If you are considering solar in California, you will likely hear the terms net metering and net billing. The rules that govern how utilities credit solar customers for the power they send to the grid have changed in recent years, and they affect how long it may take a system to pay for itself. This overview explains the basics in plain language.
From Net Metering to Net Billing
Under earlier net metering rules, customers received credit for exported energy at close to the retail rate. In 2023, the California Public Utilities Commission adopted a successor program often called net billing or NEM 3.0 for new applicants of the large investor-owned utilities. Under net billing, exported electricity is credited at a rate based on the avoided cost of electricity, which varies by time of day and season and is usually lower than the retail rate. Customers who interconnected under earlier rules are generally kept on those terms for a set period, so check your own status.
Why Timing Matters
Solar panels produce the most power in the middle of the day, when the grid often has plenty of supply and exports are credited at lower rates. In the evening, when many households use the most energy, retail rates are higher. As a result, using more of your solar power directly at home, rather than exporting it, tends to be more valuable under net billing.
The Role of Batteries
Home batteries store daytime solar production for use in the evening, which can increase self-consumption and may reduce the amount of power drawn from the grid when rates are high. Batteries add cost, so whether one makes sense depends on your usage, rate plan, backup power needs and available incentives.
Other Things to Consider
- Time-of-use rates: Most solar customers are placed on rate plans that vary by time of day.
- Fixed charges: Monthly charges can limit how much a bill can drop.
- Usage patterns: Electric vehicles, heat pumps and electric appliances can change how much solar you can use directly.
- System size: Sizing to your actual usage helps avoid exporting more than is useful.
Ask Installers the Right Questions
Ask each installer to explain which program applies, what rates they assumed in the savings estimate, and how the estimate changes with and without a battery. Request a bill-savings model that uses your actual usage data.
Stay Informed
Utility rates and state programs continue to evolve. Review your utility's website and the CPUC for the latest information before making a decision.
This article is general information, not financial or legal advice. Program details change, so confirm current rules with your utility and installer.