Solar Energy rate Plan NEM3: What does it mean?
As of April 15, 2023, all new applications for solar energy will fall in to the NEM3 solar energy utility rate plan. Solar users under NEM3 will get compensated for about $0.08 / kWh for excess energy sent to the grid, instead of the previous average of $0.30/kWh under NEM2. These changes will extend the payback period for a solar investment from an average of six years to more than ten years.
To maximize homeowner savings, we recommend that anyone who is considering installing a solar electric system, also install battery storage. With battery storage, a system owner can store excess energy to their batteries, and draw from the batteries when the solar stops working and utility grid rates are at peak. Instead of sending excess energy to the grid for $0.08/kWh, and buying energy at peak rates of $0.47/kWh or more, a homeowner generates, stores, and uses their own energy, maximizing savings.
If I already have solar (NEM1 or NEM2), will the new rules (NEM3) affect me?
The CPUC’s new rules will not affect NEM1 and NEM2 solar users until your lock-in period expires, unless you add more panels (more on that in the next section).
The NEM1 and NEM2 lock-in period, also known as grandfathering, is for 20 years after the utility turned on your solar system. Here’s two examples:
- Your solar system was turned on in 2019. You will be switched to the new rules (NEM3) in 2039.
- Your solar system turned on in 2003. You will be switched to NEM3 in 2023.
What if I already have solar and want to add more panels?
After NEM3 begins, existing solar users who increase their system size by 10% or 1kW, whichever is more, will be forced onto NEM3. You may want to consider adding panels before NEM3 goes into effect in mid-April.
If you want to add panels before NEM3 takes effect, your solar company must submit a correct and complete interconnection application to your utility by April 14th. Construction does not have to be complete by April 14th.
What if I already have solar and want to add a battery?
Unlike adding panels, existing solar users can add a battery at any time without affecting their lock-in status.
What if I have solar and sell my home?
If you are a NEM1 or NEM2 customer and you sell your home, the new owner will take over the remainder of your lock-in period.
However, this will be different under NEM3, which has a shorter, 9-year lock-in period that is lost when a home is sold.
I buy my electricity from a community energy provider or municipal utility. Does the CPUC’s decision affect them?
The CPUC’s decision does affect community choice energy providers, but some may choose to give their customers a higher credit. The CPUC’s decision does not affect locally governed utilities such as LADWP.