In the past few months, the discussion about Net Energy Metering was at the forefront of the solar industry as analysts and installers awaited the NEM 3.0 proposals. We’ve known for a while that the proposed update may include such odious additions as a tax on solar energy. This is why we have worked hard to ensure that the California Public Utilities Commission does not approve such measures.
We’ve heard the rumblings of a decision coming, but it has been delayed time and time again. This could be due to external pressure by consumer advocacy groups or to wait for a more favorable timing. The floodgates seem to have opened with the election season just over. Finally, NEM 3.0 has been proposed. You can find the entire proposal here. However, unless you’re on a long lunch break and have plenty of time, don’t expect to read it from cover to cover. It clocks in at 241 pages.
If you don’t want to read a large book, we have a webinar that will give you the information you need. We’ll also go over the key takeaways so you can be prepared. If you are a homeowner considering solar power, you should be aware of some important deadlines and understand some significant changes. Let’s get into the details of NEM 3.0.
What is NEM 3?
NEM 3.0, the third version of Net Energy Metering, is a proposed program that allows customers who have solar panels or other onsite energy-generating devices to export surplus energy to the utility for a credit on their electric bills. NEM 3.0 proposes major changes to the “time of use model” used in NEM 2.0.
What has changed with NEM 3.0?
The California Public Utilities Commission (CPUC) released on Thursday, November 10, their proposed decision regarding NEM 3.0. This aims to reduce the average export rate of California by approximately 75%, from $0.30 per hour to $0.08 per hour. In this case, the export rate refers to how much homeowners receive from utilities when they feed energy into the grid using their solar systems.
Before this proposed update was made, homeowners received the same rate as the utility for using energy from the grid. This meant that the value of home-generated energy was the same as the energy purchased from them. If NEM 3.0 is passed, the utility will be able to charge homeowners more for their energy while still undercutting the value of the home-generated electricity. This seems to be at odds with California’s green energy goals, given that not all grid electricity is produced cleanly. Solar energy generated at home is a significant step up from fossil fuel plants. However, the utility can benefit from this effort without compensating the homeowners.
The Hourly Values of Time Use
Net Energy Metering will also change with the move from time of use to hourly values. It’s one of the more complex changes that will be coming with NEM 3.0. We are hopeful it will be changed before the final vote. The current agreement determines the value of solar credits based on the time of the day. The cost of electricity varies throughout the day, depending on demand. However, the variation is usually in large time blocks called Peak and Off-Peak. You would receive more credits if you exported during peak hours. However, it was up to the customer whether they wanted to export energy in the Peak or Off-Peak time blocks.
You’ll need to be able to think quickly when it comes to hourly values. There are different values for weekends and weekdays, as well as various monthly periods and adders to take into consideration. This amounts to 576 discrete values each year, with some being more profitable than others. The spreadsheet has transformed the binary system of managing your energy exports. Consultants will need to strategize together with their clients about how to use this new export schedule best.
The table below shows the rates expected by each utility. The “Avoided Cost,” which can range from 3 to 5 cents per kWh, is the price that utilities get when they buy power from large power stations. The homeowner in the PG&E region can add an extra 1.8 cents per kWh to this rate. This is the price that PG&E would pay for the electricity generated by your solar system.
When will NEM 3.0 start?
According to the CPUC’s schedule, the new agreement would go into effect after 120 days, if not delayed. This means that NEM 3.0 will begin in April 2023 if December 15 isn’t postponed. As a potential solar adopter, it is important to understand what will occur over the next 120 days and what happens after the window has closed.
We anticipate several possible outcomes for our customers in this timeframe.
As interest and demand surge, it is expected that prices and availability of solar panels and batteries will rapidly increase.
Due to the delays caused by permitting authorities and utilities, lead times between order and installation will likely increase.
NEM 3.0 is scheduled to go live 120 days after the transition notice. This means that enrollment in NEM 2. x will cease in April 2023. To be eligible, applications must be submitted by then.
The value a solar installation has will continue to be strong despite these expected policy changes. Existing solar installations will increase in value as the California solar mandate expands to include options for battery storage. Solar installations remain the best way to combat rising rates and energy costs despite the push by utilities to eliminate customer benefits. Savvy homeowners will make the most out of the new hourly value.