Jan 30
The Aftermath of NEM 3.0, Adapting to New Net Metering Rules

The Aftermath of NEM 3.0, FAQs, and Adapting to New Net Metering Rules

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The introduction of Net Energy Metering (NEM) 3.0 in California has marked a challenging new chapter for solar installers in the state. While promoting the integration of battery storage with solar systems, this policy shift has significantly altered the financial landscape of residential solar energy installations. 

Residential installers are in a tight spot, grappling with reduced solar energy net metering compensation rates. Despite the added incentive for battery storage, these changes have compelled solar businesses to innovate and diversify strategies vigorously to sustain operations and drive the business forward. The residential sector’s resilience is being tested as it navigates these new regulatory waters.

Changes in payment and compensation structure

Under NEM 3.0, the financial dynamics of solar energy have been restructured. The compensation for surplus solar energy fed back into the grid is now lower than what was offered under NEM 2.0. This shift is a critical aspect of NEM 3.0, as it directly affects the economic feasibility of solar panel installations for California residents. 

Battery storage incentivized

In light of these compensation changes, the role of battery storage in California has become incentivized by the CPUC’s SGIP Program. Under NEM 3.0, integrating battery storage with solar panels is important for maximizing the benefits of solar. Batteries enable homeowners to store the excess energy generated during peak sunlight hours and use it when the sun stops shining. This stored energy can then be utilized during high demand or lower solar generation. By doing so, homeowners can offset the reduced compensation rates by ensuring that their energy usage is as efficient as possible, aligning their consumption with the peak production times of their solar systems.

The aftermath of NEM 3.0

  • Battery storage is incentivized by the CPUC, which increases incentives for combining solar installations with battery storage.
  • Job losses in California’s solar industry have surged, with predictions of around 17,000 jobs being lost by the end of 2023, amounting to a 22% reduction in the state’s solar workforce.
  • Industry struggles are reported by Solar Insure, which notes widespread business closures since the CPUC’s decision on NEM 3.0.
  • A decline in sales is reported by Ohm Analytics, showing solar sales in California have declined by 77% to 85% annually, with a 66% to 83% drop in interconnection applications.
  • Additional CPUC Actions: CALSSA has criticized the CPUC’s changes to the net energy metering scheme. These changes, affecting properties with multiple meters and small businesses, have been claimed to make solar unaffordable for many.
  • Lawsuit against the CPUC filed by the Center for Biological Diversity, Environmental Working Group

NEM 3.0 FAQs

Q: What is NEM 3.0 and how does it impact solar owners in California? 

A: NEM 3.0 represents a significant change in the net metering value of solar electricity. Key aspects include a major reduction in the net metering value of solar electricity, no new charges or fees (also known as “solar taxes”), an emphasis on pairing solar with battery storage for better benefits, and the possibility for existing NEM 2.0 customers to add battery storage and retain their NEM 2.0 status. Overall, home solar remains a beneficial investment under NEM 3.0, despite reduced solar export rates?

Q: Are customers of utilities other than the big three affected by NEM 3.0 rules? A: NEM 3.0 rules specifically apply to customers with PG&E, SCE, or SDG&E as their utility. Customers of other regional or municipal utilities follow different net metering rules.

Q: How does NEM 3.0 affect billing for customers who sign up after the deadline? A: Customers who enroll in NEM 3.0 after the April 14, 2023, deadline will initially be billed under NEM 2.0 rules and later automatically switched to NEM 3.0 rules once the utilities set up the new billing system. This transition could take several months to a year.

Q: What are the required electrification rates for NEM 3.0? 

A: NEM 3.0 requires customers to enroll in a Time-of-Use (TOU) rate with a significant difference between on-peak and off-peak costs. This aims to encourage energy conservation when the grid is highly strained. Electrification rates for different utilities include E-ELEC for PG&E, TOU-D-PRIME for SCE, and EV-TOU-5 for SDG&E, all featuring a fixed monthly fee of about $15.

Q: Is a battery required for NEM 3.0 customers? 

A: While a battery is not required for NEM 3.0 customers, it may provide more bill savings and potentially pay for itself if operated correctly. However, even a solar-only system can still bring significant value to a customer under NEM 3.0?. SGIP incentives can potentially cover 80& – 100% of battery storage and installation costs. 

Q: What are the implications of the new rate plans under NEM 3.0? 

A: Under Net Billing, new solar installations in California must sign up for highly differentiated TOU rate plans. These plans have increased monthly minimum charges and rates that vary significantly during peak and off-peak times. The value of excess solar energy sent to the grid is based on the Avoided Cost Calculator (ACC) and varies based on the time of export.

Q: How does the ACC Plus incentive work under NEM 3.0? 

A: The ACC Plus incentive adds a small amount to the value of every exported kWh from a solar system for residential solar owners in PG&E and SCE territory. This is designed to keep solar installations relatively economical during the first years of the Net Billing Tariff and will be paid to the system owner as a separate line item on their monthly utility bill for 9 years following the interconnection date.

Q: What changes does NEM 3.0 bring compared to previous policies? 

A: NEM 3.0 introduces reduced net metering bill credits, increased grid access charges, increased battery storage incentives, extended return on investment periods, increased installation costs, and a reduced overall value of solar-only installations compared to NEM 2.0?.

Q: What should homeowners do in light of NEM 3.0? 

A: Homeowners can still benefit from solar installations under NEM 3.0, especially if they include battery storage. 

Q: What happens to current NEM customers? 

A: Customers under NEM 1.0 and 2.0 will continue to receive credits for 20 years from their original interconnection date. After this period, they will be subject to the current ACC values for exported solar energy?.

In this challenging environment, installers are compelled to innovate, finding ways to align with California’s clean energy goals while maintaining their business viability. This involves exploring new market segments like C&I installs and battery storage installations. Ultimately, the resilience and adaptability of the solar industry in California will be key to navigating these changes and sustaining the momentum toward renewable energy goals.

The industry’s response to NEM 3.0 will likely set precedents for solar energy policies and market dynamics across the nation.

If you’re a solar installer, consider becoming a Solar Insure Certified Installer to increase your competitive edge by delivering peace of mind to your customers during these times. Click here to learn more

About The Author

Ki Song is a dynamic project management professional and certified scrum master with a six-year track record of success in the solar industry. Renowned for a client-centric approach, Ki excels in steering solar projects from conception to fruition and launching innovative solar products tailored to market demands.