Guide · Updated 2026
NEM 3.0, SGIP, and what’s actually left in 2026
The rules changed twice in three years, and a lot of what you will read online is out of date. This is the current picture for a Los Angeles homeowner, including the parts that are inconvenient for us to say.
Start here
Three things changed. Only one was fatal.
Exports got cheap
NEM 3.0 replaced retail-rate export credits with avoided-cost pricing — roughly $0.05 per kWh instead of roughly $0.30. Oversizing an array to bank credits stopped working overnight.
Survivable. It changed the design, not the deal.
The tax credit ended
Section 25D expired for systems homeowners own. The commercial credit under Section 48E survived, so leases, PPAs, and business installs still carry federal value.
Real. It raises net cost on a cash purchase.
Rates kept climbing
California retail electricity prices have risen faster than inflation for years. This is the force that made solar work in the first place, and nothing about it has reversed.
This is why the math still works.
The mechanic
The gap that decides everything
Under NEM 3.0 an SCE customer sells surplus power for about five cents and buys it back a few hours later for up to fifty-five. That spread is not a rounding error — it is the whole reason battery storage went from a luxury to the default recommendation.
It also explains why the right system got smaller. Under the old rules, a bigger array banked more credit. Under net billing, every kilowatt-hour beyond what your home can absorb is sold at a steep discount. Sizing discipline is now worth more than panel count.
If you are on LADWP, Burbank, Glendale, Pasadena, Azusa, or Anaheim, none of the above applies to you. Those are municipal utilities. They set their own terms, and their export credits remain close to retail.
By territory
Who NEM 3.0 applies to
Only investor-owned utilities are bound by the CPUC’s net billing tariff. In Los Angeles County that means SCE and no one else.
| Utility | NEM 3.0 applies | Export credit | SGIP eligible | Battery is for |
|---|---|---|---|---|
| SCESouthern California Edison | Yes | ~$0.05/kWh | Eligible | Rate arbitrage + backup |
| LADWPLos Angeles Department of Water and Power | No — municipal | ~$0.24/kWh | Not eligible | Backup, primarily |
| GWPGlendale Water & Power | No — municipal | ~$0.20/kWh | Not eligible | Backup, primarily |
| BWPBurbank Water & Power | No — municipal | ~$0.19/kWh | Not eligible | Backup, primarily |
| PWPPasadena Water & Power | No — municipal | ~$0.21/kWh | Not eligible | Backup, primarily |
| Azusa L&WAzusa Light & Water | No — municipal | ~$0.18/kWh | Not eligible | Backup, primarily |
| Anaheim PUAnaheim Public Utilities | No — municipal | ~$0.18/kWh | Not eligible | Backup, primarily |
What still carries federal value
- Section 48E, commercial. Not repealed. Businesses claim it directly on systems they own.
- Leases and PPAs. The third-party owner claims 48E, and that value shows up in your pricing.
- Prepaid lease structures. Same mechanism — the financier owns the equipment and claims the credit.
What no longer does
- Section 25D, residential. Expired December 31, 2025 for systems you buy outright.
- Retail-rate export credits. Gone for SCE customers since NEM 3.0 took effect in April 2023.
- SGIP in municipal territory. Never applied — the program is funded by IOU ratepayers.
This page is general information, not tax advice. Incentive programs, funding availability, and eligibility rules change — sometimes mid-year and sometimes by utility territory. Confirm your own tax position with a licensed professional before making a purchase decision.
See it on your bill
What this means for your number
Toggle the battery on and off with SCE selected, then do the same with LADWP. The difference between those two comparisons is NEM 3.0 in a nutshell.
Step 1
Step 2
Who bills you?
Step 3
Your estimate
Your system
System size
6.6 kW
~15 panels
Saved per year
$3,484
at today's rates
Estimated cost
$36,645
solar + storage, installed
Payback
10.5 yrs
$108,000 over 25 yrs
Why the battery matters here. SCE runs NEM 3.0 net billing, which pays about $0.05 for a kilowatt-hour you export but charges up to $0.55 to buy one back at 6pm. Storing your own production instead of selling it adds roughly $1,706 a year on this bill. SGIP storage rebates may also apply in this territory.
Show the assumptions
Usage derived from $320/mo at SCE’s ~$0.36/kWh blended rate, giving 10,667 kWh a year.
Production at 5.6 peak sun hours a day with a 0.80 derate for inverter, wiring, soiling and heat losses: 10,792 kWh a year.
Self-consumption assumed at 88% of production; the remainder is exported at $0.05/kWh.
25-year figure compounds utility rates at 4.5% a year and degrades panel output 0.5% a year, net of system cost. Planning estimate only, not a quote.
Common questions
NEM 3.0, answered
If something here contradicts what a salesperson told you, ask them to put their version in writing.
What is NEM 3.0 in California?
NEM 3.0, formally the Net Billing Tariff, is the rule that governs what California's investor-owned utilities pay you for solar power you export to the grid. It replaced NEM 2.0 for new solar customers in April 2023. Under the old rule, exported power was credited at roughly retail rate. Under NEM 3.0, exports are valued at the utility's avoided cost, which averages around a nickel per kilowatt-hour and varies by hour and season. It applies to SCE, PG&E, and SDG&E customers — not to municipal utilities like LADWP, Burbank, Glendale, or Pasadena.
Does NEM 3.0 apply to LADWP?
No. NEM 3.0 is a CPUC decision, and the CPUC regulates investor-owned utilities. LADWP is a municipal utility owned by the City of Los Angeles, so it sets its own net metering terms, and those terms remain far closer to retail-rate crediting. The same is true of Burbank Water & Power, Glendale Water & Power, Pasadena Water & Power, Azusa Light & Water, and Anaheim Public Utilities. This is one of the most consequential facts about going solar in Los Angeles, and it is routinely glossed over.
Is the 30% federal solar tax credit gone?
For systems homeowners buy outright, yes. The Residential Clean Energy Credit under Section 25D expired on December 31, 2025 under the legislation signed in July 2025. If your system received Permission to Operate before that date, you could claim it for that tax year. The commercial credit under Section 48E was not repealed, which is why third-party-owned arrangements — leases, PPAs, and prepaid plans — can still carry roughly 30% of federal value, claimed by the company that owns the equipment. Businesses installing on their own buildings still claim 48E directly.
What is SGIP and do I qualify?
The Self-Generation Incentive Program is California's battery storage rebate, funded by investor-owned utility ratepayers and administered through those territories. Because SCE customers pay into it, they can apply; LADWP, Burbank, Glendale, Pasadena, Azusa, and Anaheim customers cannot. The largest rates are reserved for income-qualified households and for customers in high fire-threat districts or on medical baseline. General-market rebates are smaller and some territory budgets are waitlisted, so eligibility and funding availability are both worth checking before you plan around them.
Should I still go solar under NEM 3.0?
For most SCE households, yes, but the system that makes sense is different from what made sense under NEM 2.0. Oversizing to bank export credits no longer works. What works is sizing close to your usage and adding storage so your production is consumed at home during the expensive evening window rather than sold cheaply at noon. The driver is no longer the export credit or the tax credit — it is simply the very high retail price of California electricity, which has continued to rise.
What is the 4-9pm peak window everyone talks about?
Most California residential customers are now on time-of-use rate schedules where electricity is most expensive between roughly 4pm and 9pm, when demand peaks and solar production has fallen off. That window is where a disproportionate share of your bill is created. A battery charged from your own midday surplus and discharged across those five hours is the single most effective structural change you can make to a Southern California electric bill.
Want this applied to your address? Find your city and we will show you the utility rules that apply, or send us a bill. You can also reach us at sales@divineenergygroup.com.