NEM 3.0 Changed Everything — Here's What San Diego Property Owners Need to Know

On April 15, 2023, California's Public Utilities Commission approved NEM 3.0 — the most significant change to solar compensation policy in the state's history. For property owners who installed solar before that date, the old rules still apply. For everyone going solar now, the economics have fundamentally shifted.

What Changed Under NEM 3.0

Under the previous NEM 2.0 framework, excess solar energy exported to the grid was compensated at or near the retail electricity rate — typically 25–35 cents per kilowatt-hour for SDG&E customers. Under NEM 3.0, that export rate dropped by roughly 75%, to an average of 5–8 cents per kilowatt-hour depending on the time of day.

This single change has a dramatic effect on payback periods. A commercial system that might have paid back in 6–8 years under NEM 2.0 could now take 10–14 years if designed the same way — unless battery storage is added to shift consumption and reduce grid exports.

Why Battery Storage Is Now Essential

The logic is straightforward: if you can't get paid well for exporting power, you need to use it yourself. Battery storage systems — like the Tesla Powerwall, Enphase IQ Battery, or commercial-scale systems from SunPower and others — allow you to store solar energy generated during the day and use it in the evening when grid rates are highest.

For commercial properties with time-of-use rates, this can be particularly powerful. SDG&E's peak rates can exceed 50 cents per kilowatt-hour in summer afternoons. Displacing that consumption with stored solar energy — rather than exporting it at 6 cents — dramatically improves project economics.

The SGIP Incentive Makes Storage More Affordable

California's Self-Generation Incentive Program (SGIP) provides rebates for battery storage systems. As of 2026, SGIP rebates remain available for many commercial and residential customers, though funding levels vary by utility territory and customer type. Non-profits, low-income customers, and customers in high fire-risk areas receive enhanced rebates.

When combined with the federal Investment Tax Credit (ITC) — currently 30% for both solar and storage — the net cost of a battery system can be reduced significantly. An independent consultant can model the exact incentive stack for your property and load profile.

What This Means for Your Project Analysis

The most important thing to understand about NEM 3.0 is that it makes independent analysis more valuable, not less. Under NEM 2.0, a rough rule of thumb — "solar pays back in 7 years" — was often close enough. Under NEM 3.0, the right answer depends heavily on:

• Your specific utility rate schedule and time-of-use structure
• Your load profile — when you use energy, not just how much
• Whether battery storage makes sense and what size is optimal
• Your eligibility for SGIP and other incentives
• The quality of the system design proposed by installers

Installers have a financial incentive to sell you a system. An independent consultant has an incentive to give you accurate numbers. In the NEM 3.0 environment, that distinction matters more than ever.

The Bottom Line

Solar still makes financial sense for most San Diego commercial and institutional properties — but the analysis is more nuanced than it was three years ago. If you're evaluating a solar project, make sure your financial model accounts for NEM 3.0 export rates, includes a battery storage analysis, and is built on your actual utility data rather than industry averages.