California NEM 3.0
California's 2023 net metering reform that cut export compensation by ~75% — dramatically changing solar and battery economics in the largest U.S. solar market.
Net Energy Metering 3.0 (NEM 3.0), effective April 2023 for new California solar customers, replaced full retail export credits with "Avoided Cost Calculator" rates that pay roughly $0.04–$0.08/kWh for exported power — compared to $0.25–$0.35/kWh retail rates under NEM 2.0. The change fundamentally restructured solar economics.
Under NEM 3.0, solar-only systems have significantly longer payback periods (8–12 years vs. 5–7 under NEM 2.0). However, NEM 3.0 specifically incentivizes battery storage with higher avoided-cost rates during evening peak hours — a designed market signal to shift solar production to grid-needed times. A properly sized solar-plus-battery system can achieve economics comparable to NEM 2.0 by storing midday production and releasing it during evening peak hours (4–9 PM) when avoided cost rates are highest ($0.15–$0.30/kWh).
NEM 3.0 is California-specific but signals policy risk for solar owners in other states — net metering policy can change after installation, affecting returns on existing and future systems.
Real-World Example
The Los Angeles homeowner installed solar in March 2023 before the NEM 3.0 deadline — grandfathering under NEM 2.0 terms for 20 years; her neighbor who installed in May 2023 under NEM 3.0 needed to add a battery to achieve similar economics.