NEM 2.0 vs. NEM 3.0 - What has changed?
Three environmental groups sued the CPUC on May 4, 2023, saying they didn’t look at all the benefits of rooftop solar. They want to get rid of NEM 3.0 and have the CPUC come up with a new way to bill for solar power. The chief judge of the California Appeals Court, Judge Tucher, agreed on September 14, 2023, to hear the case in person. A date has not been set for the oral hearings.
A new solar billing structure, called NEM 3.0, is now in place for California’s three investor-owned utilities. This comes after years of policy fights, changes, and a mad dash to keep systems that worked with the old net metering plan.
Export rates have gone down by 75% in NEM 3.0. Export rates are the value of extra energy that solar systems send to the grid. This means that total savings have gone down and the payback time for home solar has grown. Part of the goal of this new policy was to get people to use battery storage along with their solar panels so that they could become more self-sufficient and help make the power source more reliable.
It’s true that NEM 3.0 isn’t as good for solar-only users as previous net metering policies. Still, keep in mind that NEM 3.0 solar systems in California will still save you more money on energy costs than in any other state. This is especially true if you pair them with home battery storage.
What is Nem 2.0 vs 3.0?
In NEM 2.0, customers could choose their rate schedule, including the time-of-use (TOU) pricing option. It gave them flexibility in how they managed their energy costs.
However, with NEM 3.0, things are changing. Customers will no longer have the liberty to pick their TOU schedule. Instead, their energy provider will determine a specific TOU schedule for them. This adjustment in NEM 3.0 makes it more rigid, limiting the choices available to customers when managing their energy consumption.
Background
On December 15, 2022, the California Public Utilities Commission (CPUC) gave the green light to NEM 3.0, slated to replace NEM 2.0 from April 13, 2023. Here’s where the fundamental changes begin.
NEM 2.0 vs. NEM 3.0
Under NEM 2.0, the pricing structure was straightforward – one unit of electricity supplied to the grid equaled one unit taken from it. However, NEM 3.0 is set to disrupt this equilibrium by altering the price ratio.
Additionally, under NEM 2.0, customers enjoyed flexibility in choosing their rate schedule, including time-of-use (TOU). In contrast, NEM 3.0 mandates a specific TOU schedule dictated by the energy provider, reducing customer choice.
Current NEM Customers
For those already enrolled in NEM 2.0 or with NEM 2.0 agreements established by April 14, 2023, the transition to NEM 3.0 will ensure your compensation is maintained. Your rate and tariff structure remain intact for two decades after connecting to the grid.
Prospective NEM Customers
New customers venturing into rooftop solar installations post-April 14, 2023, should anticipate a payback period of approximately nine years and an estimated $100 savings on their electricity bills. However, NEM 3.0 considerably reduces compensation for net metering credits, diminishing lifetime solar savings by roughly 60%. Furthermore, NEM 3.0 restricts customers from expanding or upgrading their systems while preserving NEM 2.0 privileges.
Future CEA Customers
Solar Earth INC offers a Personal Impact option for NEM customers generating renewable energy. If you’re enrolled in SDG&E’s Net Energy Metering Program, you’ll automatically become part of Personal Impact program upon registration.
This option will persist even as NEM 2.0 phases out on April 14, 2023, ensuring you can continue to offset energy costs by selling excess energy.
What does NEM 3.0 mean for solar?
There are five major things that people who use the California IOU should know about NEM 3.0 solar billing.
- The net metering value of solar energy goes down a lot because of it.
- It’s not true that there are any new “solar taxes” or charges.
- Under NEM 3.0, it will be better to pair solar with battery backup.
- People who already have solar panels and are on NEM 2.0 will be able to add battery storage later and stay on NEM 2.0.
- Under NEM 3.0 solar bills, going solar at home is still a good idea.
The changing rate structure is the first and most crucial point. This will make solar energy less valuable.
Lower rates of solar export
The main difference between NEM 2.0 and NEM 3.0 is the rates that solar owners get paid for sending extra energy to the grid. These rates are called export rates.
Solar owners are required by law to get credit for the total market value of each kWh of energy they send to the grid. NEM 2.0 is one example of this. But with NEM 3.0, retail rates are no longer used to figure out how much solar products are worth. These prices change every month, day, and hour.
This system is even more complicated than it sounds. Here’s an example of how people will be paid for the extra solar power they produce. The gray bars show how much homeowners pay for energy from the grid per kWh, and the black bars show how much they’ll get back for the solar power they produce in excess under NEM 3.0.
Prices of imports and exports in nem 3.0
There is no doubt that they are not the same, as the price of exports is much lower than the price of imports.
According to a press release from the California Solar and Storage Association (CALSSA), “the solar industry and clean energy supporters are still reviewing the CPUC’s proposed decision. However, based on an initial analysis, it would cut the average export rate in California from $0.30 per kilowatt to $0.08 per kilowatt.” These cuts would take effect in April 2023 and result in a 75% drop in the value of exports.”
Solar taxes won’t go up.
The latest version of NEM 3.0 was approved by the California Public Utilities Commission (CPUC). A set of charges for solar owners, which are sometimes called “solar taxes,” did not make it into the final form of NEM 3.0.
At one point, these fees add about $60 a month to the energy bills of people who own solar panels. They’re no longer on the table.
A push for solar and battery to work together
One central idea in the NEM 3.0 policy paper is that solar power and battery storage should work together. That’s because the problem in California isn’t making solar power; it’s storing and using it since peak solar production doesn’t match peak energy use.
Going back to our helpful graph of import and export prices, you can see that export prices go through the roof from 7 to 8 pm. This is because energy demand is at its highest point at that time, while solar output is winding down for the night. The whole state has this problem.
Price of nem 3.0 imports vs. exports
The NEM 3.0 export rates can go as high as $3.32 per kWh in September, which is a busy month for using electricity. Solar Earth INC found that people with battery storage under NEM 3.0 can make about $200 a week by saving the solar power they get during the day and sending it to the grid during times when it’s worth more.
Electrum, the company that runs the solar.com marketplace, released calculations in July 2023 for two new battery discharge modes that are meant to save you the most money in NEM 3.0 billing. These calculations, which are the best in the business, show that many homeowners can actually get their energy bills cut by 100% by combining solar and battery storage (aside from some charges that can’t be avoided). Also, a lot of homeowners could save money on Day 1 if their monthly payments for solar and batteries are less than their usual electric bill.
Based on a study of binding quotes on the solar.com marketplace, NEM 3.0 users who buy solar and battery systems with cash can expect their bills to be offset by 70–90% and their payments to be paid back in 5–7 years. That means you can save a lot more money and get your money back faster than almost anywhere else in the country.
A 30% federal tax refund is already in place, and in 2023, an extra $900 million will be made available for the Self Generation Incentive Program (SGIP). People who use SCE, PG&E, SDG&E, or SoCalGas can get money back from SGIP for storing batteries.
Net Billing Policy
With NEM 3.0, residential solar users now enjoy a friendlier billing system. Instead of making utility payments, you receive a fixed export rate for surplus solar power sent to the grid, and it’s cheaper than what utilities charge. Real-time tracking helps manage your consumption. Opting for net billing is more appealing due to unpredictable rate increases, even though it may result in lower overall savings and a more extended payback period.
Lock-in Period
The potential of export rate changes every two years can demotivate some solar users, given the present energy crisis and utility rate rise.
What can cause the use of solar energy to diminish, which would hurt manufacturers and lessen the number of jobs the sector creates?
What is the status of the typical residential solar customer in light of these significant changes?
Thankfully, switching to solar power or partially offloading your electricity consumption to a solar storage unit allows you to enjoy the advantages of solar energy.
FAQs
Is NEM 2.0 still in effect?
As of April 15, 2023, the Net Energy Metering (NEM) 2.0 program is closed to new applicants, with exceptions for Virtual NEM and NEM Aggregation projects.
Will NEM2 be grandfathered?
The NEM 1 and NEM 2 lock-in period, also known as grandfathering, extends for 20 years after the utility activates your solar system. For instance, if your system was turned on in 2019, you’ll transition to the new rules (NEM 3) in 2039.
Has NEM 3.0 been approved?
On December 15, 2022, the California Public Utilities Commission (CPUC) approved NEM 3.0, marking its adoption from April 13, 2023. This policy redefines the billing relationship between utility providers and customers generating solar or wind power.
Final Thoughts
NEM 3.0 brings significant changes to the compensation structure and customer choices compared to NEM 2.0. Existing customers are generally unaffected, but new customers should carefully consider the implications of these alterations on their solar investments. Solar Earth INC committed to supporting NEM customers, offering a reliable path to sustainability in the evolving energy landscape.
If you want to learn more about Net Metering, call @ (805)691-8000 or contact Solar Earth Inc today for a free consultation.