Is Solar Still Worth It With NEM 3.0 in California? 5 Ways To Maximize Your Savings
With the NEM 3.0 solar billing policy in place for California’s three largest utilities, many homeowners are wondering if home solar is still worth it in the Golden State.
After all, the cost of solar panels hasn’t changed — however, the savings under NEM 3.0 solar billing has.
Spoiler alert: Yes, solar is still worth it for bill savings under NEM 3.0. The savings won’t be the same as your neighbor’s system that was grandfathered into NEM 2.0, but a home solar is still far more affordable than buying utility electricity in California.
In this article, we’ll cover two main topics:
- Why home solar is still worth it in NEM 3.0
- 5 ways to maximize the savings of a NEM 3.0 solar system
There’s no doubt that NEM 3.0 is a big change for the California solar industry, but there are two very important things to keep in mind:
- Solar systems under NEM 3.0 will still provide substantial bill savings
- Bill savings is just one of many things that make home solar worthwhile
Let’s explore each of these points a little further.
Energy cost savings for NEM 3.0 solar systems
Perhaps the most amazing thing about NEM 3.0 solar billing is that even with the major reduction in export rates, home solar is still far more affordable than paying for utility electricity. In fact, financial analysis of binding quotes generated on the solar.com marketplace shows that homeowners can still expect between 70-90% electricity bill offsets and a payback period between 5-7 years for solar and battery systems purchased with cash under and billed under NEM 3.0.
That’s because California is flush with the two main ingredients for solar savings – sunshine and high utility electricity rates. The sunshine isn’t going away anytime soon and there are plenty of reasons to believe that high utility rates won’t either.
Simply put, California’s electricity grid is a hot mess. The centralized generation model is inefficient, the infrastructure is aging, and supply shortages are filled with expensive electricity from dirty peaker plants.
Fixing these problems cost huge sums of money, and these costs are largely passed down to utility customers via rate hikes (often several per year). The chart below shows the last three years of rate increases from PG&E, SCE, and SDG&E – the three utilities that have adopted NEM 3.0.
So, it’s a pretty safe bet that electricity prices will continue to climb in California and fuel solar savings. And just because you missed out on the greater savings of NEM 2.0, doesn’t mean going solar under NEM 3.0 in California isn’t worth it. Don’t let perfect be the enemy of good.
Based on binding quotes generated through solar.com, the average 7.6 kW solar system under NEM 3.0 solar billing can be expected to have a 6-10 year payback period for cash purchases and upwards of $50,000 in lifetime bill savings.
|Cash purchase||12-year loan||20-year loan|
|Avg. electricity bill||$101||$264||$227|
|Savings begin||Year 7||Year 5||Immediately|
Based on a 7.6 kW system with 100% offset on home with $250 average monthly electricity bill and 5% annual rate hikes. Savings may change based on lending rates.
Now, are those numbers as juicy as the 3-7 year payback periods and six-figure savings of NEM 2.0 systems? Nope. But that’s hardly a reason to turn down $50,000+ in energy cost savings.
Bill savings is not the only thing that makes solar worthwhile
While it’s easy to get caught up in the numbers, it’s important to step back and remember that energy cost savings is just one of many benefits of home solar.
Whether your solar system saves $5 or $50,000, you can still look forward to:
- Less dependence on a utility provider
- Increased home value
- Reduced carbon emissions
- Backup power for outages (when paired with battery)
- Leading by example for your family, friends, and neighbors
It doesn’t matter if your main concern is cost savings, climate change, or modernizing a painfully outdated and inefficient electrical grid. The beauty of home solar in California is that it addresses all three issues all at once, and is therefore well worth it – even with NEM 3.0 solar billing.
If you’re going to put solar panels on your roof, you might as well get the most out of them. So, let’s look at some tips for maximizing bill savings with a NEM 3.0 solar system.
Pair your panels with battery storage
NEM 3.0 solar billing is designed to encourage residential battery storage in order to strengthen the electricity grid. In fact, with NEM 3.0’s drastically lower export rates, the payback period of solar and battery storage systems are typically shorter than the payback period of solar-only systems.
The latest and most accurate NEM 3.0 savings calculations released by Electrum in July 2023 show that solar and battery can be combined to provide the 100% electricity bill offset (aside from non-bypassable charges) and, in many cases, Day 1 savings that Californians had grown accustomed to under NEM 2.0. The path to get there is just a bit different under NEM 3.0.
The video below covers the benefits of having battery storage for a NEM 3.0 solar system, but here are some spoilers.
Solar and battery systems allow you to:
- Store and use your own solar production, instead of exporting it at very low rates
- Export electricity for as much as $3 per kWh during certain evening hours in September, earning over $200 per week
- Power essential electrical systems during grid outages (which are only expected to increase)
- All but eliminate your dependence on a utility provider
Simply put, if you want to maximize the savings of your NEM 3.0 solar system, add battery storage.
Match electricity consumption with production
If battery storage isn’t in the cards, then the name of the game is to use as much of your own solar production as possible to avoid exporting it under NEM 3.0 solar billing.
One relatively simple trick is to shift your electricity consumption to better match your solar production. This strategy is appropriately named “load shifting.”
As shown in the graph above, solar production (yellow line) in California typically peaks between noon and 1 pm. If you’re at home or tech-savvy, you can shift your consumption (purple line) to this window by:
- Charging an EV
- Running your air conditioner
- Doing laundry
- Cooking meals
The idea is that using your own solar electricity is much more valuable than exporting it to the grid under NEM 3.0 solar billing.
Install panels on southwest roof faces
The other way to better align your electricity production and consumption is to position your solar system for better evening production.
Conventional wisdom says that due south is the best direction to face solar panels – known as azimuth angle). BUT, changing the azimuth angle can help shift production earlier or later in the day.
So, if your peak consumption is around 5-6 pm, then placing your panels on a southwest roof face can shift more of your production to that timeframe.
Better yet – do both! Face your system southwest and shift your energy usage to align as much of your production and consumption as possible.
Undersize solar-only systems to 80% of your average consumption
This next tip seems counterintuitive, but an in-depth analysis of NEM 3.0 export rates by solar.com revealed that solar-only systems sized to offset 80% of a household’s electricity consumption can provide greater day 1 savings than a system sized to offset 100% of household consumption.
Again, the idea for solar-only systems is to use as much of your solar production as possible to avoid exporting electricity at a lower rate than you paid for it.
With an undersized system (orange area), a greater share of your solar production is used on-site, as shown in the graph above.
Combining all three strategies – load shifting, southwest alignment, and undersizing to 80% offset – may further increase the savings benefits.
Remember, home solar is still well worth it under NEM 3.0 in California. But deploying these strategies can help maximize your savings and soften the blow of not getting into NEM 2.0.
Go solar ASAP to get several months of NEM 2.0 billing
The final tip to maximize solar NEM 3.0 solar savings is to install a system as soon as possible to take advantage of a transition period while California’s investor-owned utilities (IOUs) are setting up their NEM 3.0 solar billing software.
To make a long story short, NEM 3.0 solar billing is a complicated beast and it’s going to take time for PG&E, SCE, and SDG&E to update their billing systems to account for it. This transition is expected to take at least several months, and perhaps up to a year.
During the transition, NEM 3.0 systems will be billed as NEM 2.0 systems. Better yet, the California Storage & Storage Association (CALSSA) has done the due diligence of making it abundantly clear that the IOUs will not ask customers to reconcile the NEM 2.0 bills during the transition period.
So, the earliest NEM 3.0 customers will likely enjoy several few months – if not longer – being billed as NEM 2.0 customers, which can help reduce the payback period and increase the bill savings of their systems.
Home solar is still worth it in California — even under NEM 3.0
There’s no question that NEM 3.0 reduces the savings benefits of home solar in California. But it doesn’t eliminate them.
In fact, even with NEM 3.0 in effect, California is likely to remain the top state for solar savings because the key ingredients for savings – sunshine and high grid electricity prices – aren’t going anywhere. And it’s important to remember that energy cost savings is just one of many benefits of rooftop solar.
If you do want to maximize your bill savings with a NEM 3.0 system, consider adding battery, aligning your production and consumption, and taking advantage of a few months of NEM 2.0 billing while the IOUs implement their NEM 3.0 billing systems.