar-only California quote. If seven in ten people on this tariff added storage, a proposal that skips it should explain why.

The rate plan you are required to take

This part is easy to miss in a sales conversation. Net billing customers do not keep their old rate. The CPUC requires them to take service on a specific electrification time-of-use rate with lower off-peak and higher on-peak prices than standard time-of-use rates. As of the CPUC's current listing, those are E-ELEC for PG&E, TOU-D-PRIME for SCE, and EV-TOU-5 for SDG&E.

The shape of that rate is the engine behind a battery's daily savings, so it belongs in your own math rather than in a spreadsheet you never see. Our time-of-use plans guide covers how to read a peak-to-off-peak spread, and the calculator lets you test the result against your actual usage.

The export adder and its 2027 deadline

There is a bonus credit, it is time-limited, and it is not available to everyone.

Per the CPUC, residential PG&E and SCE customers who apply to interconnect a net billing facility before the end of 2027 receive slightly higher-than-normal bill credits for exported energy, for nine years. SDG&E customers are excluded, on the reasoning that SDG&E's higher electric rates already produce more bill savings. Customers who are required to add solar, such as under California's building code for new construction, do not receive the adder either.

We are not going to attach a dollar value to that adder, because the amount depends on your utility's published schedule and the export hour. What matters for a decision is the structure: an application-date deadline, a nine year duration, and two exclusions. If an installer cites the adder, ask them to show you the utility's current schedule in writing.

Interconnection cost, sizing, and the nine year lock

Three more mechanics worth knowing before you sign anything.

Interconnection fee. The CPUC's tariff comparison lists a one-time interconnection fee of $94 to $145 for facilities under 1 MW, which covers residential systems, varying by utility. It is a real line item, not a myth, though it is small next to the system cost.

Sizing headroom. Under the net billing tariff, systems may be sized to the customer's annual electric load plus up to 50 percent more if the customer attests to a need, which is more generous than the older NEM 2.0 rule. That headroom exists mostly to accommodate future electrification, not to bank exports.

The nine year legacy period. The CPUC states the original interconnecting customer is guaranteed the net billing tariff for nine years. Customers moving over from a previous NEM tariff do not get that legacy period. Nine years is shorter than most battery warranties, which is a reason to be careful about payback estimates that assume today's export rules hold for the full life of the hardware.

How SGIP stacks on top

SGIP is a separate program from anything described above. It is a rebate on the battery itself, paid per usable kilowatt-hour, administered through the CPUC and the utilities. Full detail is in our SGIP explainer, and the state-level picture is in the California report.

Two honest points about stacking. The rebate cuts your upfront cost once; the tariff mechanics above affect your bill every month. They are different kinds of value and should sit in different lines of your math. And SGIP is funded in rounds with limited money, so it is not a standing entitlement.

One thing SGIP does not do is replace the federal credit. The Section 25D residential credit expired on December 31, 2025. A California homeowner buying a battery with cash in 2026 receives zero federal tax credit. The only surviving federal path is a lease or power purchase agreement, where the third party that owns the system may claim the Section 48E commercial credit and pass some of that value through in the price. Details are in our 2026 battery tax credit guide.

What to ask about a California quote

Ask which tariff and which export rate schedule the proposal assumes, and get the utility's own published table rather than the installer's summary. Ask whether the export adder is included in the projection, and whether you qualify. Ask which electrification rate you will be moved to, and confirm the assumed peak and off-peak prices match your utility's current schedule. Ask, in writing, who claims SGIP if the deal is a lease.

Then run the result yourself in the calculator rather than accepting a savings estimate you cannot reproduce. California tariffs change, so verify every figure above with the CPUC or your utility before it moves your decision.