January 10, 2023

What is NEM 3.0? The clock is ticking.

Net Energy Metering (NEM) is a rate policy from which thousands of California households and businesses have benefited. But it is about to drastically change for the worse. The California Public Utilities Commission is the government body that votes on how utilities like Southern California Edison (SCE) charge their customers for electricity. They have recently passed NEM 3.0, which compensates solar customers at a far lower rate for the excess electricity that they generate than the prior NEM 2.0 did.

When solar panels generate more electricity is needed, the excess energy is sent to the utility grid. This greatly affect homeowners, because solar production is at its highest at noon, and that’s when many homes are empty or using minimal energy. Many businesses have different usage profiles, so it’s important to have a professional solar evaluation to see how NEM 3.0 will affect any business.

This excess energy is sent to the electrical grid, and the utility compensates the homeowner or business for it. Under NEM 1.0 and NEM 2.0, that compensation was close to the amount that they charged for electricity. For example, if a 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 costs for electricity and the credits for electricity they generated in excess would ideally be about equal.

Every iteration of the NEM program lowers the benefit that business owners derive from solar. NEM 3.0 is no different. Under NEM 3.0, SCE will be able to compensate customers only about 25% of what they used to. They will be selling at a high rate but buying it back at about ¼ of that amount.

NEM 3.0 only affects Investor-Owned Utilities, including Pacific Gas and Electric (PG&E), Southern California Edison (SCE), San Diego Gas & Electric (SDG&E). It does not affect municipal utilities like LADWP, PWP, BWP, and others.

How this affects business owners will depend on the demand-profile of each customer. So this is why receiving a customized proposal is more important than ever.

In order to be grandfathered into the current NEM 3.0 rates before NEM 3.0 takes effect, Customers need to submit an Interconnection Application that is deemed complete by April 13th. For business owners, this includes a site plan and single line diagram. The installation doesn’t need to happen by April 13th, but all design and preliminary utility applications need to be filed. There is a three-year period to install solar systems that have Interconnection Agreements deemed complete by April 13th. NEM 3.0 will take effect after this deadline. The NEM 3.0 California Timeline is an important message anyone thinking of solar should be conscious of.

Battery storage increase the value of energy generated under NEM 3.0. During the NEM 3.0 program, excess electricity generated by a solar energy system can be stored in a battery and used later, rather than being sent back to the grid for a reduced credit. This can allow a solar energy system owner to use more of the electricity they generate, increasing the value of the energy generated by their solar systems.


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