How Much Can You Make Selling Electricity to the Grid in CA?

Homeowners in California are increasingly exploring solar panels to generate electricity and interact with the grid. The financial landscape for selling excess power back to the grid has changed significantly. Potential solar owners must understand current compensation mechanisms, as policy evolution shapes financial benefits from residential solar.

Understanding Net Metering in California

Net metering credits solar system owners for electricity added to the grid. When a solar system produces more than consumed, excess power flows back, and the homeowner receives credits. Historically, California’s Net Energy Metering (NEM 2.0) program compensated solar customers at near-retail rates for excess electricity, meaning its value was almost equal to the purchased price.

NEM 2.0 applied to installations interconnected before April 15, 2023. Customers were required to switch to a Time-of-Use (TOU) rate plan, where electricity prices varied.

NEM 2.0 introduced Non-Bypassable Charges (NBCs), small per-kilowatt-hour fees not offset by solar credits. While NEM 2.0 offered financial incentives, the landscape shifted for new solar customers with the Net Billing Tariff.

The Net Billing Tariff (NEM 3.0) Explained

California’s Net Billing Tariff (NEM 3.0) took effect on April 15, 2023, for new solar installations in territories of the state’s three largest investor-owned utilities (PG&E, SCE, SDG&E). This tariff fundamentally changes how excess solar electricity is valued. Compensation for exported electricity is based on an “Avoided Cost Calculator” (ACC), reflecting the utility’s avoided cost.

ACC export rates are much lower than retail import rates, averaging about 75% less than previous compensation. These rates are dynamic, varying by hour, day, and month. Values are lowest midday when solar production is abundant, and highest during peak demand periods.

NEM 3.0 requires customers to enroll in specific “electrification” Time-of-Use (TOU) rate plans, with higher on-peak and lower off-peak charges. While importing electricity during peak hours (typically 4 PM to 9 PM) is expensive, exporting power during high-demand windows can yield higher credits, though still generally below retail import rates.

Non-Bypassable Charges (NBCs), typically 2 to 3 cents per kilowatt-hour, apply to all grid electricity consumed and cannot be offset by solar generation.

Maximizing Your Financial Returns

Under the Net Billing Tariff (NEM 3.0), strategies for maximizing financial returns from solar have evolved. Integrating battery storage with a solar system is central to optimizing savings.

Batteries store excess solar energy generated when export credits are low. This allows homeowners to power homes during high-cost peak hours or export to the grid when rates are highest. Utilizing stored energy during peak demand reduces reliance on expensive grid electricity.

For example, midday excess solar can be stored and discharged between 4 PM and 9 PM when import rates are highest. This practice, known as energy arbitrage or load shifting, leads to greater bill savings.

Proper system sizing is important under NEM 3.0 to avoid excessive low-value export electricity. Focus shifts to maximizing self-consumption and strategic battery discharge, rather than 100% offset through grid exports.

Oversizing a solar system without adequate storage can send too much power to the grid at unfavorable rates. Energy efficiency upgrades, like improved insulation or efficient appliances, further reduce consumption, making the solar system more effective.

What to Expect on Your Utility Bill

California solar customers understand their utility bill under the Net Billing Tariff through an annual “true-up” process, which reconciles energy credits and charges.

The true-up statement summarizes all grid electricity consumed and excess solar electricity sent back over a 12-month billing cycle, determining the final balance or credits.

Monthly statements show usage, production, and accumulated charges/credits, but are often informational. The true-up statement, issued on the system’s interconnection anniversary, consolidates these figures.

Any remaining net charges must be paid. Net surplus credits, if a system produces significantly more than it consumes, are paid out at a very low wholesale rate (around 3 cents per kilowatt-hour).

Differentiate between energy charges and other fixed charges on the bill. Non-Bypassable Charges (NBCs) apply to all grid kilowatt-hours consumed and are not offset by solar generation, remaining a bill component.

Some utilities may impose minimum monthly charges for grid connection. Understanding these line items is essential for solar homeowners to track financial performance and manage energy consumption.