Passage of Net Energy Metering 3.0 Is Throwing Shade!

California, a state that normally champions green renewable energy incentives, threw some proverbial shade on rooftop solar incentives when the California Public Utilities Commission (CPUC) unanimously passed the Net Energy Metering 3.0 aka Net Billing Tariff -- on Dec. 15, 2022. The implementation of new NEM 3.0 begins on April 15, 2023.

For green-minded Californians , who may be a bit nonplussed by this legislative action, take heart, all is not lost. Rooftop solar, even under the NEM 3.0 net billing tariffs program, still provides some cost savings to people who generate solar power and sell their surplus energy back to the grid. Additionally, there are other ways to continue to save money -- and save the planet’s ecosystems -- with renewable energy and solar-powered systems. Read on

Current rooftop-solar covered by NEM 1.0 or NEM 2.0 policies are not impacted.

It is important to understand that homeowners with current rooftop solar systems covered by NEM 1.0 or NEM 2.0 policies won’t be impacted by the recently adopted NEM 3.0 program.  However, new solar owners will be placed in NEM 3.0 from April 15, 2023 forward. These new solar owners will not see the same monthly savings when compared with users of the previous programs.

Previous net metering and net billing programs basically allowed solar-rooftop owners to use the grid as storage. Excess energy from the solar panels could be transferred back to the grid in exchange for credits. So, when a homeowner’s solar system was unable to cover the home’s energy needs, energy could be pulled from the grid, and the homeowner could use these credits to compensate the utility.

The new NEM 3.0 version of net metering legislation removes some significant economic incentives for residential solar installations because the value of homeowner solar exports under this policy will be based on avoided-cost rates that are bound to the time of the day. In contrast, the previous NEM 1.0 and NEM 2.0 used retail rates and a one-to-one exchange rate.

California’s solar history:

Since 1996 California allowed customers to install home renewable-energy electrical generation equipment to serve their own electricity needs with an interconnection to the public electrical grid. Because of this past green-legislation, California now has one of the largest solar markets in the U.S.

Incentives for rooftop-solar owners are deserved because it helps everyone.

 A variety of California laws have directed the CPUC to create rules or tariffs that allow customers who generate their own energy to serve their energy needs directly and then also to receive a financial credit on their electric bills for any surplus energy fed back to their utility. This is what the NEM programs do.

The state understood that California homeowner’s rooftop solar systems with the ability to distribute excess energy back to the grid would provide needed kilowatt-hours to the grid and it would drive economic growth, create jobs, and provide public health and safety benefits for the entire state. 

It should be noted one of the biggest health benefits offered by these net metering programs is the overall reduction of the state’s carbon footprint. In a time when scientists have put us on notice that we must transition to clean renewable energy posthaste -- that statewide carbon footprint reduction is priceless.

Why rooftop solar makes electricity cheaper for all Californians.

It was also recognized that customers with rooftop-solar-energy-generation NEM contracts effectively make electricity cheaper for all Californians. It does this by 1. reducing these homeowners’ reliance on the grid (they don’t add demand) and 2. by having these homeowner’s contribute surplus energy back to the grid. 

By supplying additional energy to the grid and not adding more demand, rooftop-solar owners reduce peak demand and additionally help local utilities avoid costly construction of new fossil-fuel-based-backup-power plants. Building these plants result in increased electric rates across the board.

So, what exactly will the NEM 3.0 changes mean?

For existing rooftop solar NEM 1.0 and NEM 2.0 customers there is a grandfathering clause allowing these programs to continue for them. However, for new solar rooftop customers, if they do not submit a signed application by April 14, 2023 to be grandfathered under NEM 2.0, then they will be placed in the NEM 3.0 program.

This NEM 3.0 is the latest version of state net metering policies which was basically rebranded as a net billing tariff that governs how customers with solar panels or other renewable energy systems can sell excess electricity back to the grid. 

Under NEM 3.0, customers with renewable energy systems can receive credits on their utility bills for the excess energy they produce and send back to the grid. These credits can offset the cost of the electricity the customer uses from the grid when their renewable system isn't producing enough power. A big change under the new NEM 3.0 is a shift from the current retail rate compensation for surplus electricity to a time-of-use compensation structure.

More information on time-of-use compensation:

NEM 3.0 will transition on April 15, 2023 from a retail rate compensation structure to a time-of-use compensation structure where rates will be calculated using the  CPUC’s Grid Participation Charge plan. 

This means that the compensation rate for excess energy will vary depending on the time of day and the overall supply and demand for energy. This could impact solar savings, as customers may receive lower compensation rates during peak demand times when energy is more expensive. On the other hand, customers may receive higher compensation rates during off-peak times when energy is cheaper.

California Energy regulators also introduced a monthly $8-per-kW-access-to-the-public-grid charge for homes with rooftop solar in new NEM 3.0 rules to supposedly “even the playing field” for all public grid customers.

How NEM 3.0 net billing works:

Under NEM 3.0 net billing, customers are charged for the net amount of electricity they use from the grid, after subtracting the amount of excess electricity they have generated and fed back into the grid. The customer is typically compensated for this excess energy at a rate that is equal to the utility's avoided cost of electricity, which is the cost the utility would have paid to generate or purchase the electricity if the customer had not generated it themselves.

What’s the dollars-and-cents big picture impact of NEM 3.0 to solar owners?

Beginning April 15, 2023, when people sell their unused solar-power back to the grid, the new NEM 3.0 rules will reduce the average export rate by approximately 75%. This means that someone who would have received a $0.36 per kilowatt hour bill-credit under NEM 2.0 rules will now under the 3.0 program get only an approximate $0.08 per kWh. (Calculations use the: Avoided Cost Calculator at cpuc.ca.gov.)

By reducing the kWh bill credit, it increases the payback period to recoup the initial cost of a solar collection system. The previous NEM 2.0 policies allowed people with a solar-only system to realize a return on their investment in about 6 years, now with an identical system under the new NEM 3.0 it will take about 9 years reach that break-even mark. 

It should be noted that this calculation estimate does not include the federal solar tax credit of 30% offered until 2032 to U.S. homeowners who install new solar systems or add battery storage systems to existing solar energy collection systems. This tax credit could greatly aid the return-on-investment calculations. For more information on the solar tax credit visit: Guide to the Federal Solar Tax Credit

So, why did the CPUC make this change to the metering program?

The CPUC says the goal of this change is to encourage customers to use and feed energy back to the grid at times when it is most needed and to better align compensation with the actual value of the electricity being produced.

This means that after April 15, 2023, new solar generation customers on the new NEM 3.0 program will receive credits for the electricity their system exports to the grid based on its value to the grid.

At the risk of repeating information, it is important to recognize that participation in these state NEM policies do not limit a customer’s eligibility for any other rebates, incentives, or credits provided by an electric utility or the federal solar tax credit which was recently raised to 30% of the system’s costs. Costs for the federal solar tax-credit program include battery storage systems as well as solar photovoltaic (PV) panels, other parts, as well as system installation labor.

Act quickly before the April 14, 2023 sunset deadline to qualify for NEM 2.0.

When the CPUC passed the NEM 3.0, it granted new solar customers until April 14, 2023, to qualify under NEM 2.0 program before its scheduled to sunset. Because the new NEM 3.0 makes it less attractive to return surplus solar energy to the public grid, if you’re thinking about installing solar panels or significantly upgrading your system, then do it now before the imminent April 14, 2023 deadline for the NEM 2.0 program.

People with a completed contract and a NEM application signed before April 14, 2023, will be “grandfathered in under NEM 2.0 rules and credit rates with a protection provision lasting 20 years – but they must submit a completed interconnection application to their utility on or before April 14, 2023.  

Doing this will start a 3-year stopwatch to physically interconnect their system to the public grid to be grandfathered in under NEM 2.0 rules and credit rates. So as of the publishing this guide, people will have a short window to ensure that their roof-top solar system is officially grandfathered into NEM 2.0 to maximize the bill-credit benefits for the next 20 years. Homeowners can visit California Solar Consumer Protection Guide for more information and to ensure proper understanding of the state’s rules.

Short of this beat-the-deadline action, battery-storage is a money-saving solution.

If you can’t qualify for NEM 2.0 grandfathering, and you have a solar-only system (meaning solar panels without a battery-storage generator system) then you should add a battery-storage generator component to your system so you can again realize substantial solar-powered money saving advantages. You won’t even necessarily need the public grid to act as your storage system, because you will have your own battery storage system that can power your home at night, during less than sunny days, or when the grid goes down.

Because it is important information, note that although California’s NEM 3.0 became a bit stingy with roof-top solar incentives, the federal government recently stepped up increasing their federal solar tax-credit to 30% -- and there’s no upper cap on the cost of the system. This solar tax credit is given against the U.S. federal income tax owed by a homeowner and can be used to help offset the costs of solar panels and battery storage backup systems and their installation costs. Know that even if the battery storage systems are added later (after the initial solar panels were installed) the battery storage generators can still qualify for the federal solar tax-credit.)

Some say that NEM 3.0 makes selling excess energy back to the grid much less attractive due to lower credits and higher rates. They argue that homeowners instead should use their surplus solar energy to power their homes by adding a sufficient battery storage system. As far as these advocates are concerned, the grid can just pound sand. 

There is another camp that is not as offended by the sharp reduction in NEM incentives. They argue that net metering is still worth the trouble – that even with the new reduced NEM 3.0 net billing tariff rule changes, the program still allows homeowners to recoup their initial investment faster than if they don’t take advantage of the program.

So, how does adding a battery-generator system help homeowners save money?

According to the CPUC: “Under the new Net Billing tariff compensation for excess generation exported to the electric grid is applied to a customer’s bill at a rate reflecting the value of this generation to the grid. The value of the export compensation is usually lower than the retail rate but can rise above the retail rate on late summer evenings. Customer-generators can maximize bill savings under the NBT by installing battery storage along with their generation, so they can use or export stored energy during these high-value hours.”

This is important – if people add solar battery backup systems -- it pays.

The solar energy not used to power a home during the day is stored by the homeowner’s own solar battery backup storage system. This energy can be used to power a home at night, during a rainy day, during a power outage, or importantly, it would allow a homeowner (with a NEM grid contract) to export excess energy back to the grid during high-value hours.

Other reasons solar battery storage systems are increasingly necessary.

With more and more planned and unplanned power outages, and more people working from home, studying online, needing to power necessary safety or medical equipment... it is more important than ever that we can live life without power interruptions.

Installing a solar powered battery backup system secures your home from losing power during an infrastructure failure. Now, too, battery storage is important to let homeowners be the master of their domain to maximize solar-energy savings by using grid power at cheaper times and selling power to the grid at higher-value times.

Investing in a solar panel system will lower energy bills as well as a homeowner’s carbon footprint, but that is no longer enough -- now people need to invest in a home solar battery storage system to really lock in the protection and the savings.

Unarguably, it is increasingly important to have solar battery storage. The return-on-investment period may still be longer with NEM 3.0 than with NEM 2.0, but by installing a battery storage component homeowners will save the even more over the solar energy system’s life.

Looking into getting solar power? Consider Nature’s Generator products!

When homeowners go to investigate solar panels and battery storage systems, make sure to look at Nature’s Generator state-of-the-art products. For affordable, easy to use products, there are no better products. 

The Nature’s Generator Powerhouse is a whole home solar-energy system with excellent battery storage capacity. It can be purchased with an iron phosphate lithium battery that provides approximately 4.8 kWh battery capacity and a lifespan of up to 10 years. The Powerhouse, like all Nature’s Generator products can be infinitely expanded as a home’s power requirements increase.

The Powerhouse can be ordered with an Eco Intelligent Li smart battery management system that allows lead acid and iron phosphate lithium batteries to work in concert to deliver the best of both worlds. The Eco Intelligent Li system also allows new batteries to work together with older batteries without adverse consequences for the new battery. In the past, if you used a new battery with an older battery, the new battery was quickly drained.  With the new smart battery management system, the batteries are continuously balanced to avoid this result.

To sum up the changes to the state’s incentives and the NEM 3.0 rules:

Since the 1970’s California has championed the clean sustainable, renewable energy of the solar industry and because of this it is currently the leading producer of solar energy with an impressive total for installed capacity. Being a state with abundant free sunlight it was common sense to approve its first net metering program in 1996 to encourage residents to install rooftop solar systems to generate electricity to use in their home and to feed any surplus energy back to the public grid which benefits all Californians.

Until this latest passage of the NEM 3.0 rules which significantly reduced credit rates, California has heretofore offered generous rebates and net metering programs to push people toward solar-energy harnessing systems because the state recognized that it was good for everyone and good for the environment.

Now with the coming grudging rules for NEM 3.0, new solar rooftop customers must act quickly -- RUN DON’T WALK --to qualify for the previous NEM 2.0 policies before they sunset on April 14, 2023.

Short of that meeting the deadline, or on top of it, adding backup battery storage to rooftop solar systems is a way to provide for more cost savings for solar panel owners. If you’re a US homeowner, and will owe federal income taxes, take advantage of the 30% federal solar tax credit, it can be used to offset the cost of solar panels, solar generator battery back up systems as well as installation costs.

Homeowners should consider Nature’s Generator’s affordable, reliable, state-of-the-art solar panels and solar powered generator energy storage systems when looking at solar equipment options.

We all need to be doing more, not less to reduce the state’s carbon footprint. Regardless of the California Public Utility Commission’s recently passed NEM 3.0 policies which slashed solar incentives -- renewable energy is the state’s future.