NEM 3.0 - Go Solar Before it is Too Late!

Attention all California solar owners! Have you heard about the latest update to the state's Net Energy Metering (NEM) policy, NEM 3.0?

Net Energy Metering (NEM) is a billing structure between utilities and homeowners with solar systems. Under NEM, solar owners earn credit for the excess electricity they push onto the grid when the sun shines. This credit is used to offset the cost of the electricity they pull off the grid when the sun isn't shining. On December 15, 2022, the California Public Utilities Commission (CPUC) approved NEM 3.0, the latest update to this policy. The new NEM 3.0 policy brings some changes for California's solar owners. In this blog post, we'll explore these changes and their impact.

What is NEM 3.0?

NEM 3.0 is a new version of the net energy metering policy approved by the CPUC on December 15, 2022. It applies to utility customers in the territories of California's three major investor-owned utilities: Pacific Gas & Electric (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E). It's important to note that NEM 3.0 is not retroactive, so solar systems installed under NEM 1 or NEM 2 will remain under their current policy.

The biggest change between NEM 2.0 and NEM 3.0 is the value of export rates, or the value of excess electricity produced by solar systems. Under NEM 3.0, residential solar export rates will be based on an "Avoided Cost Calculator" instead of retail rates (what customers pay for electricity). This means that the value of excess electricity produced by solar systems will be determined based on how much it would cost the utility to produce or purchase that same amount of electricity rather than the retail rate paid by consumers. On average, NEM 3.0 export rates are around 75% lower than the export rates under NEM 2.0.

What does it mean for solar owners?

The lower export rates under NEM 3.0 means longer payback periods and fewer cost savings for solar owners. The cost savings of a solar system depends on the value of the energy exported to the grid, and with NEM 3.0, this value is significantly lower than it was under NEM 2.0.

For example, a solar system installed under NEM 2.0 that produced enough energy to offset 100% of the electricity consumption of a household, could expect to see a payback period of around 4.6 years and lifetime savings of around $116,680. On the other hand, a solar system installed under NEM 3.0, with the same characteristics, could expect to see a payback period of around 6.5 years and lifetime savings of around $73,620.

However, it's important to note that this is an average estimate, and individual savings will depend on several factors, such as the size of the system, the electricity consumption, and the location.

The good news is that even with the lower export rates under NEM 3.0, the cost of solar technology continues to decrease, and the Federal Solar Tax Credit is back at 30% until 2032. This means that there are still plenty of reasons for Californians to go solar sooner than later. Additionally, homeowners who submit a complete interconnection application for a new solar system by April 13, 2023, will be grandfathered into NEM 2.0. This means that there has never been a more important time to install solar panels in your home.