Commercial Solar in California: The NEM 3.0 Reality and the Battery Pivot
Three years into its implementation, the Net Billing Tariff (NBT)—widely known as NEM 3.0—has completely re-written the rules for commercial energy procurement in California. By slashing the compensation value of solar power exported to the grid by roughly 75%, the California Public Utilities Commission effectively ended the era of "standalone" commercial solar. In 2026, California businesses can only achieve strong returns on solar investments by pairing arrays with commercial Battery Energy Storage Systems (BESS), allowing them to self-consume their generated power during the grueling 4 PM to 9 PM critical peak pricing window.
Executive Impact
- →The End of the Meter-Spinning Meta: Under older NEM iterations, businesses used the grid as an infinite, free battery—exporting solar at retail value during the day and drawing from the grid at night. The NBT pays businesses the "avoided cost" of energy, which is near-zero during the midday solar glut.
- →Storage as a Necessity: Batteries are no longer an optional add-on for resilience; they are the financial engine of the project. A battery allows a facility to store its midday solar energy and discharge it to the building when utility rates spike to 40-50 cents per kWh in the evening.
- →Virtual Power Plants (VPPs): Commercial batteries in California are highly lucrative when enrolled in Utility Demand Response (DR) programs or VPPs, allowing the facility to get paid for dispatching stored power back to the grid during severe heat waves.
Sizing Solar + Storage in 2026
The engineering philosophy for commercial solar in California has inverted. Previously, installers would maximize roof coverage to maximize generation and export revenue.
Under NEM 3.0, "oversizing" an array is a financial mistake because exported power is virtually worthless. Modern 2026 designs meticulously analyze the facility's 15-minute interval load data. The solar array is sized strictly to meet the building's base load plus enough excess to fully charge the onsite battery by 3:00 PM. Not a panel more.
Financing the Premium
The upfront capital cost of a Solar + Storage system is considerably higher than solar alone. However, the Federal Investment Tax Credit (ITC) under the Inflation Reduction Act—currently offering a 30% base credit with potential adders for domestic content or energy communities—drastically improves payback periods.
Additionally, many California businesses utilize third-party Power Purchase Agreements (PPAs), where an investor owns the battery and solar panels, and the business simply signs a long-term contract to buy the generated power at a steep discount to the utility's exorbitant Time-of-Use rates, requiring zero upfront capital.