Net energy metering (NEM) 3 is California’s newest net metering policy, which defines how homeowners are compensated for the energy they export to the grid.This new solar billing policy, which went into effect on April 15, 2023, represents a shift from California’s traditional net energy metering structure with the introduction of a new net billing tariff (NBT). It can be called NEM3, NBT, or Solar Billing Plan. We’ll refer to it as NEM3.

What is net metering?

Net metering—and now net billing—offers a way for solar energy producers to be rewarded for sharing surplus energy with the electricity grid. When your solar panels generate more power than your household uses, the extra energy flows back to the grid, earning you credits on your utility bills.

Who is affected by NEM3?

NEM3 applies to all new solar systems installed in California's three largest electric utility territories:

• Pacific Gas & Electric (PG&E)
• Southern California Edison (SCE)
• San Diego Gas & Electric (SDG&E)

How NEM3 differs from earlier versions

In both NEM1 and NEM2, the prices that utilities credited for solar exports were essentially the same as retail electricity rates. This meant that for those with solar, installing a battery had little additional economic benefit. Even without a battery, your solar could generate export credits that would offset a significant portion of your utility bill.  Under NEM3, the value of bill credits for solar exports is no longer tied to your retail rate, but more to the avoided cost of getting that electricity to your house. As a result, the value of exporting excess solar power to the grid is much lower in NEM3 than under NEM2. These export rates are also complex: As shown below, they differ for every hour of every month of every year.

What are the impacts of NEM3 on solar battery storage?

NEM3 has shifted incentives in California towards adopting solar systems that include battery storage. Here are some key points to understand about NEM3 and solar battery storage.

Reduced average export rates, with time of use import rates: under NEM3, the average compensation for excess electricity sent to the grid (export rates) is significantly lower than under NEM2. This shift reduces the financial benefit of exporting extra energy during the day. NEM3 customers also have time of use (TOU) import rates, which means that they need to store electricity in their batteries for use during the expensive evening peak to maximize utility bill savings.

Short periods with high export rates: while the average export rates are reduced under NEM3, there are also periods in late summer where there are significantly higher export rates. This provides the opportunity for earning meaningful export credits if those high value periods can be captured through intelligent battery control software. 

Grid reliability benefits: batteries enable you to support grid stability by reducing reliance on the grid during peak times and also exporting clean energy to help reduce stress on the utility grid via participation in virtual power plants. 

Resilience and backup power: beyond financial incentives, NEM3 also indirectly promotes batteries as a way to ensure backup power during outages, giving you peace of mind.

The Lunar System makes NEM3 simple

Every Lunar System comes with Lunar AI — Lunar's proprietary battery forecasting and control software. This software has more than 850 million hours of battery control experience in markets all over the world. It automatically learns your home’s energy patterns, forecasts solar and consumption, and optimizes battery control to maximize utility bill savings and earn export credits under NEM3. With Lunar AI, you don’t need to monitor ever-changing rates and manually update your battery control plan each month. Just set it and forget it, and let Lunar deliver you NEM3 savings.

*Lunar AI availability may depend on your installer

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