On December 15, 2022, The California Public Utilities Commission (CPUC) passed Net Energy Metering (NEM 3.0) that will significantly alter the net billing rates for solar production and ultimately reduce the monthly energy bill savings for homeowners.
What is NEM 3.0? NEM 3.0 is a new version of net energy metering policy approved by the CPUC that is expected to take effect on April 14, 2023 after a 120-day grandfathering period. It’s important to note that NEM 3.0 is not retroactive. Solar systems installed under NEM 1 or NEM 2 will remain under their current policy.
Five Things to Know about NEM 3.0
It features a major reduction in the net metering value of solar electricity
There are no new charges or fees, commonly known as “solar taxes”
Pairing solar with battery storage will be more beneficial under NEM 3.0
Solar customers who submit their interconnection application before April 14, 2023 can be grandfathered into NEM 2.0 for 20 years
Solar owners who are grandfathered into NEM 2.0 will be able to add battery storage later and remain on NEM 2.0
How Net Metering works. If a customer’s solar system generates more energy than the home consumes (say, on a sunny day), then that excess energy is sent back to the grid and the homeowner earns credits for the excess energy. This is offset when a customer pulls energy from the grid (say, in the evening) and is charged for that energy. For customers who overproduce, and have remaining credit at the end of their year, the utility will pay the customer for those credits at a wholesale rate. If a customer consumes more energy than they produce, they’ll settle up with the utility at the end of the year for their remaining balance.
Proposed changes for NEM 3.0. The first and most critical point is the changing rate structure that will reduce the value of solar energy. The biggest change from NEM 2.0 to NEM 3.0 is the rate at which solar owners are compensated for the excess electricity they put on the grid. In this one-to-one exchange, every kWh you put onto the grid (export) offsets a kWh that you pull off (import). Clearly, they are not the same, and the price of exports is much lower than the price for imports.
No new solar taxes. The new rate structure will substantially eat into solar savings and drag out the paypack period of going solar, but there is a shred of good news in the version of NEM 3.0 adopted by the CPUC. A series of charges and fees for solar owners—casually known as “solar taxes”—did not make it into the approved version of NEM 3.0. They are now off the table.
A push for pairing solar and battery. A major theme in the NEM 3.0 text is a push for pairing solar with battery storage. That’s because the issue isn’t generating solar electricity in California; it’s storing and using it since peak solar production doesn’t align with peak energy consumption. Export prices skyrocket from 7-8 p.m. because energy demand is peaking while solar generation is winding down for the night. In fact, the new export rates can be as high as $3.32 per kWh during peak demand hours in September.
In addition to the 30% federal tax credit, there will be an additional $900 million in funding available for the Self Generation Incentive Program (SGIP), which provides battery storage rebates for SCE, PG&E, SDG&E and SoCalGas customers, beginning on July 1, 2023.
The Utilities’ Perspective. Utilities are responsible for providing reliable, safe, and affordable energy to all users of the electric grid. They have been concerned with potential cost shifts from solar customers to non-solar customers including many low-income customers who are less financially capable of adopting onsite solar and energy storage. Further, utilities cite their proposal as an incentive for customers to pair storage with their home solar system.
When Will NEM 3.0 Take Effect? Your system does not need to be installed by the deadline to be grandfathered into NEM 2.0. You just need to submit complete and accurate interconnection paperwork.
Start a solar project today to be grandfathered into NEM 2.0.
*Article reprinted from solar.com, December 15, 2022
