California Net Metering

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After months of speculation, industry feedback, and revisions, the California Public Utilities Commission (CPUC) unanimously passed the Net Billing Tariff, commonly referred to as NEM 3.0, in December 2022. The updated decision promotes the adoption of solar systems with battery storage, provides more solar opportunities for low-income homes, and supports grid reliability. 

The updated net metering policies for NEM 3.0 impacts current and future solar owners. According to John Berger, the CEO at Sunnova, “The percentage of customers choosing a solar system and battery together at the time of initial purchase is 30%. This will likely increase with recent updates on the Inflation Reduction Act (IRA) and NEM 3.0.” Berger also explained how the company is seeing an increase in existing solar customers asking to install a solar battery due to an increase in power outages, extreme weather, and unreliable electricity grids. 

You can still experience the benefits of solar energy with NEM 3.0. Learn more about the California net metering changes and how they might impact you. 

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What is net metering in California?

Net metering allows solar owners to send excess energy back to the grid and receive credits on their next monthly utility bill. Credits from excess energy generated during the summer months are useful during winter when production is lower.

The goal is to have a solar system that covers your yearly energy needs so you do not have to rely as much on the electricity grid.

The credited rate is typically close to the same retail rate the customer would have paid to receive the electricity. At the end of the customer’s 12-month billing cycle, any remaining excess energy is credited at a specific net surplus compensation (NSC) rate set by the utility company. Check with your utility for specific rates and program details. 

Net metering 2.0

As solar adoption grew in the Golden State, the CPUC saw the need for new net metering policies. In 2016, the NEM tariff, known as NEM 2.0 went into effect with favorable compensation for solar owners.  The popular plan includes:

• Interconnection fee: A one-time fee ranging from $75 to $145, depending on the utility. Customers with a solar system greater than one megawatt must pay an $800 interconnection fee. 
• Monthly charge: Determined by the number of kWh of electricity you consume from the grid. These charges support low-income and energy efficiency programs. 
• Time-of-use (TOU) energy plans: Varying energy rates throughout the day based on demand. Electricity rates are usually higher when demand is high. 

Current NEM 2.0 customers are locked into their policy for 20 years from the date of interconnection. For example, if you connected your solar system in 2020, you may keep NEM 2.0 policies until 2040. 

California net metering 3.0

Beginning April 15, 2023, the Net Billing tariff (NBT) or NEM 3.0 went into effect for solar customers. The major difference between NEM 2.0 and 3.0 is how the excess energy sent back to the grid is credited. The credit now reflects the value of generation to the grid, which is typically lower than the retail rate and is set by the utility. CPUC encourages customers to maximize savings by installing solar batteries for energy storage to use when rates are high. Other differences and new rules include the following. 

• Legacy period: New customers interconnecting under NEM 3.0 are guaranteed benefits  for nine years. Customers moving from a previous NEM tariff are not eligible for the legacy period. 
• Export compensation adder: PG&E and SCE customers applying to interconnect before the end of 2027 can receive slightly higher bill credits for nine years. The adder does not apply to customers required to add solar under California’s new construction building code. SDG&E customers are not included in the adder because they already receive savings due to higher electricity rates from the utility. 
• TOU rate requirement: Customers must have a specific TOU rate plan to reduce the strain on the electric grid during peak use hours. These plans have lower off-peak prices and higher on-peak prices than current TOU rate plans. 
• Monthly payments: Bill charges are due monthly, and excess solar credits will roll over to the next month until the yearly true-up. 
• Financial incentive: A total of $900 million is available to help customers with the upfront costs of solar. $630 million is specifically intended for low-income homes to have more access to renewable energy generation. The funds will be part of the Self-Generation Incentive Program (SGIP) through the CPUC and will be available starting on July 1, 2023. 

NEM 3.0 by utility

Each utility company in California has a new TOU energy plan to follow NEM 3.0 guidelines. Find details for your utility in the following.

Pacific Gas and Electric (PG&E)

PG&E provides natural gas and energy services to a 70,000-square-mile area in northern and central California. The interconnection fee is $145, and the following table displays details for the new TOU rate plan for NEM 3.0 customers, known as E-ELEC. The times apply for all seven days of the week. Off-peak hours are when prices are lowest. Peak hours have the most expensive rates, and partial peak is between the two. 

Pacific Gas and Electric (PG&E) by Save On Energy

San Diego Gas & Electric (SDG&E)

SDG&E serves San Diego and Orange counties with gas and electric services. The company’s interconnection fee is $132. The TOU rate plan currently approved by the CPUC is called EV-TOU-5. The following table shows the TOU rate time frames for the winter (November 1 – May 31) and summer (June 1 – October 31). Super off-peak hours are when prices are lowest. Peak hours are the most expensive, and off-peak rates are between the two.

San Diego Gas & Electric (SDG&E) by Save On Energy

Southern California Edison (SCE)

SCE provides electricity services to residents in Southern California’s central and coastal counties. The interconnection fee for SCE is the lowest of the three utilities at $75. The following table shows the hours for the NEM 3.0 approved TOU plan, known as TOU-D-PRIME. The rates have four categories: peak hours are the most expensive, and super off-peak is the least expensive. The winter rates are in effect from October 1st to May 31st, and summer rates are in effect from June 1st through September 30th. 

Southern California Edison (SCE) by Save On Energy

NEM 2.0 vs. NEM 3.0

The table highlights key differences in the structure of NEM 2.0 and 3.0. According to Wood Mackenzie, the changes lead to a major increase in the solar system’s payback period in California. It will take customers longer to break even and save money on electricity rates. 

Andrew Gong, senior research engineer at Aurora Solar, explained, “If you don’t change your design strategies, the payback period increases to about nine years or so. Compared to other states, that is still a strong length of time. If you include a battery or have a system that exports most of its energy, you could keep it in the six to seven year range.”

Though the new ruling lengthens the payback period, the amount of solar installations in California remains consistent. “A big driver of current interest is that utility rates have been going up substantially. They increased in 2021, 2022, and again at the beginning of this year,” said Gong. California ranks in the top ten states with the highest electricity rates, so regardless of NEM 3.0, residents are interested in energy alternatives to save money. 

Another major change is the TOU energy plan requirement. NEM 3.0 requires customers to have a specific electrification TOU plan with higher peak hour prices than current plans. Battery storage systems are beneficial because you can avoid high rates during peak hours by using stored solar energy instead of pulling from the grid. 

Learn more about the main differences between NEM 2.0 and 3.0.

Maximize net metering in California

If you are already enrolled in NEM 1.0 or 2.0, you will have your existing plan for 20 years from your interconnection date. If you already received permission to operate (PTO) and want to add energy storage, you may need to modify your existing NEM policy on your utility’s website to include storage. Adding a solar battery after the application deadline will not have any impact on your NEM status. 

You can still benefit from installing solar panels in California, even with NEM 3.0. Installing solar panels paired with battery storage is a worthwhile investment due to rising electricity rates. Some utilities have increased rates by 10% in the last year. Adding a solar battery to your system increases your savings over time because you can use stored energy during peak hours when electricity rates are higher. 

Gong said, “Homeowners should look at how they’re using electricity. Electrification rates require a major shift in your habits.” If you are on a TOU rate energy plan, consider using appliances or charging your electric vehicle during off-peak hours, such as in the morning or overnight. 

In addition to financial savings, solar energy is a more sustainable power source than fossil fuels. Burning coal or gas for energy releases harmful greenhouse gases, whereas the process of generating electricity from the sun does not. Powering your home with clean green energy is beneficial for the environment and supports healthy air quality. 

Are you interested in exploring options for solar? SaveOnEnergy partners with solar installers to fast-track your installation. Answer a few questions on this form and we’ll get your solar process started today. Receiving quotes from multiple solar companies is a good idea to compare prices and services. We also provide resources and buying guides to help you make decisions throughout your solar journey.