Policy · Analysis

NEM 3 Changed the Payback Math. The Market Added a Battery.

California cut the credit for rooftop solar sent back to the grid, and quotes across the basin now assume a battery. Here is the honest arithmetic, and which rule your address actually gets.

BY THE RENEWABLE ENERGY LA EDITORS · FILED SEPTEMBER 27, 2026 · 6 MIN READ ·

What the Net Billing Tariff changed

Under the old rule (NEM 2.0), a kilowatt-hour you exported earned close to the retail rate, roughly what you paid to buy one back. The California Public Utilities Commission (the state agency that regulates the big investor-owned utilities) approved the Net Billing Tariff in December 2022, and it took effect in April 2023. It credits exports at something closer to avoided cost (roughly what it would cost the utility to buy that same power on the wholesale market), and that number shifts hour by hour.

By most accounts the cut was large, on the order of 75 percent lower on average, though the exact hit depends on when your panels push power out. Midday exports, when the grid is already awash in solar, now earn very little. The value moved from selling power at noon to using your own power at 6 p.m., and that single shift is why batteries walked into the conversation.

The honest math on payback

Round numbers, because the real ones move with your roof, your rate plan, and your install price. Under NEM 2.0 a solar-only system in the basin often paid for itself in roughly 5 to 7 years. Under the Net Billing Tariff, solar alone commonly stretches to roughly 9 to 12 years or longer, because the exports you cannot use are worth so much less.

Add a battery and the picture changes rather than simply improving. Storing your midday solar and spending it in the evening (self-consumption) recovers value the export credit no longer pays, so payback lands back in the high single digits to low teens for many households. The battery also adds thousands in upfront cost, so whether it pencils depends on how much of your usage you can actually shift and which time-of-use rate you are on.

Who gets which rule in the basin

If your bill says LADWP, the state rule does not touch you. LADWP is a municipal utility that runs its own net metering program on its own timeline, so an Eagle Rock rooftop inside the city and a Pasadena rooftop next door can face genuinely different economics. Before you sign anything, confirm which utility serves your address, because a salesperson's payback estimate may assume the wrong one.

For Southern California Edison customers, who cover much of the county outside the city, the Net Billing Tariff is the baseline for new systems. Existing NEM 2.0 customers were told they keep their old terms for a set period (commonly cited as about 20 years from interconnection). That grandfathering is the reason the rush to install before April 2023 was real, and the reason your neighbor's older array may still earn the better credit.

Worth watching this month

1. The CPUC's periodic updates to the avoided cost calculator, which sets export values, are worth a check, though most revisions are routine rather than dramatic.

2. LADWP's own solar and net metering pages for any program or rate changes, since city customers are governed there and not by the state rule.

3. SGIP battery rebate budgets (the Self-Generation Incentive Program), which fund storage and can run low or reopen without much notice.

4. Your SCE time-of-use rate options at renewal, since the evening peak window is where a battery earns its keep and small changes there move the payback.

5. CAISO's evening net demand this fall, a routine but telling gauge of how much the grid still leans on gas after the sun sets.

Where this dispatch reads

CPUC: Net Energy Metering and the Net Billing Tariff, www.cpuc.ca.gov/industries-and-topics/electrical-energy/demand-side-management/net-energy-metering, The state regulator's official page on NEM and the Net Billing Tariff rules for investor-owned utilities (.gov).
CPUC: Self-Generation Incentive Program (SGIP), www.cpuc.ca.gov/industries-and-topics/electrical-energy/demand-side-management/self-generation-incentive-program, State page on battery storage rebates, including budget status and eligibility (.gov).
California ISO: Today's Outlook, www.caiso.com/todays-outlook, The grid operator's live view of supply, demand, and the evening ramp after rooftop solar fades.
LADWP: Solar and Net Metering, www.ladwp.com, The city of Los Angeles municipal utility, which sets its own rooftop rules outside the state tariff.
Southern California Edison: Net Billing Tariff, www.sce.com/residential/generating-your-own-power/net-billing-tariff, The utility page explaining how the new export credits apply to new SCE solar customers.
California Energy Commission, www.energy.ca.gov, State energy agency with data on solar adoption and storage across California (.gov).

Questions readers have asked

I already have solar. Did NEM 3 change my credits?

Probably not. Customers who interconnected under NEM 2.0 were told they keep those terms for a set period, commonly cited as about 20 years. Confirm your start date on your interconnection paperwork.

Does the state rule apply to LADWP customers?

No. LADWP is a municipal utility that sets its own net metering rules. If the city of Los Angeles is your power provider, check LADWP's program directly rather than the state tariff.

Do I need a battery now?

You are not required to have one. Without it, though, the low export credit makes solar-only payback much longer. Whether a battery pays off depends on your usage pattern and rate plan.

Why did the export credits fall in the first place?

Regulators shifted credits from near the retail rate to something closer to avoided cost, roughly the wholesale value of that power. Because the grid already has so much midday solar, that value is low at the exact hours most rooftops export.