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California Net Energy Metering - NEM 3.0:

Net Energy Metering 3.0: What You Need to Know

  • NEM 3.0 took effect on April 15, 2023
  • For customers of PG&E, SCE, and SDG&E, the value of solar energy credits will be reduced by roughly 75% as a result of the changes to California's net metering program.
  • Existing solar customers will be grandfathered into their original net metering policy, as will anyone who installed solar before the policy change.

What is NEM 3.0?

NEM 3.0 is the 3rd version of California's Net Metering Program. It was approved by the California Public Utilities Commission (CPUC) on December 15, 2022. Net metering enables you to receive credits for any extra solar electricity you transmit to the grid.

What is NEM 3.0 Solar NEM 3.0 Solar (1).jpg

This incentive usually occurs when your solar energy system produces more energy than you need.

Under NEM 3.0, net metering compensation rates are reduced by about 75% for new solar customers.

Although the new tariff took effect on April 15, 2023, solar customers in California who filed an interconnection application before the date can benefit from NEM 2.0 rates for the next two decades.

What are the Benefits of NEM 3.0?

NEM 3.0 offers several benefits to Californians. Some of these include.

No solar taxes

There will be no solar taxes attached to NEM 3.0 adopted by the California Public Utilities Commission (CPUC).

Attaching batteries to your solar system will be more beneficial

NEM 3.0 offers incentives to solar customers who pair their systems with batteries. Under NEM 3.0, customers can earn as high as $3.32 per kWh during peak demand hours. Furthermore, homeowners using NEM 3.0 battery storage can make about $200 per week.

NEM 2.0 can benefit under NEM 3.0

NEM 3.0 also allows NEM 2.0 users to later add battery storage while still maintaining their NEM 2.0 status. This way, NEM 2.0 customers can benefit from the relatively high compensation rates under NEM 2.0. There are two situations where this is relevant:

Note: If you add battery storage after April 15, 2023, and already have a solar system in California, you will not be upgraded to NEM 3.0.

Battery storage additions made after April 15, 2023, will not affect systems that were grandfathered into NEM 2.0 before that date.

What are the Eligibility Requirements for NEM 3.0?

To be eligible for NEM 3.0 in California, solar customers must meet the following requirements.

You must have submitted your interconnection application on or after the 15th of April, 2023. You must also have:

  • Paid an interconnection fee if your solar project is under 1 megawatt.
  • Signed an agreement consenting to serve on a transfer to time-of-use basis.

Can I sell excess energy back to the grid in NEM 3.0?

Homeowners will be able to sell excess energy back to the grid under NEM 3.0. However, the compensation rate under NEM 3.0 varies from that of NEM 2.0. With NEM 3.0, the compensation rate falls by 75%. Solar customers will also be able to sell the excess energy stored in their solar batteries during peak demand hours, earning as much as $3.32 per kWh.

Solar savings are likely to be affected by the introduction of NEM 3.0. Some experts suggest that the solar payback period for solar energy systems will move up from 5 to 6 years to 9 to 10 years.

What About Installations Prior to 2023?

Customers who installed their energy systems before April 12, 2023, will not be affected by changes in net metering compensations. These customers are automatically grandfathered into NEM 2.0 for 20 years.

Note: 20 years is calculated from the date the energy system became operational.

Additionally, those who submitted an interconnection application before April 15 and built their solar energy systems three years after submission will benefit from NEM 2.0.

Furthermore, NEM 3.0 will not apply to you even if you add batteries to your solar panel array after April 15. These additions will not affect systems grandfathered to NEM 2.0 either.

When does NEM 3.0 Start?

NEM 3.0 officially took effect on April 15, 2023, allowing customers of California's three investor-owned utilities (PG&E, SCE, and SDG&E) to begin receiving solar bills under the new billing system.

New solar systems for which interconnection applications were submitted on or after April 15 will be subject to NEM 3.0 pricing. Existing solar installations will continue to be billed according to their schedules, while NEM 2.0 will still apply to new installations with valid interconnection requests made before April 15.

What is the Difference between NEM 2.0 and NEM 3.0?

Under net metering or NEM 2.0, customers are compensated for their solar exports to the electric grid at the same rate they pay for electricity. However, NEM 3.0 is built on avoided-cost rates.

This means that the rates at which you will be paid for electricity sent to the grid by your electricity provider will not be based on your usual electricity rates. Rather, the credit will be calculated independently of your electricity rates.

Your credit rates will be majorly influenced by the hour of the day, day of the week, and month you export the electricity.

With this new system, there could be as many as 576 possible export rates. Nonetheless, the average avoided energy cost rates during those same hours amount to around 25% of retail electricity rates.

To better understand the new net metering regulations in California, here are some of the key differences between NEM 2.0 and NEM 3.0.

Solar Export Prices

Customers that produce power using renewable energy sources will see a decrease in the value of their net metering credits and an extension of the solar payback period under NEM 3.0. This implies that it will take longer for households to see a profit from their solar energy investment.

Customers who exported excess electricity to the grid under NEM 2.0 received the full retail rate for that electricity. But with new NEM 3.0 regulations, export rates decline by almost 75%. This may make it more difficult to pay off your system because you will receive less money for the energy you sell back to your utility company.

Instantaneous Netting

Electricity pricing under NEM 2.0 was determined hourly depending on a user's net generation and usage. Since higher levels of production during the day might counter peak usage (mostly occurring at night), it was considered more beneficial for solar consumers. By implementing instantaneous netting (or rapid cycling) in NEM 3.0, meters will be able to communicate in real time rather than on an hourly basis.

Cost of Grid Participation

"Mandatory Grid Participation Charge," which will be part of NEM 3.0, will make it necessary for all users to pay a fee to access the network's resources and services. Customers that use solar electricity should anticipate an additional $8 fee per kW of solar power capacity. As a result, the average homeowner will have to fork over an extra $48 each month, significantly decreasing the amount of money they save using solar power.

How will the NEM 3.0 Energy Credits Rates Differ from the NEM 2.0 rates?

The most glaring distinction between NEM 2.0 and NEM 3.0 is the value of export rates. The rates are significantly lower under NEM 3.0. Under the new tariff system (NEM) 3.0, credit rates will fall by about 75%. This fall in credit rate will shave off solar savings by 60%. It will also extend a solar energy system’s payback period from 5-6 years to 9-10 years.

Despite all these setbacks, solar customers can still decently benefit from NEM 3.0. Customers can earn as high as $3.32 per kWh. They can do this by attaching batteries to their solar systems and benefit during peak demand hours. Furthermore, homeowners using battery storage can make about $200 per week. Under NEM 3.0, solar customers can save around $100 on their monthly bills.

After connecting to the grid, existing NEM 2.0 users will continue to receive that iteration’s tariff and compensation rate for 20 years. Customers will not be able to upgrade their systems under NEM 3.0 while maintaining their NEM 2.0 status. NEM 3.0 will not have any effects on customers or clients that have NEM 2.0 contracts in place by April 15, 2023.

Net Energy Metering - Frequently Asked Questions

What is Net Energy Metering?

Owners of solar energy systems receive credit for the electricity they supply to the grid through a billing system—net metering. If a residential customer has a PV system installed on their roof, for instance, it can produce more electricity than the house needs during the day. If the house is net-metered, the electricity meter will run backwards to give credit for any electricity used at night. It will also give credit for electricity used during other times when the house uses more electricity than the solar system produces.

Only the customer's "net" energy use is charged. Just 20 to 40% of a solar energy system's production enters the grid. The solar energy is then exported to power loads for adjacent customers. Net metering enables solar customers to create and profit from their clean and efficient electricity. Most solar customers generate more electricity during the day than they need; net metering allows them to export that energy to the grid and lower their future electricity costs.

What is Net Energy Billing?

Net Energy Billing (NEB) allows business owners and communities to benefit financially from the energy generated by a locally owned and operated solar array. It allows municipalities to share the advantages of a single array due to its community component. Net billing does all this without needing to physically connect to the array or make financial investments in its construction.

Under net billing, local electricity providers keep track of the energy produced by the community solar project as it enters the grid. The utility then adds a line-item credit to each off-takers’ utility account to distribute the financial gains from the electricity produced. For instance, if you agree to purchase credits worth $10,000 that you receive on your electricity bill in August at a 15% discount from their value, your net gain for the month will be $1,500.