California’s Net Energy Metering (NEM) program has long allowed homeowners to save on electricity bills by earning credits for the excess solar energy they send to the grid. However, with the introduction of NEM 3.0, those credits have dropped significantly, reducing the financial benefits of exporting solar power. Under the new policy, homeowners who install solar without battery storage will receive far less compensation for the extra energy their systems produce.
Instead of relying on utility buyback rates, you can maximize savings by using as much of your own solar power as possible. Home battery storage is the key to making that happen. By storing solar energy during the day and using it when the sun isn’t shining, you can reduce your reliance on the grid, avoid peak electricity rates, and maintain power during outages.
If you’re considering solar in San Jose, now is the time to think beyond panels and invest in a complete solar-plus-storage system. Contact us at (650) 600-0747 to learn how Infinium Solar can help maximize your investment.
The Evolution of NEM and What It Means for Solar Homeowners
NEM has been the foundation of California’s solar incentive structure for years, allowing homeowners to earn credits for the excess electricity their solar panels generate. Since its introduction, the program has evolved significantly, with the most recent iteration—NEM 3.0—bringing significant changes that impact new solar customers.
The first version, NEM 1.0, was launched to encourage solar adoption, granting homeowners full retail credit for surplus energy sent to the grid. In 2016, NEM 2.0 modified the structure by adding non-bypassable charges and transitioning to time-of-use (TOU) rates. However, customers still received compensation based on retail electricity prices.
On December 15, 2022, the California Public Utilities Commission (CPUC) approved NEM 3.0, which officially took effect on April 15, 2023. The new policy significantly reduces the value of exported solar energy—by as much as 75% compared to NEM 2.0—by shifting compensation from retail to wholesale electricity rates.
The biggest takeaway from NEM 3.0? Using a battery for self-consumption is now the most effective way to maximize your solar investment. With lower export rates, you benefit more from using your solar power directly than selling it back to the utility.
The Pros and Cons of NEM 3.0
California’s NEM 3.0 has reshaped the financial landscape for solar energy, making self-consumption and battery storage more critical than ever. While the new policy still provides incentives for solar adoption, the drastic reduction in export compensation has changed how homeowners can maximize their savings.
Take a closer look at the benefits and drawbacks of NEM 3.0.
Pros of NEM 3.0
- Continued incentives for solar – While export rates have dropped, you still receive credits for excess energy sent to the grid. Even at lower compensation rates, generating your own solar power remains far more cost-effective than purchasing all electricity from the utility.
- Encourages self-consumption – With NEM 3.0 reducing export rates, you are now incentivized to use as much of your own solar power as possible, lowering reliance on expensive utility electricity.
- Boosts battery storage adoption – Because the best way to maximize savings is to store excess solar energy for later use, NEM 3.0 makes home battery storage a wiser investment. A solar-plus-storage system allows you to improve your return on investment by using stored power during peak-rate periods or outages.
Cons of NEM 3.0
- Lower compensation for excess energy – The biggest downside is the reduced payment for surplus solar power. Compensation under NEM 3.0 is based on wholesale electricity prices rather than retail rates, slashing payouts by up to 75%.
- Strict utility monitoring – Utilities measure solar exports frequently, meaning any energy not immediately consumed is automatically sent to the grid and credited at a lower rate. Without a battery, you lose control over how your excess power is used.
- Longer payback period for solar systems without storage – Since you now earn less from sending energy to the grid, solar-only systems take longer to pay for themselves. As a new solar adopter, you may see extended return-on-investment timelines without a battery compared to previous NEM policies.
Maximizing Your Solar Investment: Why Battery Storage Is a Game Changer
Under NEM 3.0, solar battery storage has become essential for homeowners looking to maximize their energy savings. Instead of sending excess power to the grid for minimal compensation, battery storage allows solar homeowners to keep and use more of the energy their system generates.
What Is Solar Battery Storage?
A solar battery stores the excess electricity your panels generate during the day, allowing you to use it when you need it most—like in the evening when solar production drops or during a power outage.
Instead of selling your extra energy back to the grid at a low rate under NEM 3.0, a battery lets you keep that power for your own use, maximizing your return on investment.
The benefits of solar battery storage include the following:
- Energy independence – With a battery, you can use your stored solar power during peak hours or outages, reducing dependence on the grid and delivering electricity when needed.
- Protection against rising utility rates – Many California homeowners are subject to Time-of-Use (TOU) pricing, meaning electricity costs more during high-demand hours. A battery allows you to avoid these premium rates by drawing from stored energy instead of buying from the grid.
- Maximized savings and efficiency – Because NEM 3.0 reduces the compensation for exported solar energy, sending excess power to the utility is no longer as financially beneficial. Storing and using your own solar electricity is an effective way to make the most of your system.
Solar Is Still Worth It Under NEM 3.0
With NEM 3.0 reducing the value of exported solar energy, you might wonder whether going solar still makes financial sense. The answer is yes – solar remains a great way to cut electricity costs. NEM 3.0 has shifted the focus to self-consumption, so it’s crucial to design a solar system that prioritizes using energy on-site rather than sending it to the grid. Pairing solar panels with battery storage allows you to utilize your solar investment fully, minimizing grid dependence and locking in long-term savings.
Contact our knowledgeable professionals at Infinium Solar if you're considering switching to solar. Call (650) 600-0747 to get started on a customized solution that works for you.