California Net Metering 3.0 makes the state a national leader in the solar power industry. Moreover, in the last several years, California residents have enjoyed substantial incentives for installing solar panels on their homes and businesses. Over one million people have installed rooftop solar panels. And while energy prices from utility companies have skyrocketed, solar customers have enjoyed reduced energy bills.
It was a big shock for many that after much controversy and negotiation 3.0 passed. The California Public Utilities Commission (CPUC) unanimously voted to finalize the new NEM 3.0 policy on December 15, 2022. This new metering policy will have a significant impact on both current and future solar customers, as well as the entire solar energy industry.
The rest of the nation is watching to how California’s government officials react. But, investor-owned utility companies address the goals and challenges of implementing clean and green energy practices.
For over 20 years California has been at the forefront of national clean energy initiatives. But, the state has also led the United States in solar energy production. It’s also the home to many of the world’s largest solar facilities.
The California Solar Initiative (CSI) of 2006, along with federal tax incentives, made the switch to solar energy highly affordable. On average, solar customers have saved upwards of 50% on their energy bills. Also, the number of solar installations has rapidly increased to meet the state’s clean energy goals. Getting to California Net Metering 3.0 has been a long road, but great for residents and the industry.
The states CSI Program also established shared administrative responsibility between state government and investor-owned utility companies. This includes: Pacific Gas and Electric (PG&E), San Diego Gas and Electric (SDG&E), and Southern California Edison (SCE).
When Did California Net Metering 3.0 and Laws Change?
Results show the initial program in California has the most favorable net metering laws in the nation. Net Energy Metering (NEM) is the billing system used for customers who generate their own energy. This includes solar panels or other renewable energy generators.
The law allows any surplus power that customers generate to be transferred back to the power grid. Solar customers receive a financial credit on their utility bills if the energy they generate is more than the energy they need to pull from the grid. Net Energy Metering (NEM) is intended to help customers offset the cost of any power they need to draw from the utility company.
Between 2016 – 2017, as more homes and businesses installed solar panels, the investor-owned utility companies reached their initial net metering “cap.” As a result, the California Public Utilities Commission (CPUC) created an updated net metering policy – NEM 2.0.
California Net Metering 3.0 vs. NEM 2.0 and Your Money
However, under NEM 2.0 homeowners and businesses receive credits for their exported solar electricity. Even better is the retail value of electricity imported from utility electricity. In addition to retail rate credits, it also prohibits many additional fixed charges for solar customers. As a result, solar customers can expect to see about a 20% return on their investment. Clearly, an investment in using solar energy has been very favorable under NEM 2.0.
NEM 2.0 was set to be in effect until 2019, when the California Public Utilities Commission (CPUC) would consider an update designed to account for the use of solar energy in different locations and at different times of the year and day.
The initial proposal in 2021 for NEM 3.0 was immediately met with enormous backlash from the public. Equally opposition was felt from the solar energy industry, supporters of the clean energy movement, and Governor Newsom. Experts predicted that if the proposal passed, it would cut residential solar usage 50% by 2024.
It included a drastic reduction of the value of energy exports as well as “solar taxes” for solar customers. It also introduced the eventual necessity of expensive battery storage in order for solar energy customers to save on their utility bills. Under the proposal, investing in solar energy installations could actually become cost prohibitive.
What is California Net Metering 3.0?
On December 15, 2022, the CPUC unanimously voted to pass the revised proposal of California Net Metering 3.0 despite the damaging impact it may have on solar customer savings, the progress of the clean energy movement, and the solar energy industry at large.
There is growing concern that the new NEM 3.0 will deter homeowners and business owners from investing in solar panel installations. This will put California out of alignment with the needed growth necessary to meet the updated Renewables Portfolio Standard Program (RPS) requirements that 60% of California’s electricity come from renewable resources by 2030, and 100% of its electricity from carbon-free sources by 2045.
The new method for billing solar customers takes effect on April 13, 2023. After that date, residents who wish to install solar panels will fall under the system of Net Billing instead of Net Energy Metering.
California Net Metering 3.0 Billing Changes
Net Billing is based on a complicated calculation of “avoided cost” rates. The value of surplus solar energy exported to the utility grid depends on the month, day of the week, and hour of the day. Simply put, the retail value of exported solar energy is about 25% of the imported value at any given time.
Each of the three investor-owned utility companies has its own calculation system for Net Billing:
Net Billing significantly reduces the amount of savings that solar customers receive on their energy bills.
- Export rates for solar energy will be reduced from $0.30 per kWh to $0.08 per kWh.
- Credit payments for exporting surplus energy to the utility grid will be slashed by 75%.
In order for solar customers to save the entire retail value of the surplus energy they generate, they will have to add battery storage to their solar installation.
- This reduces the financial incentive for installing stand alone solar panels.
- The initial cost of installing a solar panel system with battery storage is significantly more expensive.
Net billing will also extend the time it takes for solar customers to see a return on their investment from about 4.5 years to upwards of 9 years.
- The total return on investment will plummet from 20% to 10%.
Some Good News for California Net Metering 3.0 Changes
There is some good news for existing customers. Frankly, anyone who wants to invest in a solar panels. Installation for their home or business and still enjoy the savings under NEM 2.0.
- Existing customers will be grandfathered in under their original net metering plan.
- Existing customers can add battery storage to their solar system at any time.
- Existing customers can upgrade their electrical panels at any time.
When you sign a contract with a solar company and have them file a complete, non-deficient interconnection application on or before April 13th, 2023, you can be billed under NEM 2.0.
- The installation must be completed within three years, before April 13, 2026.
- NEM 2.0 savings will continue for 20 years from your installation date.
Having an older solar system that will most likely need to be replaced within the next five years, apply by April 13, 2023 to do so.
- You will earn the savings under NEM 2.0.
- You can save on the expense of purchasing battery storage for your system.
- You will need to take photos that prove your old system has been removed
Needing to add more capacity to your current solar system for something like an electric vehicle or additional appliances, apply by April 13, 2023 to do so.
- You will avoid the restrictions included for adding capacity under NEM 3.0.
- Your 20 year lock-in rate begins from the date of the initial installation of your system.
At this time, if you subscribe to a community solar farm, you will be locked in to net virtual metering (VNEM) under NEM 2.0 for the next 9 years.
- This is a great alternative for those who are unable to install solar panels on their property but want to save on their utility bills.
- Learn more about taking advantage of Community Solar.
The Bottom Line
Homeowners and businesses who are considering installing solar panels, you have to act quickly. Solar companies are being flooded with application requests for solar installations to beat the April deadline.
Remember, you have until April 13, 2023, to file your interconnection application to get the best solar export rates and the highest return on your solar investment under NEM 2.0. Once your application has been approved, you will have three years to complete the installation.
It is very unlikely that NEM 3.0 will be challenged or overturned despite objections from the public, the solar energy industry, and clean energy advocates. So it is very important to start shopping for quotes as soon as possible.
Please reach out to us for a FREE QUOTE to assess a cost and savings estimate tailored to your property and current net metering incentives.