NEM 1, NEM 2, and NEM 3: the short version
The biggest difference is how exported solar is valued. NEM 1 and NEM 2 are legacy net-metering structures where exports can offset imports at retail-style values during the true-up cycle. NEM 3, now called the Solar Billing Plan or Net Billing Tariff, pays export credits based on avoided-cost values instead.
Updated June 9, 2026.
NEM 1 is the older, more generous legacy setup. Solar production first serves the home, and surplus exports build credits that can offset later imports during the annual true-up period.
For homeowners, the important point is that NEM 1 is not the modern default for new systems.
NEM 2 kept much of the retail-credit logic, but made time-of-use billing central. That means when you import or export matters more.
A solar-heavy noon export profile can behave very differently from an evening import-heavy profile.
NEM 3 is the shorthand most people use for the Net Billing Tariff, branded by SDGE as the Solar Billing Plan.
Exports are credited at hourly avoided-cost values, so batteries and 4pm to 9pm usage often matter more than raw annual kWh production.
Side-by-side
| Tariff | Typical customer | Export value | Billing pattern | Practical takeaway |
|---|---|---|---|---|
| NEM 1 | Older legacy solar customers | Credits generally track retail/import energy rates before true-up. | Annual true-up. Unused excess generation is settled at a wholesale-style value. | Strongest legacy structure for simple solar payback, but most customers cannot newly enroll. |
| NEM 2 | Legacy solar systems generally interconnected before the Solar Billing Plan cutoff | Credits still generally track retail/import rates before true-up, but customers are on time-of-use rates and pay more non-bypassable charges. | Annual true-up. Interval timing matters more because imports and exports are mapped to TOU periods. | A full-year Green Button comparison is useful because TOU periods can change export value. |
| NEM 3 / NBT / SBP | Newer Solar Billing Plan customers | Export credits are based on CPUC avoided-cost values, usually below retail import rates and changing by hour and season. | Monthly billing with credits rolling forward during the annual cycle. | Batteries and evening energy use matter more because export value is no longer retail net metering. |
Why NEM 3 changes solar design
Under legacy NEM, overproducing at noon could still be useful because credits could offset later usage. Under the Solar Billing Plan, exporting at noon may earn much less than avoiding an evening import. That is why battery storage, pre-cooling, EV charging windows, and 4pm to 9pm household habits matter more under NEM 3.
The right question is no longer only "how many kWh will my panels make?" It is also "when will my home use, store, or export those kWh?"
- Check whether your account is NEM or Solar Billing Plan.
- Use a full year of Green Button data if you are comparing rate plans.
- Look separately at imports, exports, and net usage.
- For NEM 3/SBP, model batteries and evening usage before sizing solar.
- Remember that the Base Services Charge is not offset by solar credits.
Want to test your own usage?
Upload SDGE Green Button data to compare rate plans and see whether your solar profile has meaningful exports or credits.