California’s Net Energy Billing Plan, NEM 3.0, Explained.

Oct 18, 2022 | Community Solar News, Renewable Energy News, Solar Energy

The California Public Utilities Commission (CPUC) is proposing to update the net energy metering policy for solar homeowners, commonly referred to as NEM.

The proposed billing plan, NEM 3.0, is complicated and confusing, not surprising. Maybe it was intended to confuse, so we don’t really focus on how unjust the proposed new plan is. But don’t fret. I have summarized the proposed changes for you here:

Historically the export compensation of solar in California is based off a Net Energy Metering (NEM) Policy. Both NEM1.0 and NEM2.0 were under this compensation mechanism. With NEM, when a system owner is generating more electricity than they are consuming, the excess energy is exported back to the utility grid and the customer receives a credit equal to or slightly less than the full-retail rate. This credit can then be applied to offset electricity consumption within the current billing cycle (i.e. monthly) or in future billing cycles before expiring annually at some specified month (known as the true-up period).

NEM has been the law of the land in California since 1995, covering all customers of the state’s three largest utilities—PG&E, SCE, and SDG&E. It’s currently on its second version, NEM 2.0. The California Public Utilities Commission (CPUC) is nearing the end of designing NEM 3.0, and the changes that have been proposed could greatly reduce the financial benefits people can get by owning solar panels or subscribing to community solar.

Under NEM 3.0, most of the homeowners savings are stripped away, ending up in the utility company’s pockets. Under NEM 2.0, current solar customers in California save an average of between 22 and 36 cents for every kilowatt-hour (kWh) of electricity generated by their panels. Under the proposed NEM 3.0 plan, the credit for excess generation will go down to just 4.7 to 5.8 cents, on average. Let’s not forget that the utilities currently already make a good profit reselling excess solar power at peak energy rates.
Save $310 per month or save $10 per month. That is NEM 2.0 vs. NEM 3.0 in the simplest terms.
Example: In April, under the current NEM 2.0, my solar array produced 1.5MWh of energy. My home used .5MWh. The additional 1 MWh was sent to the grid and I receive a credit of $310 (1,000 kWh x $0.31 [$.34/kWh retail rate LESS ±$0.03/kWh grid fee] = $310). I will use this credit in any month where my use exceeds my solar energy generation, such as in July and August when I am running my air conditioner.

Running the same scenario under NEM 3.0, my solar array produces 1.5MWh of energy. My home used .5MWh. The additional 1 MWh was sent to the grid. But I only receive a credit of $0.05/kWh. In addition, I must also pay a “participation” fee of $40/mo. on average. My new monthly savings is just $10. Ten stinking dollars. Thanks, PG&E, for letting me keep a little sumpin’ sumpin’.

In May 2022, the CPUC commission delayed the decision “until further notice.” The solar energy industry, as well as the utility energy industry in California expect the issue to be revisited this year, possibly as soon as July 2022. If and when a final NEM 3.0 decision and policy is voted on and approved, NEM3.0 could be implemented as soon as Jan 2023.

Industry and consumer lobbying fighting for solar rights has taken place throughout the negotiating process. Unfortunately big utility has the power to get their way. It seems like the CPUC has forgotten the “Public” part of their name, and are siding with big utility companies and their control over energy and shareholder profit. You can still call your local representative, or the governor’s office to voice your support for solar rights.

The good news, if there is any, is that, folks who go solar before the NEM 3.0 deadline, possibly as soon as December 2022, MAY be locked into the NEM 2.0 rate structure for 10 years. Calculate your new solar savings by looking at 10-year return on investment, not 25 years. And being that the decision to go solar and lock into NEM 2.0 will have to happen before Dec, 2022, you will also qualify for the 26% solar tax credit before drops again.

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