Can I Still Get Grandfathered into NEM 2.0 (And Avoid NEM 3.0)?
Looking To Go Solar In The Near Future? Pay Close Attention!
The California Public Utilities Commission (CPUC) recently voted to pass NEM 3.0, which dramatically reduces the value of solar energy for residential solar customers.
The NEM 3.0 changes went into effect on April 15, 2023.
The rate cuts enacted as part of NEM 3.0 represent the most significant cut of export rates in US history and stand to deal an unfortunate blow to new solar customers throughout California.
This article details the impacts NEM 3.0 will have on future solar customers, and what you can do if you missed the deadline for NEM 2.0.
Let’s get started.
What is Net Energy Metering (NEM)?
NEM stands for Net Energy Metering. It refers to the billing program utilities give solar customers, which defines the value the utility will provide for the homeowner’s exported solar energy.
Here’s how it works:
The utility “nets out” energy charges from the grid for solar customers. When a customer’s solar panel system produces excess energy and sends it back into the grid, the customer earns billing credits.
When the customer needs to draw power from the grid at night or on a cloudy day, the utility charges them for the energy they use but applies “solar credits earned” against those charges.
Customers who produce more energy than they use over an entire year will have credits on their energy statement at the end of the billing year.
Under NEM rules, the utility pays customers for those credits through a program called Net Surplus Compensation.
This allows solar system owners to offset their energy costs by using the credits their systems generate during higher-producing periods.
What Has Changed Under NEM 3.0?
NEM 3.0 has been approved and implemented.
The CPUC published the NEM 3.0 proposal on November 10, 2022, and voted to approve the measure on December 15, 2022.
The newly passed NEM 3.0 alters net billing rates for future customers going solar, ultimately reducing how much money solar customers will save on their monthly energy bills.
Here’s a quick breakdown of some of NEM 3.0’s critical features:
NEM 3.0 decreases the value of solar energy credits for residential customers, decreasing the compensation for the solar energy customers export onto the grid by about 75%, compared to NEM 2.0 pricing.
NEM 3.0 still provides the most benefits to customers who pair solar panels with solar battery backup systems. Doing so allows customers to offset peak energy charges and minimize the impact of lower solar credits.
The proposal does not introduce new charges, fees, or solar taxes.
NEM 3.0 introduces Net Billing.
NEM 3.0 also limits system oversizing.
The most salient part of NEM 3.0 is the first point: it reduces the net metering value of solar power by changing the existing rate structure.
Specifically, NEM 3.0 slashes California’s export rate by about 75% - from the current $0.23/kWh to $0.35/kWh (depending on the TOU rate plan and time of day) down to an average of approximately $.05/kWh.
As you can see, NEM 3.0 significantly changes the value of exported solar energy.
The current version of NEM 3.0 bases solar credit rates on the “Avoided Cost Calculator” rather than retail values. This means solar credits will increase or decrease throughout the day and night, according to existing Time of Use rates.
It also means that the price of solar exports (the energy customers contribute to the grid) will be much less than the price of imports (the kWhs of energy customers pull from the grid), resulting in dramatically decreased energy savings for consumers.
Fortunately, Sandbar is on top of the latest innovations in the solar industry, and in April 2023, a new option has emerged to lessen the impact of NEM 3.0 and recover some of the long-term savings of going solar.
Contact us today if you’re interested in learning more about this exciting new development!
For a more detailed breakdown of export vs. import price, check out this graph pulled directly from page 231 of the approved NEM 3.0 proposal:
Can I still Get Grandfathered Into NEM 2.0 At This Point?
Existing Solar Customers
If you installed your solar power system during NEM 1.0 or NEM 2.0, NEM 3.0’s implementation won’t change your Net Metering status.
Instead, your system will be grandfathered into the previous NEM plan for 20 years from the initial date your system was placed into service.
Here’s an example:
If your solar system was installed in 2012, your existing NEM plan will remain in effect until 2032. If you went solar in 2020, your current NEM plan will remain in place until 2040.
If you’re grandfathered into NEM 2.0, you’ve locked in NEM 2.0’s export value.
New Solar Customers
If you’re thinking of installing a new solar system in the coming months, you’ll fall under the NEM 3.0 policy.
To get the most value possible from NEM 3.0, we strongly recommend installing a battery storage system with your solar PV system.
This will help you secure the largest possible cost savings and avoid peak TOU rates.
More on that in the next section.
Why Should I Pair Solar with Battery Storage?
Adding a battery storage system to your home gives you resiliency when the power goes out and allows you to use your own stored solar energy during “Peak Hours” under your Utility’s Rate Plan.
Under NEM 3.0, the export rate for solar electricity produced by residential solar panel systems has decreased, and having a battery lets you store (and utilize) more of your available excess daytime solar energy produced, thus reducing the amount of energy you export back to the grid and increasing your savings.
NEM 3.0 incentivizes adding battery storage to your solar energy system, as homes with solar PV systems and battery storage will reduce the amount of energy they export.
Customers who install battery storage systems stand to reap the benefits of more solar savings, added energy independence, and less vulnerability to future net metering rate hikes.
Rebates & Incentives Available to Homeowners Right Now
If you’re considering going solar after NEM 3.0, there are rebates and incentives you should know about.
Here are two we recommend considering:
Federal Solar Tax Credit. The Federal Solar Tax Credit is a tax credit that customers can claim on their federal income taxes for a percentage of the cost of a PV system paid for by the taxpayer. As long as the installation of the system is completed during the tax year, customers can claim a tax credit. The credit is 30% for systems installed from 2023-2032. In 2033, the tax credit will decrease to 26%. Learn more about the Federal Solar Tax Credit and how to claim it here.
SGIP Program. The CPUC’s Self-Generation Incentive Program (SGIP) offers rebates for residential and non-residential customers who install energy storage technologies. To prepare California’s grid for the upcoming wildfire season, the CPUC has authorized over $1 billion of funding for the program through 2024. This funding prioritizes high fire-threat areas, which have experienced at least two Public Safety Power Shut-off (PSPS) events, as well as medically vulnerable and low-income customers. Learn more about the SGIP here.
Thinking of Going Solar? Sandbar Can Help!
Based in Santa Cruz, California, we provide various solar services for San Francisco Bay Area and Central Coast homeowners and businesses, including free estimates, custom design, and expert installation.
We’re proud to be known for designing and installing the most efficient solar panels on the Central Coast, including Monterey and Santa Cruz Counties.
Contact us today to get a free solar consultation: (831) 469-8888
FAQs
1. What is the difference between Net Metering 2.0 and 3.0?
While NEM 2.0 and NEM 3.0 are both net metering policies, there are some significant differences between the two.
Most notably, NEM 3.0 cuts the rate at which solar owners are compensated for the energy they send back to the grid. While NEM 2.0 pays solar owners for the full retail value of each kWh of energy they produce, NEM 3.0 reduces that value by 75%.
2. Is NEM 3.0 retroactive?
No, NEM 3.0 is not retroactive. Utility companies must grandfather their customers into NEM 1.0, 2.0, or their current net metering rate for 20 years. Now that NEM 3.0 has passed, it cannot go back and retroactively affect these grandfathered customers.
3. Can I add battery backup to my existing PV system without losing my grandfathered NEM 2.0 status?
Yes, you can. Adding battery backup to your existing home solar system will not jeopardize your NEM 2.0 status.
