Is solar worth it in Santa Cruz under NEM 3.0?

The short answer

If you’re skimming: with a battery, solar still pencils for most Santa Cruz County homeowners — typically a 7–9 year payback for owned systems. Solar-only stretches to 10–12 years, because California cut export compensation by roughly 75% in April 2023^[1]. The economic case for solar now leans on self-consumption rather than selling power back to the grid. The economics improve further if you drive an EV or are planning to convert to one — published industry analysis shows California EV households capture substantially more annual value by self-consuming midday solar production into vehicle charging instead of exporting it at NEM 3.0 rates^[6]. The Section 25D 30% federal credit also expired 12/31/2025 — a separate development we cover in our solar tax credit guide^[4]. And at Sunrise, we don’t sell standalone solar in 2026 unless you already have a battery or plan to add one. The rest of this guide walks through how NEM 3.0 changed things, why batteries became central to the math, and how to figure out whether solar pencils for your specific situation.

What changed: NEM 2.0 to NEM 3.0

California has had Net Energy Metering (NEM) policies since the 1990s. Each version sets the rule for what your utility pays you when your solar system produces more than you use and exports the excess to the grid.

NEM 2.0 (active April 2016 – April 2023):

• Exported solar credited at roughly $0.23–$0.30/kWh
• Effectively a full retail-rate offset for most exports
• Solar-only systems paid back in 5–7 years
• Batteries were a “nice to have” for backup but didn’t significantly improve the economic case

NEM 3.0 / NBT (effective April 15, 2023) — adopted under CPUC Decision D.22-12-056, issued December 15, 2022^[1]:

• Technically renamed: the official name is the Net Billing Tariff (NBT), but the industry still uses “NEM 3.0”
• Exported solar credited at “avoided cost” — roughly $0.05–$0.08/kWh depending on hour, season, and the CPUC-published lookup table
• About 75% less export compensation than NEM 2.0
• Solar-only payback stretched to 10–12 years
• Solar + battery payback stayed around 7–9 years, because the battery lets you self-consume production at the retail avoided cost (~$0.42/kWh) instead of exporting at $0.05–$0.08/kWh

One important nuance: if you already have a NEM 2.0 interconnection from a system installed before April 15, 2023, you stay on NEM 2.0 for the original 20-year term. NEM 3.0 only applies to systems newly interconnected after that date. For an example timeline — a system that received PTO under NEM 2.0 in April 2018 will see its 20-year grandfathering expire in April 2038, at which point it transitions to whatever rules are current then. A system that just barely made the NEM 2.0 deadline in April 2023 doesn’t transition until 2043.

The good news for existing NEM 2.0 customers adding storage: under CPUC Decision D.22-12-056 — the same ruling that created NEM 3.0 — existing NEM 1.0 and NEM 2.0 customers can add battery storage to their existing system without triggering a transition to NEM 3.0^[2]. Your grandfathered tariff is preserved. The exception: significant capacity increases — typically more than 10% over your original system size — can trigger a transition. Same-size or smaller storage adds don’t. If you have an existing NEM 2.0 system and you’re adding to it or replacing inverters, ask about whether the existing tariff is preserved before any work starts — there are specific rules.

The self-consumption math (why batteries matter now)

Here’s the load-bearing concept: under NEM 3.0, every kWh you self-consume is worth significantly more than every kWh you export.

A battery stores the excess production during the day, then discharges it at night or during peak hours when you’d otherwise be buying expensive power from PG&E. Every kWh self-consumed via battery turns a $0.07/kWh transaction into a $0.42/kWh avoided-cost benefit.

• Solar-only system: typically self-consumes 25–35% of production. Most of the rest exports at the low NEM 3.0 rate.
• Solar + battery: typically self-consumes 80–90% of production. The battery shifts almost all surplus generation to self-use.

That difference is what makes payback work for solar + battery in 2026 California while solar-only struggles.

PG&E rates: the other half of the equation

Solar economics depend on what you’d otherwise pay PG&E for power. According to the California Public Advocates Office — the CPUC’s independent ratepayer-advocate arm — average PG&E residential electricity rates increased 104% between January 2015 and April 2025; they more than doubled in a decade^[7]. PG&E residential rates have grown an average of 8.7% per year from 2014 to 2024^[3]. For comparison: the U.S. national average residential rate has grown about 2.5% per year over the same period. PG&E is roughly 3.5× faster.

What that means looking forward: we can’t tell you what rates will do next — nobody honestly can. What the record shows is that the gap between “what you’d pay PG&E” and “what your solar + battery system costs to run after install” has widened year after year for a decade^[7]. The slower rates grow, the longer your payback; the faster they grow, the shorter it gets. Every year you don’t have solar, your bill follows the rate curve. Every year you do have it, your bill stays roughly flat — or shrinks, as you displace more grid usage.

When we run payback math at Sunrise, we model from your actual PG&E bills and the current tariff, and we show you the escalation assumption we used so you can judge it yourself. We can’t predict that rate growth continues. We can say that wildfire-recovery cost recovery alone has rate increases approved through 2027. The current rate environment isn’t about to suddenly reverse.

When solar genuinely pencils in 2026

Solar + battery makes sense if most of these are true:

• Your PG&E bill is a real monthly line item. The bigger the bill, the faster the payback — low-usage homes wait longer to break even. We baseline from your last 12 months of actual bills.
• You have decent roof exposure. South-facing or near-south is best; east + west work; deep shade doesn’t pencil.
• You plan to stay in the home 8–10+ years. Solar transfers with the house, but the payback math works best for the original owner.
• You can pay cash or use GoGreen Financing. Without one of those, the upfront cost is hard to make work.
• You have a Tier 2 or Tier 3 HFTD address (much of the Santa Cruz Mountains) where PSPS shutoffs recur. The battery’s backup value adds to the economic case.

A note on north-facing roofs, since they come up a lot: they’re usually the hardest case but not always a no. Published industry data shows north-slope arrays in California typically produce around 20–30% less than south-facing under otherwise-equal conditions^[8], and with high-efficiency panels and the right tilt the gap can come in lower. If your only available exposure is north, the math still sometimes pencils with battery storage at NEM 3.0 rates, because you’re self-consuming production at avoided-cost value — just expect a somewhat longer payback than a south-facing equivalent. We model your specific roof during the free home inspection.

Solar might not pencil for you if:

• Your PG&E usage is genuinely low — small bills mean long paybacks
• Your roof is shaded, oddly shaped, or oriented away from the sun
• You’re planning to sell within 5–7 years
• You’re cash-strapped and don’t want any monthly payment — in which case wait, or save up
• You have an existing NEM 2.0 system that’s still working — don’t undo a good tariff to chase newer hardware

Worked example: a typical Santa Cruz family

Here’s the shape of a typical install: a Soquel family with a substantial PG&E bill, a south-facing roof, two adults working from home, no PSPS exposure — sized at 8 kW of solar with a 13.5 kWh battery (one Tesla Powerwall 3 or equivalent). Paid cash, the system pays back through avoided PG&E purchases — typically in the 7–9 year band, with the battery doing the self-consumption work^[1]. GoGreen-financed, a fixed loan payment works against the utility bill it displaces — the payment never grows, while the bill it replaces historically has^[3]. We model the real numbers — your bill, your roof, your usage — at the free inspection.

A third path — leased or third-party-owned systems — also exists: the company that installs and owns the system claims the commercial-side Section 48E credit, which survived the 25D expiration, and passes savings through as lower monthly payments. We sell owned systems only and don’t make referrals on that route; if you’re considering it, vet the provider carefully — CSLB license, customer references with installs 3+ years old, a contract review by your own attorney, and particular attention to early termination, transfer on sale, and payment escalation — and compare against owned-system financing through GoGreen Home. Both of the paths we actually sell — cash and GoGreen-financed owned systems — produce net savings. The right pick depends on what you have available up front, your timeline, and whether the loan payment fits your monthly budget.

How to evaluate quotes you’re getting

Most solar contractors in California are working hard to keep selling solar in the NEM 3.0 era. The good ones have updated their messaging; some quotes still lean on stale assumptions. Here’s what to watch.

Yellow flags:

• Anyone still pitching the 30% federal Section 25D credit on a 2026 owned install — it expired 12/31/2025
• Quoted payback under 7 years on solar-only under NEM 3.0 — almost certainly assumes outdated NEM 2.0 export rates
• Generic “save 70–90% on your bill” claims without showing the actual math on your specific energy use
• Pressure to sign before “the credit phases down” — there’s no phase-down; the credit ended

Green flags:

• Shows you the actual NEM 3.0 export rate they’re modeling and where they got it
• Walks you through the self-consumption math explicitly
• Walks through owned vs leased honestly, with the full contract terms up front — including early-termination provisions — no surprises
• Discloses the full scope of work clearly and pulls the permits + interconnection as part of the quote — no hidden permit pass-through fees, no surprise interconnection paperwork charges
• Doesn’t push for a same-day decision

A good quote pencils on paper after you read it twice. A bad quote needs a salesperson to talk you through it.

Sunrise’s honest positions on solar in 2026

• We don’t sell standalone solar in 2026. The NEM 3.0 export math doesn’t support it for most homeowners. If you want solar, plan for solar + battery, or come back with an existing battery in place.
• We sell owned systems only. Cash or GoGreen-financed. We don’t sell leased or third-party-owned systems, and we don’t refer to specific providers — we haven’t found an arrangement we’d stand behind. If you’re set on that route, vet the provider carefully: CSLB license, customer references 3+ years old, attorney-reviewed contract.
• We install solar and battery ourselves — single contractor, single contract. Sunrise holds a C-10 (Electrical) license. Per CSLB, C-10 scope explicitly includes solar photovoltaic cells, which means we install the full system in-house: rooftop array, racking, modules, inverters, electrical interconnection, AC disconnect, battery storage, PG&E NEM coordination, and AHJ electrical permitting. Same crew that does our panel upgrades and EV chargers. You sign one contract, we pull one permit, one crew does the work — we don’t split solar projects across a C-46 + C-10 two-contractor coordination; the project runs simpler and accountability is clearer when it’s all one team.
• We surface PSPS value where it applies. Mountain customers should weigh the battery’s backup-power benefit, not just the bill-savings math. A battery that cuts the bill AND carries the house through a long PSPS shutoff is a much more interesting purchase than the bill-savings number alone suggests.
• We’re not afraid to say “wait” or “no.” If your roof is shaded, your usage is low, your timeline is short, or your cash position is tight — sometimes the honest answer is “this isn’t the right time for solar for you.” We’d rather lose the job than sell you a payback you’ll resent living with.

Everything here is recheckable against the primary sources listed below. If anything doesn’t match a source we cite, the source wins — see our corrections policy.