In April 2023, California regulators rolled out NEM 3.0, the biggest change to solar economics in over a decade. The new rules slashed the value of solar energy exported to the grid by roughly 75 percent, fundamentally changing the math for grid-tie solar systems.
If you installed solar before April 2023, you are grandfathered into the older NEM 2.0 rules for 20 years. But if you are considering solar today, NEM 3.0 applies, and the economics look very different. Here is what changed, why it matters, and how off-grid solar sidesteps the problem entirely.
What Is Net Energy Metering?
Net Energy Metering, or NEM, is the policy that governs how utilities credit you for solar energy you send back to the grid. With a grid-tie solar system, your panels produce power during the day. You use what you need, and any excess flows back to the utility. Your meter spins backward. At night, you draw power from the grid, and the meter spins forward.
At the end of the month, the utility calculates the net difference. If you exported more than you used, you get a credit. If you used more than you exported, you pay for the difference. The key question is: how much is each kilowatt-hour of exported solar worth?
NEM 2.0: The Old Rules
Under NEM 2.0, which applied to systems installed before April 2023, you received roughly 1:1 credit for exported solar. If the utility charged you 30 cents per kWh, they credited you about 30 cents for every kWh you sent back. This made grid-tie solar very attractive. You could size your system to overproduce during summer, bank credits, and draw them down in winter.
NEM 2.0 customers are grandfathered for 20 years from the date their system was interconnected. If you installed solar in 2022, you keep NEM 2.0 rates until 2042. This is a significant financial benefit and one reason there was a rush to install solar before the NEM 3.0 deadline.
NEM 3.0: What Changed
NEM 3.0, officially called Net Billing, replaced the 1:1 credit structure with a time-of-use export rate that varies by hour. Instead of getting retail rate credit for exported solar, you now receive wholesale-style rates that average 5 to 10 cents per kWh, depending on time of day.
The highest export rates occur during evening peak hours from 4 PM to 9 PM, when demand is high but solar production is waning. Midday export rates, when solar production is strongest, are the lowest -- sometimes as low as 3 to 5 cents per kWh. Meanwhile, the utility still charges you 35 to 45 cents per kWh when you draw power at night.
The result: the value of exported solar dropped by roughly 75 percent. A system that would have paid for itself in 6 years under NEM 2.0 now takes 12 to 15 years under NEM 3.0. The payback math no longer works for many homeowners unless they add a battery to store daytime solar and use it at night instead of exporting it.
Why Did California Make This Change?
The California Public Utilities Commission argued that NEM 2.0 over-compensated solar customers and shifted grid maintenance costs onto non-solar customers. They also pointed to the duck curve problem: massive midday solar generation followed by steep evening demand ramps that strain the grid.
Utilities including PG&E, SCE, and SDG&E lobbied hard for NEM 3.0. They argued that solar customers were not paying their fair share for grid upkeep. Environmental groups and solar advocates pushed back, saying NEM 3.0 would kill rooftop solar and slow California progress toward renewable energy goals.
The CPUC sided with the utilities. NEM 3.0 passed in December 2022 and took effect for new solar applications submitted after April 14, 2023. The policy effectively forces new solar customers to add batteries if they want reasonable payback periods, which increases system costs by $10,000 to $20,000.
How NEM 3.0 Affects Grid-Tie Solar Today
If you install a grid-tie solar system today, you are subject to NEM 3.0. The system still works, but the economics are worse. You export midday solar at low rates and buy evening power at high rates. Unless you add a battery to shift your usage, your savings are cut by half or more compared to NEM 2.0.
Adding a battery helps, but it adds cost. A Tesla Powerwall costs around $15,000 installed. Enphase batteries run $7,000 to $9,000 per 5 kWh unit. For a typical 10 kW solar system plus battery, you are looking at $30,000 to $45,000 total. Financing that over 20 years at 6 to 8 percent interest pushes the all-in cost past $50,000.
Some installers respond by oversizing systems to compensate for the lower export value. This drives costs even higher and still leaves you exposed to future rate changes or NEM 4.0 policy shifts.
Why Off-Grid Solar Sidesteps NEM 3.0 Entirely
Off-grid solar systems do not interconnect with the utility, so NEM rules do not apply. You generate power, store it in a battery, and use it on-site. No exports. No credits. No policy risk. You are completely decoupled from utility rate games and regulatory changes.
This makes off-grid solar immune to future NEM 4.0 changes, fixed-charge proposals, or whatever the CPUC dreams up next. Your system works the same regardless of what Sacramento decides. The value proposition is stable and predictable.
Off-grid also costs less upfront because you size the system for your actual needs, not for gaming export credits. VoltSol installs complete off-grid systems with solar, battery, and mini-split heat pump for under $10,000. That is a fraction of what a comparable grid-tie system costs under NEM 3.0, and you get true energy independence.
Should You Stay Grid-Tied or Go Off-Grid?
If you already have NEM 2.0, keep it. You are grandfathered for 20 years, and the economics are still strong. Do not disconnect from the grid unless you have a specific reason like frequent outages or wanting full independence.
If you are installing new solar under NEM 3.0, the decision is tougher. Grid-tie with battery backup still makes sense if you want whole-home coverage and can afford the $30,000+ system cost. But if your main goal is affordable energy independence and resilience, off-grid solar is the better value.
VoltSol focuses on off-grid because it delivers the best outcome for most Northern California homeowners: lower upfront cost, no exposure to rate hikes or policy shifts, and true energy independence. We handle permitting and installation across Fresno, Sacramento, Modesto, and surrounding counties.
Frequently Asked Questions
Does NEM 3.0 apply to me if I install solar today?▾
Yes, if you submit your interconnection application after April 14, 2023, NEM 3.0 rules apply. You are not grandfathered into NEM 2.0 unless your application was submitted and approved before the deadline.
Can I switch from NEM 2.0 to NEM 3.0 or vice versa?▾
No. Once your system is interconnected under a specific NEM tariff, you stay on that tariff for 20 years. NEM 2.0 customers cannot switch to NEM 3.0, and NEM 3.0 customers cannot go back to NEM 2.0.
Is grid-tie solar still worth it under NEM 3.0?▾
It depends on your situation. If you add a battery to store daytime solar and avoid evening grid usage, payback can still be reasonable. But the upfront cost is much higher. Off-grid solar often delivers better value if your goal is energy independence and lower cost.
What happens if California changes the rules again with NEM 4.0?▾
Nobody knows. The CPUC can change net metering rules every few years. If you are on NEM 3.0, you are protected from future changes for 20 years. But off-grid systems sidestep the entire problem because they do not interconnect.
Can I go off-grid and still keep a grid connection for backup?▾
Yes. Many customers run off-grid for daily use but keep the utility connection as a backup for rare heavy loads or extended cloudy periods. You pay a minimal connection fee but use very little grid power. This gives you the best of both worlds.