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December 8, 2022

The Latest News on California’s NEM 3.0

  • icon SOLAR

The California Public Utility Commission (CPUC) recently announced its long-awaited revised proposed decision on NEM 3.0 (California’s policy for reimbursing non-utility solar electricity generators). While Sunworks and our renewable energy colleagues are far from satisfied, this updated proposal is an improvement over the last one. Here is what we know.

What is Net Energy Metering (NEM)?

First of all, for those who are unfamiliar with NEM, Net Energy Metering (NEM) is a type of agreement between utility companies and non-utility owners of solar energy generating systems. NEM determines how much solar owners are credited for any unused electricity they send to the grid.

It also establishes when solar owners are billed for their draws on the grid vs. their contributions to it (monthly or annually, for instance) through a “True Up” bill. Generally, a longer true up period allows solar owners more time to contribute their electricity to the grid to offset any power they may have to buy.

The Good: No More Monthly Fees

The previous proposal for NEM 3.0 included fees for grid usage. These fees would have added significant costs for both residential and commercial solar owners. Fee estimates for a 750 kw commercial system were projected to be $5,595 per month under the last proposal. We are pleased to see that the latest proposal for NEM 3.0 has dropped these fees.

These fees would have made solar in California prohibitively more expensive and potentially hurt State clean energy goals.

The Bad: NEM Credits Are Significantly Reduced

Unfortunately, the latest NEM 3.0 proposal still includes a significant reduction to NEM credits. Credit amounts will vary by demand throughout the day and year, but overall, they are significantly lower. On average, NEM rates will decline by 75% for residential and nearly 60% for commercial installations in the first year of NEM 3.0. Rates will then continue to decrease for another four years.

This proposed credit change is obviously not favorable for solar or for California’s renewable energy goals. The commission will vote on December 15th for policy changes that will probably go into effect in April 2023.

Neutral: Overbuilding and NEM 2.0 Grandfathering Are Allowed

Potential solar customers appear to have two options to mitigate some of the lost credits value under NEM 3.0. The first and best immediate option is to lock in NEM 2.0 credits before NEM 3.0 takes effect. If a new solar customer gets their project approved before April 2023, they can lock in the old, more favorable credits.

Additionally, customers can potentially avoid some of the unfair NEM 3.0 charges by “overbuilding” their solar system and adding energy storage. Under this option, solar owners can overbuild their system by up to 50% to produce more energy than they are projected to need. They can then store this energy to avoid buying from their utilities company on high-usage or low-production days.

In short, while the updated NEM 3.0 proposal is far less than ideal and is extremely pro-utility and pro-union at the expense of consumers and the environment, potential solar owners can find some comfort in the options they may still have. Acting quickly over the next few months and incorporating storage into future solar installations may go a long way in managing the impacts of NEM 3.0.

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