NEM 3.0 Changed the Rules — But Solar Still Makes Sense in San Diego
If you've been researching solar in San Diego, you've probably heard that "NEM 3.0 killed solar." That's an oversimplification. NEM 3.0 (officially the Net Billing Tariff) changed how solar saves you money — but it didn't eliminate the savings, especially in a market with SDG&E's extreme rates.
Here's what you actually need to know.
What Is NEM 3.0?
NEM 3.0 is California's current net metering policy, formally adopted by the CPUC in December 2022 as Decision 22-12-056 and effective for interconnection applications filed on or after April 15, 2023. It replaced the previous NEM 2.0 rules as part of the broader SDG&E solar program changes.
Under the previous NEM 2.0 rules, solar customers received retail-rate credits for excess energy exported to the grid — essentially, SDG&E paid you the same rate per kWh that they charge you.
Under NEM 3.0, export credits are based on avoided cost — a lower rate that varies by time of day and season. The result: you get paid less for sending energy back to the grid.
How Export Credits Work Under NEM 3.0
The Net Billing Tariff uses time-dependent export compensation:
| Time Period | Export Credit (Approx.) | Compared to Retail |
|---|---|---|
| Summer Peak (4-9 PM) | Higher (~$0.08-0.12/kWh) | Still well below retail (~$0.45/kWh) |
| Summer Off-Peak | Lower (~$0.03-0.05/kWh) | Significantly below retail |
| Winter | Lower (~$0.03-0.05/kWh) | Significantly below retail |
Key takeaway: Exporting solar to the grid is worth much less than consuming it yourself. This fundamentally shifts the economics toward self-consumption.
Why Solar Still Makes Sense in San Diego Under NEM 3.0
Here's the thing most articles miss: SDG&E's rates are so high that solar self-consumption is extremely valuable even without export credits.
Think about it this way:
- If SDG&E charges you 45¢/kWh during peak hours
- And your solar PPA costs 20¢/kWh
- Every kWh you self-consume saves you 25¢
That's a 55% savings on every kWh you use directly — no export credits needed. The higher SDG&E's rates go, the more valuable self-consumption becomes.
Self-Consumption: The New Solar Strategy
Under NEM 3.0, the smartest solar strategy is to use as much of your own solar energy as possible during the day:
- Run appliances during solar hours. Dishwasher, laundry, EV charging — shift them to daytime when your panels are producing.
- Pre-cool your home. Run the AC hard during solar hours so it works less during peak evening hours.
- Consider battery storage. A battery stores excess daytime production for use during peak evening hours, maximizing the value of every kWh.
How a PPA Works with NEM 3.0
With a solar PPA, you pay a fixed rate per kWh for the power your system produces. The key advantage under NEM 3.0:
- PPA rates are lower than SDG&E retail rates — typically $0.18-$0.22/kWh vs SDG&E's $0.45/kWh+
- Self-consuming PPA power saves you the difference — 40-60% savings on every kWh you use directly
- Zero maintenance responsibility — the PPA provider handles everything, including monitoring and repairs
- $0 down — no upfront investment, so you start saving from day one
Battery Storage and NEM 3.0
Batteries are more valuable under NEM 3.0 than under previous net metering rules. Here's why:
- Store excess daytime production instead of exporting it at low avoided-cost rates
- Discharge during peak hours (4-9 PM) when SDG&E rates are highest
- Backup power during outages — an increasingly relevant feature in San Diego
Whether a battery makes financial sense depends on your usage patterns, rate plan, and the cost of the battery system. We can help you evaluate this during your free consultation.
Quick Reference: NEM 3.0 vs NEM 2.0
| Feature | NEM 2.0 | NEM 3.0 (Net Billing Tariff) |
|---|---|---|
| Export credits | Retail rate (~45¢/kWh) | Avoided cost (~3-12¢/kWh) |
| Self-consumption value | Avoids retail charges | Avoids retail charges (same) |
| Best strategy | Export to maximize credits | Self-consume to avoid SDG&E charges |
| Battery value | Nice to have | Much more valuable |
| Effective date | Pre-April 2023 | April 15, 2023+ |
The Bottom Line
NEM 3.0 changed how solar saves you money, not whether it does. In San Diego — where SDG&E rates are the highest in the contiguous U.S. — self-consuming solar at a PPA rate of $0.20/kWh while avoiding SDG&E's $0.45/kWh still means substantial savings.
The strategy has shifted: instead of maximizing exports, you maximize self-consumption. And with SDG&E's rates only getting higher, that savings gap keeps growing.
See What NEM 3.0 Solar Looks Like for Your Home
Every home's solar economics are different under NEM 3.0. Use our calculator with your real SDG&E bill, then book a free consultation for a personalized assessment.
Sources
1. CPUC Decision 22-12-056 — Net Billing Tariff: https://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M500/K043/500043682.PDF
2. SDG&E Net Energy Metering Information: https://www.sdge.com/renewable-energy/net-energy-metering
3. Protect Our Communities Foundation — SDG&E Facts: https://protectourcommunities.org/facts-on-sdge/
Free Solar Consultations helps San Diego homeowners understand their options under NEM 3.0 and connect with trusted solar providers. We serve the entire SDG&E service territory. Call (619) 396-7530 or book your free consultation online.