NEM 3.0: A New Era for Solar Homeowners

Recently, solar has changed for millions of California homeowners and how they receive compensation for the excess energy, or exported energy their solar systems produce. We want to shed light on those changes enacted by the California Public Utilities Commission (CPUC) for Net Energy Metering (NEM) 3.0.

NEM 3.0 took effect on April 15, 2023, for customers of California’s three investor-owned utilities (PG&E, SCE, and SDG&E). Existing solar systems will remain under their current billing structures and export rates for 20 years after the initial installation date.

Unveiling NEM 3.0 and Its Key Changes

Let’s first take a step back and explain Net Energy Metering and why it is so important. Without NEM Solar owners would only have power during the day when the solar panels are being hit with sunlight and they wouldn’t have any power at night since their system would not be producing energy. However, with the use of this energy agreement it allows solar owners to send excess power that they are not using to the utility company in which they will either get credited or paid for that energy which offsets the energy that they will be pulling from the grid later that day or when the sun isn’t out. It’s essentially an agreement with you, the homeowner and your utility company that allows you to send and receive energy from each other.

The most significant change under NEM 3.0 is that instead of getting a 1:1 credit for the energy you send to the utility company, you will only get paid, on average about ¼ of the energy you send to the grid. Essentially you would need to send the utility company 4 watts of energy to get back 1 watt instead of sending 1 watt and receiving 1 watt. This reduction in export rates decreases the overall savings and increases the time solar owners receive cost recovery of their investment in home solar. This new policy was designed, in part, to encourage homeowners to pair battery storage with their solar panels to become more self-sufficient and contribute to a more resilient electricity grid.

Impact on Homeowners’ Energy Usage Patterns

Now, let’s delve deeper into how this change affects homeowners’ homes during the day versus those absent during the day and how all their energy gets sent to the grid for reduced credit back to the homeowner.

Homeowners who are home during the day can use the solar energy generated directly, thereby reducing the amount of energy they need to draw from the grid. This direct use of solar energy is more valuable under NEM 3.0, as the export rates for excess solar energy have been significantly reduced. Stated if more of the energy you usually use can be used during the daytime the better the return on your solar investment will be.

Addressing the Needs of Absentee Homeowners

On the other hand, homeowners who are absent during the day will likely export most of their solar energy back to the grid. Under NEM 3.0, these homeowners will receive less credit for this exported energy than the previous NEM 2.0 policy. Remember, this is a 75% reduced export rate for the energy sent back to the utility. This change makes it more beneficial for these homeowners to consider adding a battery storage system. By storing the solar energy generated during the day, they can use it during the evening at home instead of drawing energy from the grid.

Recognizing the Overall Value of Solar

With the reduced export rates, the return on the investment for solar and battery storage systems will roughly equal the payback period of solar-only systems. This makes adding a battery storage system more appealing, as it provides the same return on investment and offers the additional benefit of having a backup power source.

Embracing the Changes of NEM 3.0 and Adapting Energy Usage

Despite the reduction in export rates, it’s important to note that solar systems in California under NEM 3.0 will still largely provide more significant energy cost savings than in any other state. Furthermore, the benefits of home solar extend beyond energy cost savings. They include increasing home value, reducing carbon emissions, contributing to a more resilient grid, providing backup power for outages (if paired with a battery), and setting a good example for friends, family, and neighbors.

In conclusion, while NEM 3.0 brings significant changes to the solar industry in California, it does not diminish the value of solar energy. Instead, it shifts the focus towards greater self-sufficiency and resilience. As solar homeowners, it’s essential to understand these changes and adapt how you use energy to continue reaping the benefits of solar energy.