NEM 3.0 Explained

Coming Soon - April 13, 2023

Starting April 13th, 2023, NEM 3.0 policy will be activated - which will result in a 75% reduction in credits for solar owners

The third installment of the "Net Energy Metering" policy (or NEM 3.0) is coming soon - are you ready for the changes? Are you aware of what the changes are? Don't worry! We will be going over a complete overview of NEM 3.0 and how it will impact residential solar.

Key Takeaways:

Solar owners under NEM 3.0 will earn approximately 75% less for the excess electricity they sell back to the grid.

Under NEM 3.0, the total lifetime savings of installing solar panels onto your property will be reduced by approximately 35%.

If Homeowners submit an interconnection application before April 13, 2023, they will remain under NEM 2.0 and maintain all of the benefits for 20 years.

Who does this affect? Any homeowners in CA serviced by Southern California Edison (SCE), Pacific Gas & Electric (PG&E), and San Diego Gas & Electric (SDG&E).

Monthly energy bill savings will be reduced by over 30% with NEM 3.0 compared to NEM 2.0.

Federal Tax Credit remains unchanged throughout this transition.

What is
'Net Metering Energy'?

Net Metering - Explained!

In simplified terms, Net Energy Metering (or NEM) is an incentive system that allows homeowners to receive financial credits from their utility company in exchange for their excess electricity produced by their solar system. So, whatever energy that was unused by their solar panel system can be sold back to the utility company.

This was an extremely effective incentive program that allowed millions of homeowners across the state of CA to make the switch to solar energy. However, since California is now scaling homes into solar, the utility companies are lobbying to remove this incentive - more on this later. For now, it is important to note that since the NEM policy was introduced in 1996, the California Public Utilities Commission (CPUC) has gradually reduced this incentive with the implementation of NEM2.0 in 2016. This brings us to their most recent update: NEM3.0.

As new installments of NEM are introduced, the opportunities for savings scale back as a result.

What's the difference between NEM 3.0 and NEM 2.0?

Arguably the biggest change that NEM 3.0 brings to the table in the solar industry is the massive export rate reduction of about 75% - which results in lower monthly savings from utility expenses, and lower lifetime savings from installing solar panels. In fact, according to a recent study from the Solar Energy Industries Association (SEIA), homeowners under 3.0 will have a reduction of over 35% in lifetime savings from their solar panel system.

This means that for a solar owner who saves $40,000 under NEM 2.0, solar owners under NEM 3.0 will only have a lifetime savings of approximately $26,000.

total solar savings over a 20 year period

How is this reduction being calculated by the utility companies? Well, Both NEM 1.0 and 2.0 allowed solar owners to sell their excess electricity based on the retail value of the kWh. So, with NEM 3.0, instead of using this previous method to monetize the excess electricity from homeowners, the utility companies will use an “Avoided Cost Calculator” which will vary by the month/hour the energy is transferred.

Why the transition? Simply put, instead of simply being rewarded for transferring excess electricity back to the power grid, this incentive system encourages solar owners to sell their excess electricity back to the utility company when it is most needed.

"Peak solar production is not synonymous with peak energy consumption."

The times when energy consumption is most high are usually the times when energy production from solar energy is most low (at night). And as you can imagine, this new reward system will incentivize homeowners for their excess energy based on their demand for energy.

Important notes for solar owners!

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If you are wondering about solar energy for your property, here are a few points that may help you with the decision:

If you add solar energy BEFORE NEM 3.0 is activated on April 15, 2023, your lifetime savings will be over 35%.

Under NEM 3.0, your average monthly energy savings will be 50% less than it would be under the NEM 2.0 policy.

With either NEM 2.0 or NEM 3.0, the 30% tax credit is unaffected. So, you can receive a tax rebate for installing solar onto your property.

With the start of NEM 3.0, you may want to consider adding a solar battery onto your system - as the new export rates can be as high as $3.32 per kWh during peak demand hours.

Whether you are under NEM 2.0 or 3.0, the 30% federal tax credit from the Inflation Reduction Act is still applicable.

With these points, it is clear that the best time to go solar is NOW! If you want to make the most out of your savings and transform your home to become more energy independent from the grid, it is important to note that solar incentives are only going to decrease as solar energy becomes more accessible. So, don't miss out on any more opportunities.

Why is Net Energy Metering occurring?

The real reason for NEM 3.0

Many speculate that the utility companies are reducing their incentives due to their greediness and obsession for homeowners dependency on them; however, after a careful review, this may not be the case at all. When it comes down to it, these changes are based on supply and demand for energy, and their ability to store energy.

With regards to Net Energy Metering, it is important to understand the basics of transferring energy. To quickly summarize, Net Energy Metering policy is becoming more strict because utility companies are unable to safely and securely store this surplus of energy for later distribution.

Net metering treats the utility companies like an energy bank that can quickly transfer energy from house to house no matter the time or place. However, upon closer inspection, this is not at all how utility companies operate or how they are meant to function. These utilities, while being very efficient at producing energy for current consumption (through means of natural gas, nuclear fusion, biomass, ect.), are not so good at storing produced energy for later use - and this is simply because of limited battery technology. Battery storage technology is not advanced enough to capture and redistribute energy this large of a scale.

Here in California, we have, by far, one of the best climates and the strongest incentives for solar energy in the whole nation. Not only do we have the 30% solar tax credit available for homeowners, but our state also recently passed a law which requires any new property construction (residential or commercial) to include a solar panel system as well. So, it should go without saying that there is a surplus of energy that is not being used, which the utility companies are struggling to maintain. Because of this, the CPUC is now lobbying to remove this incentive entirely.

Need Help? Contact Us!

If Net Energy Metering and the rest of this article makes absolute, complete sense to you, then congratulations - you are a genius! If you still think you need help, then we completely understand. Our staff is available at anytime to help explain this policy and to help you get the most out of your solar installation.

Don't wait on this opportunity - click or call to get started!