What Palm Desert Homeowners Need to Know
If you own solar in Palm Desert or are considering installing residential solar in 2026, understanding the difference between NEM 2.0 and NEM 3.0—also known as Net Billing—is important.
Both programs allow homeowners to generate electricity with solar, but they value excess solar energy differently. Under NEM 2.0, homeowners could export excess electricity to the grid and receive credits that helped offset electricity purchased later. Under NEM 3.0, export compensation can vary significantly depending on when electricity is sent to the grid.
That difference has changed how modern solar systems are designed and made battery storage increasingly important.
How Does NEM 2.0 Work?
Under NEM 2.0, solar electricity first powers the home. When the system produces more electricity than the home needs, the excess is exported to the utility grid in exchange for credits based on the applicable Time-of-Use rate. Those credits can help offset electricity purchased from the utility when solar production is lower, such as during the evening or at night.
In this sense, the grid essentially functioned as a financial battery. Homeowners weren’t physically storing their excess electricity but were storing some of its value through utility credits. That’s one reason many NEM 2.0 solar systems were originally installed without batteries.
However, changes in Time-of-Use rates can affect this strategy. If a system exports electricity during lower-value periods but the home purchases electricity during more expensive peak periods, those solar credits may not offset as much of the homeowner’s bill. This can contribute to a larger annual True-Up even when the solar system is producing normally.
Protecting Your NEM 2.0 Agreement
NEM 2.0 systems are generally grandfathered into their net metering agreement for 20 years from when they originally entered the program. That grandfathered status can have significant value and should be considered carefully before expanding an existing system.
Homeowners need to be cautious when increasing system size beyond what is permitted under their existing agreement. A commonly discussed threshold for NEM 2.0 expansions is approximately 10% of the original system size.
For larger additions, one potential solution is a non-export solar and battery system.
This approach allows the original solar system to continue operating under its existing NEM 2.0 agreement while additional solar helps power the home and charge battery storage rather than exporting the new system’s excess production to the grid.
This can be particularly useful for homeowners whose electricity consumption has increased after adding an EV, pool, heat pump, electric appliances, additional air conditioning, or other electrical loads.
Before making a significant addition to a NEM 2.0 system, the original solar system and interconnection agreement should be reviewed to determine how the expansion should be designed.
Why Are Some NEM 2.0 True-Up Bills Increasing?
If your NEM 2.0 True-Up has increased, it doesn’t necessarily mean something is wrong with your solar equipment. The problem may be when electricity is produced and consumed.
Solar produces most heavily during daylight hours, while household electricity consumption often continues into the late afternoon and evening. If you’re exporting solar during lower-value periods and purchasing electricity during more expensive peak periods, the financial difference can contribute to a higher True-Up.
Your electricity consumption may also have increased since the original system was installed. Adding an EV, pool, spa, electric water heater, heat pump, or other major electrical load can cause your home to consume more electricity than your solar system was designed to produce.
This is an important distinction because a battery stores electricity—it doesn’t create it. If your system produces enough electricity annually but you’re purchasing too much expensive power during peak periods, battery storage may help. If your home now consumes substantially more electricity than the system produces, you may need additional solar production as well.
How Is NEM 3.0 Different?
NEM 3.0 changed the economics of exporting solar electricity in California.
Instead of the traditional NEM 2.0 credit structure, export compensation under NEM 3.0 can vary based on the hour, day, month, and season. During periods when California already has abundant solar production, daytime exports can have relatively low value.
That means a solar-only system could export excess electricity during the afternoon for relatively little compensation and then purchase higher-priced utility electricity later. Battery storage helps change that relationship.
For many NEM 3.0 systems, the strategy becomes: Home first. Battery second. Grid third.
Solar production first powers the home. Excess electricity then charges the battery. Later, when solar production declines, the battery can supply electricity to the house rather than immediately purchasing power from the utility. Instead of relying primarily on utility credits, homeowners can store more of their solar electricity on-site and use it when it’s most valuable.
Why Batteries Matter Under NEM 2.0 and NEM 3.0
Battery storage can benefit homeowners under both programs, but the strategy may be different. For a NEM 2.0 homeowner, a battery may primarily help reduce electricity purchases during expensive Time-of-Use periods, such as approximately 4 PM to 9 PM. If savings are the primary goal, the battery may only need enough capacity to cover that peak window rather than powering the home throughout the night.
For a NEM 3.0 system, battery storage is often a more fundamental part of the design. The goal is to capture excess daytime solar production and use more of that electricity at home rather than relying heavily on lower-value exports. Batteries can also provide backup power during outages when the system includes the appropriate equipment, giving homeowners another reason to consider storage.
What Should Palm Desert Solar Homeowners Do in 2026?
If you’re already on NEM 2.0, don’t make significant changes to your system without first understanding how they could affect your existing agreement. If your True-Up is increasing, determine whether the problem is higher household consumption, Time-of-Use rates, insufficient solar production, or a combination of factors.
Depending on the cause, the solution could be battery storage, additional solar paired with storage, or a properly designed non-export addition that works alongside your existing NEM 2.0 system.
If you’re installing a new system under NEM 3.0, solar and battery storage should generally be considered together. Solar production, usable battery capacity, daytime and nighttime electricity consumption, future energy needs, and utility rates all influence how the system should be designed.
Solar Energy and Battery Storage in Palm Desert
At Supreme Solar and Electric, we evaluate each homeowner’s net metering agreement, electricity consumption, solar production, Time-of-Use periods, True-Up history, future electrical loads, and battery needs before recommending a solution.
Whether you’re on NEM 2.0 or NEM 3.0, the goal is ultimately the same: produce the electricity your home needs, use that electricity efficiently, and reduce how much expensive power you need to purchase from the utility.
Homeowners in palm Desert deserve maximum production, maximum energy storage, and maximum savings, and Supreme Solar is here to help. Request a FREE consultation to learn more about what we can do for homeowners in Palm Desert.