NEM 2.0 vs. NEM 3.0 (NBT): What’s Changed and What It Means for Solar Customers

If you’ve been researching solar in California, you’ve probably come across the terms NEM 2.0 and NEM 3.0, or heard about something called the Net Billing Tariff (NBT). These are different versions of the Net Energy Metering (NEM) program, which determines how you’re credited for the solar energy your system exports to the grid.

NEM 2.0 was in effect until April 14, 2023, when the new NEM 3.0 (NBT) rules took over.

Here’s what changed, why it matters, and what it means for solar system design, financing, and battery storage moving forward.

What Is NEM?

Net Energy Metering (NEM) allows solar homeowners to receive credit for the excess electricity they send to the utility grid. Under earlier programs like NEM 1.0 and NEM 2.0, this meant receiving nearly full retail value for each kWh exported.

NEM made solar a no-brainer in California—until utilities and regulators changed the rules to reflect grid demands and rising solar penetration.

The Shift from NEM 2.0 to NEM 3.0 (NBT)

NEM 3.0 was approved by the California Public Utilities Commission (CPUC) in late 2022 and went into effect on April 15, 2023. Officially called the Net Billing Tariff (NBT), this new structure dramatically changes how exported solar energy is valued.

Key Differences: NEM 2.0 vs. NEM 3.0 (NBT)

Feature

NEM 2.0

NEM 3.0 (NBT)

Export Value

Retail rate (TOU-based)

Wholesale rate (avoided cost)

Credit Structure

One-to-one-ish offset with TOU

Credits based on hourly market prices

TOU Plan Required

Yes

Yes

Non-Bypassable Charges

Yes (~$0.02–$0.03/kWh)

Yes

Battery Incentives

Optional but helpful

Essential for savings

Interconnection Fee

$75–$150

Same

Rate Lock

20 years

9 years for export value; TOU may change

Payback Period

5–7 years

8–12 years (without battery)

So What’s the Big Deal with NEM 3.0?

1. Export Credits Are Much Lower

Under NEM 3.0, your solar exports are credited at the “avoided cost” rate—the amount your utility saves by not generating or buying power elsewhere. These rates are:

• Much lower than retail (as low as $0.05/kWh midday)

• Change every hour of the day

• Change by season and utility (PG&E, SCE, SDG&E)

This means solar-only systems without batteries now export power during the day for pennies on the dollar, while still buying back power at peak rates in the evening.

2. Solar Without Storage Is Less Valuable

Under NEM 2.0, you could go solar without a battery and still make it work financially.

Under NEM 3.0, you need to self-consume or store your excess energy to make the economics work. Batteries let you:

• Avoid exporting during low-value midday hours

• Discharge during high-value evening peaks

• Shrink your reliance on utility power when it’s most expensive

This is why NEM 3.0 is considered a battery-focused policy.

Real-World Example: Solar-Only vs. Solar + Battery

Let’s say you install a 6 kW system that produces 9,000 kWh/year.

Under NEM 2.0:

• You export during the day and offset your usage at near retail value

• Payback = ~6 years

• No battery required

Under NEM 3.0:

• Your exported energy is worth far less (up to 75% less)

• You buy back power at higher TOU rates

• Payback extends to 10–12 years without storage

• Add a battery, and you can restore ROI to ~6–8 years

How Batteries Shift the Equation

With NEM 3.0, batteries are no longer a luxury—they’re a tool for rate arbitrage.

Batteries let you:

• Charge using your own solar when rates are low (or free)

• Discharge to your home when grid power is expensive (typically 4–9 PM)

• Participate in time-based control programs or Virtual Power Plants (VPPs) for additional value

Battery incentives like the Self-Generation Incentive Program (SGIP) can reduce upfront costs by thousands of dollars, making them even more attractive under NEM 3.0.

9-Year Export Value Lock

NEM 3.0 includes a 9-year guarantee for your export rate schedule (based on “electrification rates”), even if the utility adjusts its TOU plans. However, your retail TOU rate structure itself may still change over time—unlike NEM 2.0’s full 20-year lock-in.

Who Gets Which Program?

• If you applied for interconnection before April 14, 2023, and got permission to operate (PTO) within 3 years, you’re under NEM 2.0.

• Everyone else going forward is under NEM 3.0 / NBT.

Final Thoughts: Is Solar Still Worth It Under NEM 3.0?

Absolutely—but your strategy has to change.

Under NEM 2.0, you could install a solar-only system and still come out ahead. Under NEM 3.0, success means focusing on:

• Maximizing self-consumption

• Avoiding daytime exports

• Storing energy for evening use

• Designing for TOU-based optimization

• Leveraging battery incentives + smart software

Solar is still a smart investment—but now it’s smarter with storage.

Want to See What NEM 3.0 Looks Like for Your Home?

We’ll run your actual usage, utility rate, and system design through our modeling tools and show you the impact of solar alone vs. solar + storage.

Book a consultation at www.reinnovations.org to see which setup gets you the best ROI and protects you against rising energy costs.