On Nov 10th, 2022 the California Public Utilities Commission (CPUC) released the much anticipated, Proposed Decision for Net Energy Metering (NEM 3.0), which would bring significant changes for homeowners and businesses installing solar PV systems. With final approval expected in the next few weeks, these changes would go into effect in April 2023.
Currently, NEM 2.0 credits customers for excess solar energy produced during the day at the retail electricity rate, or about $.30/kWh on average. This allowed customers to offset their energy costs during non-solar hours, and their utility bills would show the “net” offset. These net energy credits usually account for more than half of the savings for current solar customers.
The new NEM 3.0 would reduce the value of NEM credits dramatically, a 75% or more reduction to about $.08/kWh. For new solar customers, this cuts expected savings by 50% or more and extends the average payback period from 5 years to 9 years.
For homeowners that already have solar under NEM 2.0, the 20 year grandfathering has been preserved, meaning they will stay on that NEM version for 20 years after their interconnection date.
While this new program is meant to discourage exporting energy to the grid during the daytime and early evening, there are new incentives for customers to include a battery with their solar system. Using excess solar energy to charge a battery and strategically discharge it during times of peak grid stress can receive higher NEM credits.
Other changes included in the decision are a new mandatory rate with a higher fixed charge and changes to system oversizing rules. There was stiff opposition from industry trade groups and consumer advocates to the original decision that was released earlier this year, resulting in some improvements to the current proposal. There is still a possibility for some last minute changes to NEM 3.0 during final negotiations.
NEM 2.0 will also apply to any project that submits a completed interconnection form to the utility before April 15th, 2023. Projects with completed application forms submitted in time, will be grandfathered to NEM 2.0, but will technically have unlimited time to complete the installation.
The following will be required to qualify for NEM 2.0 (no final building permit needed):
- Completed Interconnection form (known to be rejected for minor errors)
- Signed Installer Contract with CPUC disclosure form
- Single Line Diagram (basic system design)
- Oversizing Attestation (if necessary)
With such a drastic change in customer value and basically no “glide path”, there is expected to be a rush of customers submitting applications and benefitting from the favorable NEM 2.0 rates.
Like every policy shift solar has seen, there is good news and bad news. Here’s our initial take from the team at Enact Systems:
CONS
- Dramatically reduces incentive for solar-only customers
- Little to no “glide path” to ease changes over a few years
- NEM values will change every year, causing uncertainty for consumers and installers.
- Limit to over-sizing a system for future electrification of home appliances.
- Potential for market slowdown, putting thousands of jobs at risk.
PROS
- No Grid-Access Charges as previously proposed
- 20 year Grandfather period upheld
- No mandatory rate changes for existing customers
- Encourages self consumption of solar energy and battery storage
- Ample time for customers to still submit for NEM 2.0
This change could rapidly affect the future of solar adoption in California. If you have additional questions and would like to talk to an expert about a new or existing solar system, fill out our webform here to provide more information about your home. After submitting your information, schedule a call today to go over your options.