NEM 3.0 Explained for SCE Customers in Temecula: What Changed and What It Means for Your Solar System

Adrian Marin|Independent Solar Advisor, Temecula CA

Helping Riverside County homeowners navigate SCE rates and solar options since 2020

California's Net Billing Tariff, known as NEM 3.0, took effect for SCE on April 14, 2023. It cut the rate SCE pays for excess solar you export from roughly 28-30 cents per kWh to 5-8 cents. That change rewrites the math on how solar systems should be sized, whether batteries make economic sense, and what the realistic payback period looks like for new customers in Temecula, Murrieta, and surrounding areas.

What NEM 2.0 Looked Like, and Why It No Longer Applies to New Customers

Under the old Net Energy Metering 2.0 program, SCE credited excess solar exports at close to the retail electricity rate. When you sent a kilowatt-hour to the grid during the afternoon, you received a credit worth roughly 28 to 30 cents. That credit offset the electricity you imported from the grid in the evenings at the same rate. The grid functioned almost like a free, unlimited battery.

This structure made solar sizing simple: install enough to match your annual consumption, export freely during the day, import back at night for nearly zero net cost, and settle the annual balance in a True-Up bill once a year. Oversizing by 10 to 15 percent above consumption was common because any extra production had nearly full retail value in the form of credits.

NEM 3.0 ended this arrangement for new solar customers. The California Public Utilities Commission approved the Net Billing Tariff in December 2022. SCE began applying it to all new interconnections from April 14, 2023 onward.

What NEM 3.0 Changed: The Avoided Cost Calculator and Its Export Rates

Under NEM 3.0, the export compensation rate is no longer the retail electricity rate. It is the "Avoided Cost Calculator" (ACC) rate, a value that approximates what the utility would have paid to procure that energy from wholesale market sources.

The ACC rate varies by month and by time of day. In practical terms, it averages 5 to 8 cents per kWh across the year for most Temecula and Murrieta households. During summer afternoons when the grid is stressed, rates are somewhat higher. During winter middays when solar is plentiful and demand is lower, rates are near the floor.

At the same time, what you pay for electricity from SCE has not gone down. TOU-D-PRIME customers in Riverside County pay 34.5 cents per kWh during the 4pm to 9pm on-peak window on weekdays, and 47 to 55 cents during summer peak periods. The gap between the sell rate (5 to 8 cents) and the buy rate (34.5 cents and above) is the defining feature of NEM 3.0 economics.

A kilowatt-hour you export is worth about 6 cents. A kilowatt-hour you consume directly from your solar panels instead of importing from the grid is worth the full retail rate you would have paid: 34.5 cents during peak, and 15 to 20 cents during off-peak hours. Self-consumption is worth five to six times as much as exporting during the hours that matter most.

How NEM 3.0 Changes System Sizing: Oversizing No Longer Helps

Under NEM 2.0, an installer might size a system at 110% of annual consumption to ensure you export a modest surplus, knowing that surplus had near-full retail value. The extra panels paid for themselves in credits.

Under NEM 3.0, that math reverses. Every kilowatt-hour your system produces beyond what your home consumes in real time is exported at 6 cents rather than consumed at 30-plus cents. Adding more panels to generate surplus that goes to the grid at 6 cents does not improve the economics. It just increases your upfront cost for production that earns a fraction of what it cost to generate.

The correct sizing strategy under NEM 3.0 is to match your solar production profile to your home's actual daytime consumption as closely as possible, rather than matching annual totals. A system sized to 100% of annual consumption but with large afternoon production that exceeds daytime load will still export substantial excess at low rates unless a battery captures it.

Practically, this means the system sizing conversation has become more detailed. A good installer will model your hourly consumption profile, your roof's production curve through the year, and the expected daily export pattern before recommending a system size. The goal is to maximize the percentage of solar production that your home consumes directly, which is called the self-consumption ratio.

NEM 3.0 Payback Periods vs NEM 2.0: The Real Numbers

The payback period comparison between NEM 2.0 and NEM 3.0 depends on system size, consumption patterns, and rate schedule, but the directional impact is consistent across all configurations.

Under NEM 2.0, a typical Temecula homeowner installing a $30,000 system (after the 30% federal tax credit: $21,000 net) with SCE paying near-retail rates for exports could expect a payback period of 5 to 8 years. SCE's continued rate increases pushed that number toward the lower end for customers who installed in 2021 and 2022.

Under NEM 3.0 without a battery, the same $21,000 net system faces payback periods of 10 to 14 years. The reduction in export value is the driver. A home that exports 40% of its solar production at 6 cents instead of 30 cents loses $0.24 per kWh in value on that exported share. At 6,000 kWh of annual exports, that is $1,440 per year in lost value compared to NEM 2.0 economics. Over 10 years, that is $14,400 in forgone credits, which effectively shifts the payback timeline by four to six years for many households.

Under NEM 3.0 with a properly sized battery, payback periods narrow considerably. A battery that captures 10 kWh per day of excess midday production and dispatches it during the 4pm to 9pm on-peak window converts low-value exports into high-value self-consumption. The battery itself has a cost and a payback, but when the ITC and SGIP rebate are applied, the combined solar-plus-storage system can achieve paybacks of 7 to 10 years, which is closer to what NEM 2.0 solar-only systems delivered.

Why Batteries Became Economically Essential Under NEM 3.0

Under NEM 2.0, a battery added convenience and backup power but did not dramatically change the financial case for solar. The grid was already functioning like a free battery, crediting your exports at retail and letting you import at the same rate. Adding a physical battery improved resilience during PSPS events but did not change the economics much.

NEM 3.0 changed this completely. With export rates at 5 to 8 cents and peak import rates at 34.5 cents and above, a battery that captures excess midday solar and discharges it during the evening peak replaces grid purchases at a 4 to 6 times higher value than exporting to the grid would achieve.

The economic case is straightforward. A 13.5 kWh Tesla Powerwall 3 that self-consumes 10 kWh per day instead of exporting saves $3.00 per day in avoided grid purchases at TOU-D-PRIME peak rates ($0.34 x 10 minus $0.06 x 10 = $2.80 to $3.20 per day depending on exact rate and timing). At $3 per day, that is $1,095 per year. After the 30% ITC and SGIP rebate, a Powerwall 3 net cost can be $5,000 to $8,000, pushing the battery-specific payback to 5 to 7 years independent of the panels.

The CPUC explicitly designed NEM 3.0 to shift the economics toward batteries. The intention was to reduce the midday solar export glut on the grid (the "duck curve") by incentivizing storage that dispatches in the evening when demand peaks. For Temecula and Murrieta homeowners, the result is that solar-plus-storage is now a stronger combined investment than solar alone, even though solar alone is still financially sound at current SCE rates.

Grandfathering: What NEM 2.0 Customers Need to Know

Homeowners who were on NEM 2.0 before April 14, 2023 are grandfathered on their original program terms for 20 years from their interconnection date. This is one of the most important facts for existing solar customers in Temecula and Murrieta.

If you installed solar and received SCE interconnection before April 14, 2023, you remain on NEM 2.0. SCE must continue paying you near-retail rates for your exports through the full 20-year grandfathering period. If your system was interconnected in January 2022, you are protected through January 2042.

This grandfathering applies to your existing system size and configuration. If you add a battery to an existing NEM 2.0 system, the battery addition can be made without triggering a re-enrollment in NEM 3.0, under CPUC rules that allow system modifications to stay on the grandfathered tariff. However, if you significantly expand your panel capacity (typically defined as adding more than 10% to your existing system size), the expansion may be subject to NEM 3.0 treatment.

If you are a Temecula or Murrieta homeowner currently on NEM 2.0, your solar investment is protected for the duration of your grandfathering period. The economics of your system are calculated under the original tariff. You do not need to do anything to maintain this protection, and the value of your system is substantially higher than it would be under NEM 3.0.

One consideration for NEM 2.0 customers: if you are planning a major roof replacement that requires removing and re-installing your panels, consult with your installer before proceeding. The process of disconnecting and reconnecting a solar system can affect interconnection status in some cases. Get written confirmation from SCE and your installer about whether the reinstallation will maintain your grandfathered tariff.

Optimizing a Solar System for Self-Consumption Under NEM 3.0

For new customers in SCE territory, the design goal has shifted from annual production matching to hourly self-consumption maximization. These are the practical design decisions that affect performance under NEM 3.0:

System Size: Match Daytime Consumption, Not Annual Total

Work with your installer to model your hourly load profile. If your home uses 5 kW on average between 9am and 4pm (when solar production is highest), a system producing 6 to 7 kW peak during those hours will generate roughly what you consume, leaving a modest excess for the battery. Sizing to 10 to 12 kW peak to maximize annual output will produce large afternoon surpluses that export at 6 cents rather than being consumed at 30-plus cents.

Battery Sizing: Capture the Evening Peak

The 4pm to 9pm window is where NEM 3.0 penalty is highest. A battery sized to cover your household load during those five hours per day is the highest-value use of storage under the current rate structure. For a home using 2 kW average during the evening: 2 kW times 5 hours is 10 kWh. A single Powerwall 3 (13.5 kWh) covers this with margin. Two Enphase 5P units (10 kWh total) cover it closely matched to the need.

Rate Schedule: Switch to TOU Before Installing

All new solar customers in SCE territory are automatically enrolled on a TOU rate schedule under NEM 3.0. But if you have not yet installed solar, reviewing your rate schedule before installation and switching to TOU-D-PRIME or TOU-D-5-8PM beforehand can help you understand your actual peak costs and size the battery to the right window.

Smart Inverter and Energy Management Systems

Modern inverter systems with energy management software can optimize dispatch in real time. Tesla's Gateway software manages Powerwall charge and discharge to maximize savings given current rates and production forecasts. Enphase's IQ System Controller and Enlighten app does the same for Enphase systems. These tools prioritize charging the battery from solar, dispatch storage during high-rate periods, and avoid exporting to the grid at low-value times when storage capacity remains.

Setting your battery to "self-powered" or "time-based control" mode in the relevant app is usually the right configuration for NEM 3.0 customers focused on economics rather than pure backup. Under "self-powered" mode, the battery charges from solar first and discharges to cover home load before importing from the grid. Under "time-based control," you program specific charge and discharge windows aligned with your rate schedule.

The April 14, 2023 Start Date and What It Means If You Are Shopping Now

Every SCE customer who received solar interconnection approval from April 14, 2023 onward is on NEM 3.0. There is no longer any path to NEM 2.0 for new systems. The grandfathering cutoff is fixed.

If you are shopping for solar in 2026, your system will be subject to NEM 3.0 economics. Any proposal you receive should reflect NEM 3.0 export rates, not NEM 2.0 rates. Be cautious of any installer who presents a savings projection that assumes export credits at or near the retail import rate. Under NEM 3.0, that calculation overstates savings significantly. Ask the installer to show you the assumed export rate in their financial model. If it is higher than 8 cents, the projection is optimistic.

A properly modeled NEM 3.0 proposal will show you two distinct value streams: (1) direct self-consumption savings, which is the retail value of solar electricity your home uses as it is produced, and (2) export revenue, which is the ACC-rate value of surplus energy sent to the grid. For most Temecula and Murrieta homes, the self-consumption portion will account for 60 to 80% of total system value under NEM 3.0. That percentage increases further when a battery is included.