California Solar Owners Face New Credit Reductions

The NEM 3 tariff reduces solar export credits by 80 percent, changing how homeowners manage their energy.

Updated on Oct. 26, 2026 in Electric Vehicles

Isometric editorial illustration of a house with solar panels and a battery unit, representing new residential energy storage requirements. — New NEM 3 regulations in California cut solar export credits by 80 percent, incentivizing homeowners to install home battery systems. AI Illustration. Upload story photo >

Live Poll

Is now a good time for your household to invest in a home solar and battery system?

California solar owners face a new reality under the NEM 3 net billing tariff implemented in 2023. The policy drastically reduced financial credits for electricity exported to the grid, shifting the economic focus for new systems toward battery storage.

Why it matters

The change reduced solar export credits by roughly 80 percent, making it less profitable to send power back to the grid during the day. Residents now must prioritize using their generated power at home to avoid expensive evening utility rates.

The NEM 3 tariff reduced export credits by 80 percent compared to older standards. While typical solar batteries now cost more than $14,000, solar owners who connected before the April 2023 deadline retain their original credit terms for a 20-year period.

The players

California

The state jurisdiction responsible for setting residential energy policy and tariff structures.

The details

Under the new billing structure, solar systems no longer provide high credits for excess power pushed to the grid during peak daylight. New system owners must install home storage batteries to capture generated energy for use during evening hours. By deploying stored power when grid electricity is most expensive, homeowners can mitigate the loss of export credits and manage household utility costs.

2023: The NEM 3 net billing tariff was implemented in California.
April 2023: The deadline for legacy solar net billing credit eligibility passed.

The Home Front

The transition to NEM 3 marks a major departure from earlier solar incentives that prioritized grid support through net metering. Homeowners must now align their system planning with self-consumption trends rather than relying on high-value credits for exported power.

If you are a new solar owner, evaluate whether adding a battery storage system is necessary to offset higher evening grid prices. Review your existing utility agreements to confirm if you remain under legacy credit terms or if your household is subject to the new NEM 3 tariff.

The takeaway

The NEM 3 tariff shifts the primary value of home solar systems from grid export to immediate self-consumption. Homeowners should consult with a licensed solar installer to determine if adding a battery is a cost-effective strategy for their specific usage patterns.