Solar Education: California Net Billing Tariff (formerly Net Energy Metering) 1.0 Vs. 2.0 Vs. 3.0
If you're ready to switch to solar, you should know about one of the key programs available to California homeowners — Net Billing Tariff (NBT), formerly Net Energy Metering (NEM). While the environmental benefits of going solar are often enough incentive to invest, California’s NBT program can also help homeowners save money by providing credits for excess energy sent back to the grid.
Net energy metering allows homeowners to sell the excess energy from their solar array back to their electric provider, often at the same retail rate the company charges customers, making solar energy a great way to save on utility bills.
Are you ready to learn more about net energy metering in California and how the program has evolved? This blog covers:
WHAT IS NET BILLING TARIFF(NBT) - (FORMERLY NET ENERGY METERING)?
Net energy metering (NEM) is a billing arrangement that allows homeowners with solar panels to receive credits for the excess electricity they generate and send back to the grid. In NEM in California, this program has been a cornerstone of encouraging solar energy net metering by making solar installations financially rewarding. Here’s a look at why it matters:
- Why NEM Matters:
- Environmental Benefits: NEM in California promotes renewable energy by incentivizing solar adoption, reducing reliance on fossil fuels. This helps lower greenhouse gas emissions, contributing to a cleaner environment.
- Financial Benefits: Solar energy net metering can drastically cut electricity costs. By earning solar panel credits California, homeowners can offset their utility bills, and in some cases, even generate a profit by selling excess energy at retail rates. This makes net energy metering a smart investment for long-term savings.
Net energy metering in California has evolved through different versions (NEM 1.0, 2.0, and 3.0), each with unique incentives and costs. Understanding these differences helps you maximize the benefits of solar energy net metering.
HOW NET ENERGY METERING WORKS
In most areas, net energy metering connects your home’s solar system to the local grid, allowing you to send excess power back to your utility. There may be a connection fee to get started, but once in place, your electric meter tracks your usage, delivering monthly savings. If you sell power to the grid, your meter counts backward. When you're using more power than you generate, it counts upwards. At the end of the month, you only pay for the energy you use after all your solar panel credits are deducted.
Some programs allow you to sell at peak rates and buy energy at off-peak rates, making net energy metering a great way to quickly offset your original solar investment. Over time, NEM programs have evolved, changing how energy exchanges and billing credits are offered.
CALIFORNIA NET METERING 1.0 (ORIGINAL PROGRAM)
When net energy metering was first introduced in California, the goal was to incentivize renewable energy installation at point-of-use. The state electric grid was stressed and relied heavily on fossil fuels. The original program, NEM 1.0, applies to customers enrolled before July 1, 2017, and includes substantial incentives for solar energy net metering.
1. Free Interconnection: Participants paid nothing to connect their solar system to the grid, unlike later programs.
2. Low Monthly Fee: A continuing connection fee of just $1 per month, regardless of power exchange costs.
3. High Bill Credits: Eligible participants receive $0.25 per kilowatt-hour in solar panel credits, resulting in average savings of $245 per month for a 10 kW system.
4. ROI: With these incentives, the average return on investment (ROI) time is just six years.
NEM 1.0 is ideal for early adopters who locked in these generous terms, maximizing savings through net energy metering in California.
CALIFORNIA NET METERING 2.0 (CHANGES)
In 2017, Net Energy Metering 2.0 rolled out, maintaining many incentives of the original program but passing along more costs while guaranteeing a 20-year rate plan. Customers who signed up for net energy metering on or after July 1, 2017, and before April 15, 2023, joined NEM 2.0.
1. Interconnection Fee: A one-time fee of $75 to connect to the grid.
2. Monthly Connection Fee: Ranges from $10 to $20.
3. By-Passable Charge: A $0.02 per kWh charge for users who don’t consume enough utility energy to cover account costs.
4. Bill Credits: Remains at $0.25 per kWh, offering average monthly savings of $204 for a 10 kW system.
5. ROI: The average ROI for solar remains six years with solar energy net metering.
NEM 2.0 balances cost and savings, making it attractive for homeowners in California seeking net energy metering benefits.
CALIFORNIA NET BILLING TARIFF(NBT) - (FORMERLY NET ENERGY METERING) 3.0 (LATEST)
Net energy metering has been so successful in California that the state now faces challenges meeting electricity needs during evening peak hours, prioritizing grid reliability. To address this, NBT (formerly NEM 3.0), also known as the Net Billing Tariff, took effect on April 15, 2023, for new customers submitting interconnection applications focusing on solar installation and battery storage for solar energy net metering.
1. By-Passable Charges: Increased to $0.04 per kWh, with potential for higher rates in some areas.
2. Monthly Connection Fee: Starts at $8 per kW, with surcharges from specific suppliers, costing $48–$64 per month for a 10 kW system.
3. Bill Credits: Dropped to the export rate, reducing compensation by about 75%, leading to average monthly savings of $70.
4. ROI: The ROI extends to 10 years or more, but battery storage can shorten this timeline.
NBT benefits homeowners who pair solar with battery storage to maximize solar panel credits.
COMPARISON OF NBT 1.0, 2.0, AND 3.0
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Program
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Credit Rate
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Eligibility
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Installation Requirements
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Expiration/Phase-Out
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Who Benefits Most
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NEM 1.0
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$0.25/kWh
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Enrolled before July 1, 2017
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Free interconnection, $1/month fee
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Still active for enrolled customers
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Early adopters with high energy production
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NEM 2.0
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$0.25/kWh
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Enrolled July 1, 2017–April 14, 2023
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$75 one-time fee, $10–$20/month
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20-year rate lock, must complete installation by April 15, 2026
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Homeowners seeking stable, long-term savings
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NEM 3.0 (Net Billing Tariff)
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Export rate (~75% less)
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Applications on/after April 15, 2023
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$8/kW/month, battery storage recommended
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Ongoing for new customers
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Households with battery storage and high evening usage
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Who Benefits Most:
1. NEM 1.0: Best for early adopters who locked in high credits and low fees, ideal for high energy producers.
2. NEM 2.0: Suits homeowners who enrolled before April 15, 2023, and want predictable savings with a 20-year rate lock.
3. NBT: Ideal for those investing in battery storage to store excess energy for evening use, offsetting lower credits.
Financial Benefits and Savings with NBT
Net energy metering offers significant financial benefits in California through solar energy net metering, especially when optimized for your household’s needs. Below is a sample calculation for a large household and tips to maximize savings with solar panel credits.
- Sample Calculation for a Large Household:
- Scenario: A family of 6 in California with a 10 kW solar system under NEM 2.0.
- Monthly Production: Generates 1,200 kWh/month, with 800 kWh used and 400 kWh sent to the grid.
- Credits Earned: 400 kWh at $0.25/kWh = $100 in solar panel credits.
- Costs: $75 one-time interconnection fee, $15/month connection fee, $8/month by-passable charge ($0.02/kWh x 400 kWh).
- Net Savings: $100 (credits) - $15 (connection) - $8 (by-passable) = $77/month, or $924/year.
- ROI: With a $15,000 system cost, ROI is ~6 years, consistent with NEM 2.0 averages.
- Tips to Maximize Savings:
- Time of Use (TOU) Strategies: Shift high-energy tasks (e.g., laundry, dishwashing) to peak solar production hours (midday) to maximize solar energy net metering credits. Use grid power during off-peak hours when rates are lower.
- Pairing Solar with Battery Storage: Store excess energy during the day for evening use, especially under NEM 3.0, to reduce reliance on grid power and increase solar panel credits. Batteries can cut ROI time by 3–4 years by storing energy for high-rate periods.
FREQUENTLY ASKED QUESTIONS
DOES NBT AFFECT EXISTING SOLAR CUSTOMERS?
No, NEM 3.0 only applies to new customers submitting interconnection applications on or after April 15, 2023. If you’re enrolled in NEM 1.0 or 2.0, your existing net energy metering terms remain unchanged, ensuring continued solar panel credits at your original rates.
CAN BUSINESSES PARTICIPATE IN NBT?
Yes, businesses in California can participate in net energy metering, provided they meet utility requirements for solar installation and interconnection. Businesses with high energy demands can benefit significantly from solar energy net metering, especially under NEM 2.0, with savings similar to residential customers.
WHAT HAPPENS IF I MOVE?
If you move, depending on the utility’s policies, your net energy metering agreement may not transfer to the new homeowner. However, solar panels increase property value, and Burgeson’s can assist with transferring or reapplying for solar panel credits to ensure continued benefits under net energy metering in California.
HOW BURGESON’S CAN HELP YOU GO SOLAR AND SAVE
California's solar rules have changed. As of 2026, new residential solar systems fall under California’s Net Billing Tariff (formerly NEM 3.0), where export credits are lower than traditional net metering. Because of this, today’s solar systems deliver the most value when designed for self-consumption, often by pairing solar with battery storage.
Burgeson's helps homeowners design solar and battery systems that perform well under current utility rates and handles all required documentation, including interconnection applications and utility coordination, for a smooth installation process.
Are you interested in switching to solar? Act fast!
Call us today at 909-792-2222 to request your free estimate for a custom solar installation and battery storage. At Burgeson's, you always work with experienced and respectful advisors who will help you maximize net energy metering savings in California.