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January 24, 2023

California’s NEM 3.0 – An Update

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On December 15th 2022, the CA Public Utility Commission (CPUC) approved NEM 3.0, the state’s long-awaited 3rd iteration of the California Net Energy Metering program. The changes will see a drastic reduction in electricity export rates – the unused power sent back to the grid – and an attendant reduction in solar savings.

Export rates are set to fall by nearly 75%, resulting in a reduction of more than 60% in solar savings. NEM 3.0 will take effect on April 14th 2023.

What is Net Energy Metering (NEM)?

Net metering allows solar system owners to earn credit for any energy production not used by their property at the time it is generated.  The unused energy flows onto the grid to be consumed by other customers, and the power-generating customer is credited at the end of the month.

Originally, under NEM 1.0, every kWh exported to the grid was deducted from the generating customer’s bill, in what was effectively a ‘one-for-one’ credit system. In 2016 the CPUC created NEM 2.0, under which any excess electricity exported to the grid was compensated at slightly less than the retail rate. This enabled systems to offset 80-90% of their utility’s total annual electric load.

What Will NEM 3.0 Change?

NEM 3.0 will significantly reduce the value of export credits from a current average of $0.30/kWh (under NEM 2) to $0.02/kWh (under NEM 3). Because export credits will be far lower than retail electric rates under the new metering system, installing a solar system to offset a property’s annual load is no longer economically sound. Systems may need to be reduced in size to ensure they only offset the load while the system is producing electricity during daylight hours.

Who is Affected?

NEM 3.0 will impact customers of California’s three investor-owned utilities: Pacific Gas and Electric Co., San Diego Gas & Electric Co., and Southern California Edison.

Can I Avoid NEM 3.0?

Fortunately, there is a way to lock in the more favorable NEM 2.0 rates. The CPUC’s decision to approve NEM 3.0 came with a ‘sunset period’ built in to allow residential and commercial customers to prepare. This 120-day period began on December 15th 2022 – the day NEM 3.0 was approved – and will end on April 14th, 2023.

Customers who submit interconnection applications by April 14th will get 20 years on NEM 2.0, provided the install occurs within three years and is not tagged for deficiencies. Any required service panel upgrades do not need to take place before the deadline. As long as a complete interconnection application is submitted before April 14th, customers can be grandfathered into NEM 2.0.

What Should I Do Next?

In order to take advantage of the sunset period and be grandfathered into NEM 2.0, Sunworks must complete the interconnection application process and the utility be issued a ‘Deemed Valid’ confirmation by April 14th 2023. To meet this deadline, the application process should be started as soon as possible.

To satisfy the requirements of the April 14th deadline, your utility provider needs to approve the following:

  • Signed solar installation contract and supporting forms
  • Solar project design details
  • Completed interconnection agreement

By acting quickly to lock in the more favorable NEM 2.0 rates, customers can continue to make the most of their solar system and avoid the expected fallout from NEM 3.0.




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