California NEM 3.0 Solar Payback Calculator
Understanding California’s NEM 3.0 landscape
California’s Net Billing Tariff—popularly known as NEM 3.0—fundamentally reshaped rooftop solar economics. Under the new policy, exported kilowatt-hours earn a value pegged to hourly avoided-cost rates instead of the retail price credited under NEM 2.0. Export values average 5 to 9 cents per kWh, compared with 25 to 35 cents previously. While this shift lengthened payback periods for solar-only systems, it also created a strong incentive to add batteries that store midday production and discharge during evening peaks. Homeowners now face a complex optimization problem: how much self-consumption can they achieve, what battery size maximizes value, and how does the investment compare with the legacy tariff?
This calculator helps you navigate those questions by modeling first-year savings, lifetime value with utility rate escalation, and payback relative to total installed cost. You can customize production assumptions, export rates, and battery behavior to reflect PG&E, SCE, or SDG&E territory nuances. The tool also estimates emissions reductions, showing how much grid carbon your solar array avoids over time.
Methodology overview
The analysis begins with your system size and production per kilowatt. Annual production is simply:
where \(S\) is system size in kW and \(Y\) is annual kWh per kW. We divide production between self-consumed and exported energy. Without storage, many California households self-consume only 25%–40% of their solar because most production occurs midday. You can enter your expected percentage based on load profiles or utility guidance.
The battery model treats storage as a way to shift a portion of exported energy into self-consumption. We estimate the annual kWh the battery can shift as the product of usable capacity, cycles, and round-trip efficiency, capped by the available exported energy. The enhanced self-consumption fraction is:
where \(f_{base}\) is the base self-consumption fraction, and \(B_{shift}\) is the shifted energy in kWh. We cap \(f_{sc}\) at 1.0 because you cannot consume more than you generate. The exported portion under NEM 3.0 becomes \(1 - f_{sc}\).
Savings under NEM 3.0 equal self-consumed kWh valued at the retail rate plus exported kWh valued at the NEM 3.0 rate. Under NEM 2.0, all production effectively offsets retail usage, so we value total kWh at the legacy credit rate. We subtract annual operations and maintenance (O&M) expenses, calculated as a per-kW value, from both scenarios to reflect panel cleaning, monitoring, and insurance.
Worked example
Suppose you install a 7.5 kW system in San Diego with 1,600 kWh/kW-year production. Without a battery, you self-consume 35% of energy. Exported kWh earn $0.07 under NEM 3.0 and $0.30 under NEM 2.0. Retail electricity costs $0.32/kWh. If you add a 10 kWh battery capable of 250 solar-shifting cycles at 92% efficiency, it can shift roughly 2,300 kWh per year. That boosts self-consumption to about 66%, leaving 34% exported. First-year NEM 3.0 savings total around $2,800, compared to $4,000 under NEM 2.0. Solar costs $3.30/W installed (≈$24,750) and the battery adds $12,000, for a combined $36,750 investment.
With 2.5% annual utility rate escalation, cumulative savings surpass the total investment in year 11. Over a 25-year horizon, lifetime savings exceed $65,000. Even though NEM 3.0 yields smaller export credits, the battery recaptures value by time-shifting production to evening rates. The calculator reveals how sensitive payback is to export rates, battery cycling, and retail price assumptions.
Detailed outputs
The results section displays first-year savings under both tariffs, the spread between them, simple payback, and lifetime savings after escalation. You also see the percentage of production consumed on-site versus exported, giving you a tangible target for load shifting. Emissions reductions derive from multiplying annual production by the grid’s emissions intensity. Because California’s grid is already relatively clean, the carbon benefit may seem modest today but will grow as the grid decarbonizes; the tool shows avoided emissions in metric tons for clarity.
Scenario comparisons
The table below illustrates how different battery strategies influence economics for a representative PG&E customer.
| Scenario | Self-consumption | NEM 3 savings | Payback | Lifetime savings |
|---|---|---|---|---|
| No battery | 38% | $2,150 | 13.8 years | $41,000 |
| 10 kWh battery | 66% | $2,850 | 11.2 years | $58,000 |
| 15 kWh battery | 74% | $3,050 | 11.5 years | $60,500 |
The sweet spot often lies around 8–12 kWh of storage for typical single-family load profiles, though electric vehicle charging or heat pumps may push you higher. Use the calculator to match battery capacity and cycling assumptions to your lifestyle.
Math focus: cumulative savings
To model rate escalation, we treat annual savings as a geometric series. If first-year savings equal \(S_1\) and rates escalate at \(g\) per year, savings in year \(n\) are \(S_1 (1+g)^{n-1}\). Cumulative savings after \(N\) years become:
The script computes cumulative savings iteratively to find the year in which this sum exceeds total installed cost. If the sum never surpasses the investment within the analysis horizon, the payback output notes that it is not reached, signaling a need to revisit costs or incentives.
Limitations and considerations
NEM 3.0 export values vary hourly and seasonally; our calculator uses an average rate for simplicity. For more granular accuracy, you would segment production into monthly buckets and apply the utility’s published hourly values. Battery behavior also depends on control algorithms—some systems prioritize backup power over economic dispatch. If you plan to participate in virtual power plant programs or demand response events, adjust the cycle count to reflect additional revenue opportunities. Federal and state incentives, such as the Investment Tax Credit or SGIP, can significantly reduce net cost; incorporate them by subtracting from the installed cost inputs.
Grid emissions intensity is rapidly changing as California adds renewables. The default value approximates current averages, but you can input marginal emissions to capture the benefit of shifting exports to evening peaks when fossil generation dominates. Lastly, solar production degrades about 0.5% per year; our model does not include degradation, so you may want to adjust production downward or treat escalation as net of degradation. Despite these simplifications, the calculator provides a robust framework to evaluate investments and communicate with installers, lenders, or homeowner associations evaluating NEM 3.0 projects.