Key Takeaways:
Net metering in San Diego is a billing mechanism that tracks your solar energy production and consumption in both directions. When your rooftop solar system generates more electricity than your home uses, the surplus energy flows back to the electric grid through a bi-directional meter. San Diego Gas & Electric (SDG&E) credits your account for this excess solar electricity, which you can apply during periods when your solar panels produce less power—like cloudy days or evenings when energy consumption spikes from air conditioning or electric vehicle charging.
The current net metering program in San Diego operates under NEM 3.0 (also called the Net Billing Tariff), which the California Public Utilities Commission implemented on April 15, 2023. Unlike previous net metering policies, NEM 3.0 calculates generation credits using an Avoided Cost Calculator that determines the value of your solar generation based on when you export it to the grid. This system is available across SDG&E's entire service territory, covering all of San Diego County and southern Orange County. All residential solar customers with renewable energy systems—including solar panels, wind, biomass, or geothermal—qualify for the NEM program if their solar power systems meet SDG&E's interconnection requirements and grid connection rules.
| Feature | NEM 2.0 | NEM 3.0 (Current) |
| Implementation Date | June 2016 | April 15, 2023 |
| Export Credit Rate | ~$0.30/kWh | $0.074/kWh average |
| Credit Method | Nearly full retail price | Avoided Cost Calculator |
| Export Value Reduction | Baseline | 75% lower than NEM 2.0 |
| Interconnection Fee | $132 (under 1 MW) | $132 (under 1 MW) |
| Optimal Strategy | Maximize exports | Maximize self-consumption |
| 20-Year Savings | 60% higher than NEM 3.0 | Baseline |
The shift from NEM 2.0 to the new solar billing plan represents the most significant change to net metering policy in California's solar industry history. The California Public Utilities Commission reduced export rates by approximately 75%, dropping the average compensation for excess solar electricity from around $0.30 per kilowatt hour (kWh) to just $0.074/kWh under the Net Billing Tariff. The Avoided Cost Calculator now determines solar export rates using 576 possible rate combinations that vary by climate zone, month, day-type, and hour, ranging from $0.00/kWh during periods of excess grid supply to as high as $3.50/kWh during peak summer evening electricity demand. This fundamental change shifted optimal savings strategies from maximizing solar generation exports to maximizing self-consumption with battery storage systems. Solar customers who interconnected before the April 15, 2023, deadline remain grandfathered on their current net metering programs for 20 years from their interconnection date, preserving the more favorable rate structures of NEM 1.0 or NEM 2.0.
San Diego Gas & Electric's Time-of-Use rate structure directly impacts how much you save with rooftop solar systems under the current net energy metering policy. Residential solar customers on the Solar Billing Plan use the EVTOU5 Rate Schedule, which divides each day into three distinct TOU periods with different electricity rates and solar export rates. On-peak hours (4 PM - 9 PM) charge $0.62/kWh for grid electricity but only credit $0.12/kWh for solar generation—just 19% of the retail rate. Off-peak hours (2 PM - 4 PM and 9 PM - 12 AM) charge $0.38/kWh with $0.06/kWh export credits (16% of retail), while super off-peak hours (12 AM - 2 PM) charge $0.28/kWh with only $0.04/kWh export credits (14% of retail). The average SDG&E retail electricity rate sits at $0.42/kWh, but the average export credit for surplus energy is just $0.074/kWh—only 18% of what you pay for grid electricity.
Understanding these Time-of-Use rate structures is critical for maximizing solar savings under NEM 3.0. Solar panels generate peak electricity during midday super off-peak hours when export credits are lowest, but your home's energy consumption typically peaks during evening on-peak hours when solar generation has stopped and electricity rates reach their highest point. Late summer and early fall months (August-September) between 5-7 PM offer the highest export rates—sometimes reaching $3.00-$3.50/kWh—but solar power systems aren't producing during these premium evening hours. This mismatch between solar time of use generation and peak electricity hours makes battery storage systems essential for capturing the most value from your renewable energy system by storing excess solar electricity during the day and discharging it during expensive on-peak periods.
Battery storage systems have become crucial for maximizing solar savings under San Diego's current net metering rules. The financial impact is dramatic: adding a solar battery increases first-year savings from $1,858 to $3,390—an 82% boost. Over 25 years, solar-only systems deliver $48,310 in net savings, while solar + storage generates $121,427 (a 151% increase). The payback period drops from 8.5 years for solar alone to just 3.2 years with battery storage—62% faster. This shift in economics explains why approximately 70% of Net Billing Tariff customers paired battery storage systems with their rooftop solar by the end of 2024. The Self-Generation Incentive Program (SGIP) sweetens the deal further, offering up to $1,000 per kWh of storage capacity—a $13,500 rebate for a typical 13.5 kWh solar battery that dramatically reduces upfront costs.
The strategic value of a battery for net metering lies in time-shifting your solar generation to match peak electricity hours. Instead of exporting surplus energy during midday for minimal credits ($0.04-$0.12/kWh), battery storage systems capture that excess solar electricity and discharge it during on-peak hours (4 PM - 9 PM) when grid electricity costs $0.62/kWh. Your solar battery can even export stored renewable energy to the electric grid during late summer and early fall premium rate periods (5-7 PM) when export rates spike to $3.00-$3.50/kWh, times when solar panels aren't producing. Beyond economics, solar battery storage provides energy independence during San Diego's frequent power outages from wildfires and planned shutoffs. With a proper safety disconnect switch and subpanel, your battery storage system keeps essential appliances, electric vehicle charging, and smart home technology running when the utility grid goes down.
San Diego Gas & Electric charges solar customers a one-time interconnection fee of $132 when you submit your interconnection application for systems under 1 megawatt (1,000 kW)—which covers virtually all residential solar installations. Single-Family Affordable Solar Housing program participants are exempt from this interconnection fee. Beyond the initial connection cost, all SDG&E residential customers—including those with rooftop solar systems—must pay a Base Services Charge of $24.15 per month. This non-bypassable charge covers grid infrastructure maintenance and cannot be offset by your generation credits, meaning you'll pay it regardless of how much solar electricity you produce.
Under the NEM 3.0 Solar Billing Plan, residential solar customers on the EVTOU5 Rate Schedule pay a monthly fixed rate of approximately $14-$16, though this comes with overall lower base per kilowatt hour (kWh) pricing compared to standard time-of-use rates. Solar customers still grandfathered on NEM 2.0 net metering programs pay additional non-bypassable charges (NBCs) on the net kWh of grid electricity delivered during each metered interval—these public purpose program charges also cannot be offset by solar credits. Understanding these mandatory fees is essential for calculating your true solar savings and payback period, as they reduce the total cost of electricity you can offset through renewable energy generation.
San Diego Gas & Electric reconciles your net metering account at the end of every 12-month true-up period, when you'll need to pay any outstanding balance for grid electricity used beyond what your solar credits covered. After the true-up bill, your account resets for a new 12-month relevant period. Solar customers can choose between monthly billing—where SDG&E settles charges each month to avoid large annual true-up bills—or annual billing, where you accumulate solar credits throughout the year and settle at the true-up date. Once you select a billing option, you cannot switch for a full 12 months or change mid-cycle during your true-up period. Any generation credits remaining at the end of your 12-month period get zeroed out, so timing your energy consumption patterns strategically maximizes the value of accumulated solar credits.
If your renewable energy system produces more electricity than your home consumes over the entire annual true-up period, you earn Net Surplus Compensation (NSC) for that excess solar generation. The NSC rate ranges from $0.02 to $0.03 per kilowatt hour (kWh)—based on the wholesale market value of electricity as required by California's Assembly Bill 920. This compensation rate is significantly lower than retail electricity rates because it reflects avoided costs rather than retail rate bill credits. San Diego Gas & Electric sends Net Surplus Compensation payments of $100 or more via check, while payments under $100 roll over as true-up credits to your next relevant period. Given these low wholesale rates for surplus generators, proper system sizing and battery storage systems help you consume your solar generation rather than selling excess solar electricity back to the grid at minimal compensation.
Despite the reduced export rates under the Net Billing Tariff, residential solar remains an excellent investment in San Diego thanks to the combination of California's highest-in-the-nation electricity rates and abundant sunshine. San Diego Gas & Electric customers pay between $0.22-$0.50 per kilowatt hour (kWh), depending on the month and Time-of-Use period, with on-peak hours reaching $0.62/kWh—the highest residential electricity rates of any mainland U.S. state. SDG&E increased electricity rates by 25% in January 2023, and these rising costs directly translate to shorter payback periods for solar power installations. San Diego's exceptional solar irradiance averages 6.13 kWh/m²/day annually (with some zip codes reaching 6.23 kWh/m²/day), and peak sunlight hours during summer months generate 15-20% more solar electricity than winter production.
The California Public Utilities Commission projects that solar customers under NEM 3.0 will pay off their systems within 9 years and save approximately $100 monthly on electricity bills. While solar-only systems still deliver substantial savings, pairing solar panels with battery storage roughly doubles your financial return by maximizing self-consumption during expensive peak hours rather than exporting surplus energy at minimal credit rates. Even under the new net metering policy, San Diego rooftop solar systems provide greater cost savings than solar installations in any other state—particularly when combined with solar battery storage to optimize energy consumption patterns. The solar investment remains compelling: you're protecting yourself against future electricity rate increases while reducing dependence on the electric grid and lowering your carbon footprint through renewable energy sources.
CRITICAL: Federal Solar Tax Credit Expires December 31, 2025
The federal Renewable Energy Credit (Investment Tax Credit) remains the most valuable solar incentive, providing 30% of your total system cost as a tax credit—averaging $6,800 in savings, or $6,782 for a typical $22,600 residential solar system. However, this federal incentive was ELIMINATED for properties placed in service after December 31, 2025, under Public Law 119-21. You must have your solar power system installed and operational by December 31, 2025, to claim this credit—there is no extension or phase-down period. Without the federal solar tax credit, 2026 installations will see payback periods extend from 8.5 years to 12.2 years (43% longer), fundamentally changing the economics of going solar. This deadline makes 2025 the last opportunity to maximize your solar investment through federal incentives.
Beyond federal incentives, California and San Diego offer robust state and local programs to support renewable energy adoption. The Self-Generation Incentive Program (SGIP) provides $1,000 per kWh of battery storage capacity—a $13,500 rebate for a typical 13.5 kWh solar battery system. Income-qualified homeowners can access even more generous programs: DAC-SASH offers no-cost solar for eligible residents in Disadvantaged Communities, while the San Diego Solar Equity Program provides monetary assistance to income-qualifying single-family homeowners in the City of San Diego. California allocated $630 million in state funding for low-income customers installing solar + storage after April 14, 2023, and the CARE program offers subsidized net metering billing for low-income households. Additionally, California's Property Tax Exclusion ensures that your solar energy system won't increase your property tax assessment, preserving long-term savings. These stacked solar incentives, combined with SDG&E's high electricity rates and San Diego's abundant sunshine, create compelling economics for residential solar—but only if you act before the federal tax credit deadline.
Ready to Maximize Your Solar Savings Before the Federal Tax Credit Expires?
The December 31, 2025, federal solar tax credit deadline is approaching fast, and waiting until 2026 could cost you thousands in lost savings and years of extended payback. With San Diego's high electricity rates, abundant sunshine, and the current stack of solar incentives, there's never been a better time to invest in rooftop solar and battery storage systems.
Precision General Contracting specializes in helping San Diego homeowners navigate net metering rules, Time-of-Use rate structures, and solar incentive programs to maximize their solar investment. Our team understands the complexities of NEM 3.0, SGIP battery rebates, and optimal system sizing for self-consumption strategies. Don't leave money on the table—contact us today for a free solar consultation and discover how much you can save with a properly designed solar power system that takes full advantage of remaining federal incentives and California's renewable energy programs.
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