Changes in Net Energy Metering Policy in California

UPDATED: 4/9/2024

Net Energy Metering (NEM) has been a beneficial rate policy for thousands of households and businesses in California. However, recent developments, particularly the introduction of NEM 3.0 or Net Billing Tariff (NBT) by the California Public Utilities Commission (CPUC), signify significant changes that could adversely impact solar customers.

What is Net Energy Metering?

NEM occurs when a solar system generates more electricity than needed, sending excess energy to the utility grid and being compensated for the energy produced.

Evolution of Net Energy Metering Programs

Under NEM 1.0 and NEM 2.0, that compensation was close to the amount they charged for electricity.

For example, if a kilowatt per hour (kWh) of electricity at noon on a Monday would cost the customer $0.40, the utility would credit the customer about that much for sending it to the grid. At the end of the year, the customers' electricity costs and the credits for electricity they generated in excess would ideally be about equal.

Impact of NEM 3.0 on Solar Customers

With each iteration of the NEM program, business owners' benefits from solar energy decrease. NEM 3.0 continues this trend by allowing utilities such as Southern California Edison (SCE) to compensate customers at only about 25% of the previous rates

The compensation for excess electricity generated by solar panels is substantially reduced compared to previous versions of the policy. This shift is particularly concerning as solar production peaks at noon, a time when many properties experience minimal energy usage.

It's crucial to note that NEM 3.0 impacts only Investor-Owned Utilities (IOUs) like Pacific Gas and Electric (PG&E), SCE, and San Diego Gas & Electric (SDG&E), excluding municipal utilities such as LADWP, PWP, and BWP.

Businesses that run electrical equipment all day are less susceptible to changes to NEM because they consume the power generated by the solar system.

Customers were able to grandfather NEM 2.0 rates by submitting interconnection applications before the April 13, 2023 deadline.

There are still ways to save money, such as utilizing PPAs or taking advantage of battery storage.

Leveraging Battery Storage under NEM 3.0

Battery storage emerges as a valuable asset under NEM 3.0. It allows solar energy system owners to store excess electricity for later use rather than accept reduced credits for exporting it back to the grid, enhancing the overall value of solar energy systems in the NEM 3.0 framework.

Importance of Professional Solar Evaluation

Given the variability in energy usage profiles across residential and commercial properties, it's essential for both homeowners and business owners to undergo a professional solar evaluation.

This assessment, conducted by one of Green Convergence’s experts, can shed light on how NEM 3.0 will specifically affect energy costs and the overall financial outlook.