Net energy metering (NEM) is a practice in which utilities credit you for the excess electricity generated by your solar panels, that is then sold back to benefit others on the electricity grid. You can use upon these credits when your panels don’t produce enough electricity to match your use.
It results in substantially lower compensation for electricity customers who don’t install battery storage along with their solar.
What is NEM 3.0?
On April 15, 2023, the California Public Utilities Commission enacted the new net billing tariff (NBT).
The regulation has a new payment and compensation structure, which reduces the value of installing only solar panels across California.
NEM 3.0 vs NEM 2.0
California investor-owned utility customers pay the highest electricity rates in the United States. There are many factors that go into this, but one of them is that California’s utility companies started catastrophic wildfires and have passed the cost of wildfire recovery onto their ratepayers.
NEM 2.0 was in place for about seven years. In this system, many people were able to see value from just installing solar, without battery storage. That has changed with NEM 3.0, and now the best way to realize the most value is to install battery storage.
How does NEM 3.0 work?
It drastically changes the compensation that customers receive when they sell their excess solar energy.
Alongside the new avoided cost compensation, it features an adjusted TOU rate with lower off-peak prices and higher peak prices. The wider gap aims to discourage power use during the most demanding times for the electricity grid, shifting electrical consumption at times when there is not a stress on the grid. This shift in off-peak and on-peak pricing encourages homeowners to invest in a battery to maximize savings.
How does NEM 3.0 affect solar costs/savings?
Under the old regulation, NEM 2.0, homeowners in California could cover around 90% of their electricity bill but with the new NEM 3.0 billing tariff ,with a solar plus battery system, your power bill offset can be as much as 70-90%.
How to maximize savings from NEM 3.0
Purchase a battery
NEM 3.0, or the net billing tariff, reduces compensation for solar-only customers, which extends the payback period of the investment from what it was under NEM 2.0.
Minimize power usage during peak hours
NEM 3.0 offers very low electricity rates during off-peak hours. Therefore, if you opt to use appliances or charge electric vehicles from around 9:00am to 2:00pm, you’ll spend significantly less money on power.
Make the Shift with backup and non-backup batteries
Californians can still save tens of thousands of dollars with NEM, but it requires a little more planning. Purchasing a backup battery, such as the Tesla Powerwall, allows you to use energy without paying peak prices. And with a substantial 13.5kWh capacity, you’ll have electricity during blackouts, when it matters most.
Sources
- California New Net Metering Policies
- 2022 Electric Rates Report
- An installer’s guide to unlocking the full potential of California’s new net billing tariff (NEM 3.0)
- Decision revising net energy metering tariff and sub-tariffs
- Net Energy Metering
- California’s New Solar Program
- CALSSA Statement on CPUC’s Revised Proposed Decision on Solar Net Metering — CA Solar & Storage Association
- Proposed decision revising net energy metering tariff and subtarrifs
