What to Know About California’s Net Metering 3.0

  • February 03, 2022

Proposed changes would alter the course of solar in the Golden State

It's rainy season in California, but the controversy over the state's net metering program is heating up. State regulators, the California Public Utilities Commission (CPUC), have proposed alarming changes to the Golden State's net energy metering(NEM) program for rooftop solar.

The CPUC is reconsidering the electric bill credit offered to solar customers for the excess energy their panels produce — a perk praised for catapulting California's solar industry. Additionally, the proposed changes, dubbed NEM 3.0 (for the third iteration of net metering program), would impose fixed dollar-per-kilowatt fees — the highest in America — for all rooftop solar installed after mid-2022.*

Net Metering Changes Over the Years

The CPUC states that California has "aggressively supported the rooftop solar market through net metering" for over 20 years.* Back in 1996, the CPUC approved the initial net metering laws, which have since encouraged more than 1.3 million residents to install solar on their rooftops.

Two decades later, facing pressure from utilities, the CPUC approved NEM 2.0, which implemented higher electricity rates during peak demand hours (called time-of-use or TOU) and charge solar customers a nominal fee (about 3 cents per kWh) that goes to low-income programs.* These fees can't be offset by excess solar production.

Six years later, NEM 3.0 promises to once again alter the course of solar in California.

An Ongoing Battle Between Utilities and the Solar Industry

The proliferation of residential solar has raised a handful of concerns for utilities. They are concerned that increased self-generation will undermine their profits. Utilities also earn a rate of return for every investment they make and solar reduces the need for those investments. Utilities claim that solar users raise rates for everyone, but that is misleading.

The actual culprits for increased rates are $4 billion in transmission costs, a 66% increase over 2016 in PG&E territory alone.* In addition, California's investor-owned utilities charged ratepayers $5 billion in wildfire liability expenses in 2019, costs that are expected to increase.*

Countless studies have been conducted over the years that echo the same thing: the economic benefit associated with net metering outweighs the costs and poses no major cost increase to non-solar customers.*

What Will California’s NEM 3.0 Mean for Solar Customers?

The move toward fixed charges that aren't dependent on usage will reduce the incentive to install solar, industry advocates warn. The threat of a major disruption to the market could not only thwart a thriving sector, but could undermine California's clean energy goals altogether.

A final vote on NEM 3.0 was scheduled for the end of January, but has been postponed. The current proposed decision includes the following provisions:*

    • PG&E customers

    • $8 per kilowatt (kW) of installed solar capacity

    • For a typical solar system size of 6kW, this equals $48 per month.

    • SCE customers

    • $8 per kW of installed solar capacity plus $12 per month

    • For a typical customer, this equals $60 per month.

    • SDG&E customers

    • $8 per kW of installed solar capacity plus $16 per month

    • For a typical customer, this equals $64 per month.

In addition to fixed monthly charges, if NEM 3.0 is approved in its current form, solar customers can expect to be compensated for their excess energy at 5 cents per kilowatt-hour (kWh) — a reduction of 20-30 cents per kWh, reports CALSSA*. Time-of-use periods would still be implemented, so solar customers can anticipate varying electricity prices during times of high and low demand.

    • NEM 2.0
      24.4 cents/kWh

    • NEM 3.0*
      4.9 cents/kWh

    • NEM 2.0
      19.3 cents/kWh

    • NEM 3.0*
      3.9 cents/kWh

    • NEM 2.0
      30.7 cents/kWh

    • NEM 3.0*
      6.1 cents/kWh

  • The estimated value of solar export credits could be reduced by as much as 80%.

What Can I Do to Protect Myself Against NEM 3.0?

If you’ve been considering solar in California, now is the time to act. By installing panels on your property and signing the interconnection agreement before July 2022, you should be grandfathered into NEM 2.0 (or NEM 1.0 if installed prior to the change to NEM 2.0), pending the final vote.

Keep in mind that a solar installation doesn't happen overnight. At Sunnova, it takes an average of three months from the day you begin your research to the day your solar system is turned on. So, even if you're toying with the idea of going solar, it doesn't hurt to request a no-obligation quote now.

If installing solar isn’t feasible before summer, you have another option: battery storage.

How Does a Solar Battery Protect Me Against Changes to Net Metering?

Through net metering, grid-tied solar systems use the power grid like a battery. After feeding excess solar energy to the battery when you don't need it, you can use the [battery] to supply electricity when you do need it — such as nighttime.

Adding battery backup to an existing home solar system frees you of the volatile pricing of peak demand hours and the relentless battle between utility companies and the solar industry. The best alternative to using the grid as a battery, is to use a battery.

If you want to take action to save solar in California, click here to sign the petition.

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