NEM 3.0: What is it and what does it mean for residential solar?

California has long been an excellent state to go solar in, with plentiful sunshine and significant incentives. The state aims to go carbon-free by 2045, which is why solar energy has been adopted by many homeowners in the state, incentivized by savings and sustainability. One of the major methods of saving money on electricity bills with solar panels is with net metering. Residential solar systems are tied to the grid, and homeowners receive an offset on their electricity bill for the solar they don’t use during the day. The new net billing system called NEM 3.0 proposes quite a few changes, such as a monthly grid participation fee, reassignment of the value of exported energy and more.

What is NEM?

Net Energy Metering (NEM) has helped residential solar owners save money on their energy bills since 1995. The system works by offsetting the energy you consume at night by the amount of energy your solar panels produce at peak sunlight hours (about 4-6 hours of sunshine a day). However, in this third iteration of the NEM, things are going to change. The biggest difference between NEM and NEM 3.0 is the rates paid to homeowners for their excess electricity, otherwise, the program works in much the same way as it always has.

Grid Participation Fee

The new monthly grid participation fee will be based on system size. The proposed program will charge solar system owners $8 for each 1kW unit of solar capacity. A typical 6 kW system will cost 6 x $8 =$48 per month, costing $576 a year for grid participation.

Reduced Export Rates

The California Public Utilities Commission (CPUC) updated its net metering policy on December 15th, 2022. Under NEM 2.0, homeowners could save between 22 and 36 cents per produced kilowatt hour (kWh) of solar energy. With the new NEM 3.0 program, those savings may fall to about 4.7-5.8 cents per kWh. The reason for such a drastic change is due to the value of exported energy being determined with an avoided cost calculator, on the basis of the cost of buying clean energy from elsewhere. The new prices will vary based on time-of-use rates which change by the hour.

Benefits of Battery Storage

This net metering policy may incentivize more solar panel owners to invest in battery backup. Utility companies will charge consumers for using grid energy with time-differentiated tariffs. Because of this, storing solar energy and exporting it later in the day will become more cost-effective.

Invest In Solar Energy

The NEM 3.0 will come into effect in around April 2023. The CPUC made the decision to pass N.E.M 3.0 on the 15th of December 2022. Homeowners who go solar before the new program sets in can still benefit from the NEM 2.0 for the next 20 years, greatly reducing their electricity bills. As long as the interconnection process is complete within 120 days of NEM 3.0, homeowners can still benefit from NEM 2.0. The bill will only affect PG&E, SCE, and SDG&E territories. The CPUC will reevaluate the bill in 5 years.

Going solar will still be incredibly beneficial even after the implementation of the NEM 3.0, with the 30% federal solar tax credit reducing the overall cost. Net metering still saves homeowners money in the long run, but in order to make the most savings, investing in battery backup is advisable. If you would like to purchase solar panels and batteries for your home, SolarQuote is ready to provide quality installations, great customer service and freedom of choice to all buyers. Get a quote and make a purchase with our solar quote tool, or get in touch with us today.