Is Solar Still Worth It After NEM 3.0?

What NEM 3.0 actually changed

Under NEM 2.0, excess solar you sent to the grid was credited at close to the full retail rate you pay for power. Under NEM 3.0 (officially the Net Billing Tariff, which launched April 2023), that export credit dropped to a much lower avoided-cost rate.

The impact: a solar system that previously exported half its production and received generous credits for it now receives far less for that same exported power. The value of power you consume directly from your panels during the day - running your AC, your fridge, your pool pump - did not change. That power still offsets what you would have paid SCE at retail rates.

The new math: self-consumption is everything

Under NEM 2.0, it almost did not matter when you used power vs. when your panels produced it. The virtual net meter smoothed it out. Under NEM 3.0, timing is the entire game.

Power you consume directly from your panels during daylight hours offsets power you would have bought from SCE at whatever rate applies at that time. On SCE's TOU-D-4-9PM rate, daytime off-peak power runs in the 30-35 cent range. That offset is still valuable. The problem is that solar panels produce the most power from about 10am to 3pm - not during the 4-9pm peak window when rates are highest.

Why adding a battery changes the calculation

A battery solves the core NEM 3.0 problem. Instead of exporting excess midday solar at low avoided-cost rates, you store it. Then between 4pm and 9pm - when SCE's peak rates apply - you draw from the battery instead of the grid.

The SGIP program (Self-Generation Incentive Program) offers rebates specifically for home batteries in California. SCE customers can apply. Current SGIP rebate amounts and eligibility here.

When solar makes sense in 2026

Solar is most likely to deliver a strong return if you check at least two or three of these boxes:

When solar may not make sense in 2026

There are real scenarios where the math does not work well under NEM 3.0:

• Very low monthly bills. If your SCE bill is under $100 a month, the savings ceiling is low and payback periods can stretch past 15 years.
• Home is empty all day. If nobody is home and no scheduled loads run during daylight hours, most of your solar production exports at low avoided-cost rates. The economics rely heavily on evening consumption without a battery to bridge it.
• Short-term horizon. Planning to sell in 3 years? Solar adds resale value, but you are unlikely to recoup the full system cost in that window under NEM 3.0 payback timelines.
• Heavily shaded roof. Reduced production compounds every other challenge. If your roof cannot deliver 80% or more of the theoretical production, the numbers get tight.

The SCE rate trajectory makes waiting expensive

SCE has raised residential rates significantly every year since 2019. Approved increases through 2028 are already on file with the CPUC. Every year you wait, you pay those higher rates with no offset and no asset.

The argument for waiting - "rates might come down" or "panels will get cheaper" - has not played out for homeowners who made it in 2022 or 2023. Rates kept rising. Panel prices have been relatively stable since 2022. Meanwhile, the federal investment tax credit is scheduled under current law to begin stepping down after 2032.

The risk of waiting is not hypothetical. It is concrete: you pay more in electricity bills with nothing to show for it.

NEM 3.0 vs NEM 2.0: should you rush to grandfathering?

Homeowners who installed under NEM 2.0 kept those terms for 20 years. That window is closed for new customers - NEM 3.0 applies to all new solar applications.

There is no NEM 2.0 grandfathering opportunity to rush. What you should focus on instead is system design that maximizes self-consumption and battery sizing to capture the peak-rate savings opportunity. The right system design under NEM 3.0 is different from the right design under NEM 2.0.

What the payback period looks like now

These ranges are illustrative and depend heavily on system size, shading, usage patterns, and whether you add a battery. Use them as directional guides, not promises.

Ranges assume 30% federal ITC applied, standard SCE TOU-D-4-9PM rate. Individual results vary. Get a site-specific estimate for your home.

What to look for in a system design under NEM 3.0

Under NEM 2.0, oversizing your system was a reasonable strategy. Extra production earned full retail credits. Under NEM 3.0, oversizing beyond your home's self-consumption capacity mostly produces cheap exports. What matters now:

• Right-size for consumption, not export. A system sized to cover roughly 90-100% of your daytime usage is better than one sized to maximize production.
• Battery sizing to cover the peak window. A 10kWh battery covers an average home through the 4-9pm TOU window. Homes with AC running through the evening need more.
• TOU rate selection. SCE has multiple TOU rate options. The right rate depends on your usage pattern. Ask installers to run numbers on your actual 12-month SCE data.

For more on SCE rate structures: SCE Summer TOU Rates Explained and Solar PPA vs Buying Panels Under NEM 3.0.

Frequently asked questions

Is solar still worth it after NEM 3.0?

For most SCE homeowners, yes. The economics changed but did not break. Self-consumption savings at full retail rate still add up, SCE rates are still rising, and the 30% federal tax credit is still in effect. Homes with daytime usage or a battery see the strongest returns.

What is NEM 3.0?

NEM 3.0 (Net Billing Tariff) is California's current compensation structure for rooftop solar that launched April 2023. It replaced NEM 2.0. The main change is that excess solar sent to the grid is now compensated at avoided-cost rates rather than near retail rates.

Should I wait for NEM 4.0 or a policy change?

Waiting is a bet that policy improves and that the savings from waiting outweigh the electricity bills you pay in the meantime. SCE rates rose in 2024, 2025, and 2026. There is no announced NEM 4.0 timeline. The concrete downside of waiting is real and calculable.

Does a battery make solar worth it under NEM 3.0?

Adding a battery substantially improves NEM 3.0 economics. It converts midday solar production you would export at low rates into stored power you use during the 4-9pm peak window at high rates. The SGIP rebate helps offset battery cost.

What was the biggest mistake under NEM 2.0 that new buyers should avoid?

Oversizing for export. Under NEM 2.0 that made sense. Under NEM 3.0, extra production beyond your self-consumption capacity earns very little. The right system size is calibrated to your actual usage, not the maximum your roof can hold.