What is NEM 3.0?”
NEM 3.0 is the third version of “Net Energy Metering,” which began April 15, 2023.
“Net Energy Metering” is the process by which California’s investor-owned utilities (SCE, SDG&E and PG&E) charge and credit solar owners for energy that they buy from the utility, minus the excess electricity they may produce and send back to the utility, for systems less than 1000 kilowatts (kW).
Note: None of these changes apply to publicly wned LADWP at this time.
Solar homes produce power when the sun is shining (i.e. “solar power”), yet they need energy when the sun is not shining, which they will still get from the utility. As such, solar homes aim to create excess power during the day (in kilowatt-hours or kWhs) equal to the amount of power the home will need from the utility at night, trading power back and forth.
Because the amount of sun we receive varies from season to season, a properly designed solar system will aim to create the total amount of energy a home needs for a year. During fall and winter, solar owners expect to get less power from their systems and more power in spring and summer, which is why a proper accounting of credits is so important.
The biggest change is the value of the credit (or “export rate”) solar owners receive back from the utility. Under NEM 1.0, every kWh sent to the utility was credited the same amount as the cost of buying that kWh, so it was possible to have a zero monthly bill.
Under NEM 2.0, solar homes had to adopt a time-of-use rate that charged and credited more for power bought and sold during times of “peak demand,” as well as certain “non-by-passable” charges, which made the effective minimum bill for a solar home about $10 per month regardless of how much excess power went back to the utility.
Under NEM 3.0, residential solar export rates are based on a newly created “Avoided Cost Calculator,” which are closer to wholesale rates (what utilities pay for electricity). NEM 3.0 export rates can be up to 75% lower than those for NEM 2.0.
What’s the Bottom Line?
While lower NEM 3.0 export rates increase payback periods and reduce cost savings for solar owners, solar power still costs significantly less than utility power and its fixed cost generates greater savings each year against the utility’s annual rate increases. NEM 3.0 has also made battery backup systems even more economical and a powerful tool to combat these changes for solar homes.
Steve Hochman is the owner of Solar Hawk, a renewable energy broker. He can be reached at (818) 402-4166. For more information visit thesolarhawk.com.