NEM 3.0 and Battery Storage: Why the Equation Changed

When California's Public Utilities Commission approved NEM 3.0 in December 2022, it set off a wave of homeowners rushing to lock in NEM 2.0 interconnection agreements before the April 2023 deadline. The new tariff cut export credits for solar by roughly 75%. What it didn't change: the case for home battery storage. If anything, NEM 3.0 made batteries more compelling than they've ever been.

How SCE pricing works under NEM 3.0

Southern California Edison uses time-of-use (TOU) rates, which means what you pay for electricity depends on when you use it. Peak hours — typically 4–9 PM on weekdays — cost significantly more than off-peak hours overnight. Super off-peak rates (9 AM–4 PM on weekdays) are the cheapest.

Solar panels produce most of their energy right when super off-peak rates are in effect — roughly 9 AM to 3 PM. Under NEM 2.0, that solar energy was credited at close to the full retail rate even when exported to the grid during those hours. Under NEM 3.0, exported solar earns only about $0.05/kWh during those same hours.

The result: solar energy exported to the grid during peak solar production is worth far less than it used to be. But solar energy consumed by your home — or stored in a battery for use later — is still worth the full retail rate you'd otherwise pay SCE.

What a battery actually does for you under NEM 3.0

A home battery bridges the gap between when your solar panels produce energy and when you actually need it. Here's the basic flow for a South Bay home with solar + battery:

• 9 AM – 3 PM: Solar panels produce at full capacity. Your home draws directly from solar. Excess production charges the battery rather than exporting to the grid.
• 3 PM – 4 PM: Solar production starts tapering. Battery continues charging from any remaining solar.
• 4 PM – 9 PM (peak hours): Solar production is low or zero. Instead of pulling from SCE at peak rates ($0.40–0.50/kWh), your home draws from the battery. The battery's stored energy is worth the peak rate you'd otherwise pay.
• 9 PM – 9 AM: Off-peak hours. Battery is usually depleted by this point or held in reserve for backup. Grid power is relatively cheap.

The financial logic: you charge the battery for "free" with solar energy that would otherwise earn $0.05/kWh on the grid, and you discharge it during peak hours to avoid paying $0.40–0.50/kWh to SCE. Each kWh of battery capacity used this way saves roughly $0.35–0.45 per cycle. For a Tesla Powerwall 3 (13.5 kWh), that's $4.70–6.10 of value per day when fully cycled.

The federal tax credit no longer applies

Through the end of 2025, battery storage qualified for the 30% federal Residential Clean Energy Credit (Section 25D) — whether installed alongside solar or as a standalone system. The One Big Beautiful Bill Act, signed into law in July 2025, terminated that credit for any residential system not placed in service by December 31, 2025. If you're buying and owning a battery today, that federal offset no longer applies.

Commercial solar and storage tax credits were left largely intact, so batteries installed under a lease or power purchase agreement (PPA) — where a third party owns the equipment — can still indirectly benefit from a federal credit through that owner. That makes lease/PPA structures worth a look if the upfront cost of ownership is what's giving you pause. Either way, the time-of-use arbitrage math above is what makes a battery worthwhile now — not a tax credit stacked on top of it.

Which battery is right for your home?

We primarily install three systems, each suited to different home profiles:

• Tesla Powerwall 3. 13.5 kWh, whole-home backup capable, integrated solar inverter. Best for homes that want a clean, single-vendor system with strong app monitoring. The Powerwall 3's built-in inverter also simplifies the installation.
• Enphase IQ Battery 5P. 5 kWh per unit, stackable to 15+ kWh. Best for homes already on Enphase microinverters — the integration is native and monitoring is unified in the Enphase app.
• Franklin WH. High discharge rate, good for larger homes with significant HVAC or pool loads that need to stay on backup. A strong option when peak discharge capacity matters more than total capacity.

The right system depends on your home's load profile, which loads you want on backup, and whether you have an existing solar inverter. We do a load analysis before recommending a size or brand.