NEM 3.0 Explained – How the Change Will Impact Your Net Metering if Passed

If you’re interested in solar and considering installing solar photovoltaic (solar PV) panels on your commercial building or residence, then it’s crucial to understand Net Energy Metering 3 (NEM 3.0). First, it’s essential to understand what Net Metering is and how it can help you reduce your monthly electrical bill using the energy generated by your solar system. 

Net Metering measures the difference between the amount of electricity your solar system generates throughout the month and the amount of electricity your home uses. This amount is offset against each power bill, allowing you to pay the net energy amount. You then sell back your excess energy to the grid at the retail rate. In exchange for sending solar energy back to the grid, you receive a credit on your electrical bill, which can roll over month-to-month for a full year.

Sounds good, right? Especially when you consider that California leads the nation in expanding solar, with solar powering more than 2,000 schools, 1,000 farms, 300 apartment buildings, and 1 million + homes. Plus, there are nearly 400 new consumers daily who go solar and do their part to stop climate change. If you’re considering going solar, right now is a great time to act for a couple of different reasons: 

  1. 2022 is the final year to take advantage of the 26% Federal Investment Tax Credit (ITC), aka the Solar Tax Credit.
  2. NEM2 is still currently in effect until May 2022. 

While now is a great time to make your decision to go solar, unfortunately, those benefits could be significantly diminished for consumers if NEM 3.0 is approved. This is due to big utility companies like PG&E lobbying the California Public Utilities Commission (CPUC) to add a monthly solar penalty fee to ratepayer bills, drastically reducing the solar credit consumers receive for selling excess power back to the grid. Let’s take a deeper dive into NEM 3.0, the proposed changes, and how it all affects you and your decision to go solar.

NEM 3.0: What’s Changing?

At the end of 2021, the CPUC proposed a decision that would give utility companies almost everything they are lobbying for, including adding a monthly solar penalty fee to ratepayer bills, drastically reducing the solar credit that consumers receive for selling excess power back to the grid. Some of the additional changes will: 

  • Force solar customers into the new NEM tariff without knowing the terms of their net metering program. 
  • Remove the 20-year grandfathering for existing customers. 
  • Reduce the economic value of going solar by 50-75% from what it is today. 
  • Charge a monthly “grid participation” of approximately $8/kW of solar capacity installed. This would be around $57/month for the average home. The fee is essentially a “penalty” and would be the largest in the U.S. 
  • Cut the credit solar users get for sharing surplus energy with the grid by 80%. The credit would drop from an average of 25 cents/kWh to about 5 cents/kWh.
  • Rollback protections for existing users. Currently, they are protected from changes to net metering rules for 20 years from the date their system turned on. The CPUC proposes reducing that protection to 15 years and eliminating protection altogether if you accept their battery rebate.

The Impact of NEM 3.0

In a state as sunny as California, which averages about 284 sunny days each year, harnessing the sun’s power provides both economic and environmental benefits. The current net metering policy is helping millions of middle and working-class Californians tap into the sun’s energy to save money and clean up our air. The proposed adjustments in NEM 3.0 will render solar unaffordable to most people at a time when nearly half of all new solar is being installed by working and middle-class neighborhoods. According to California DG stats

  • 150,000+ solar roofs serve customers in the CARE discount program
  • An additional 30,000 rental units serving more than 100,000 people at multi-family affordable housing projects are under development due to Net Metering
  • 200,000+ families in affordable multi-family homes are projected to go solar by 2030

Unfortunately, this utility power grab will not only stifle progress made to install solar in California, but it will also affect the job market. According to the IREC’s annual Solar Jobs Census, NEM 3.0 will ruin thousands of small, locally-owned solar businesses and threaten more than 60,000 jobs.

What Happens Next?

Beginning in November 2020, the CPUC provided a preliminary schedule regarding NEM 3.0. It is estimated that the proceedings would take roughly 15 months, starting with a pre-hearing conference in November 2020. The CPUC finalized its Guiding Principles of NEM 3.0 in February 2021 and opens for main hearings between April and August 2022. In November 2021, the CPUC commissioners issued their final decision, and beginning in the second quarter of 2022, and based on the current framework, NEM 3.0 would go into effect on May 27, 2022. That means people interested in installing residential solar systems under the current net metering rates have a limited time to do so.

The End of Residential Solar?

It’s disheartening to think that the CPUC will implement NEM 3.0, essentially halting all progress to install residential solar systems throughout California. However, there is still a chance to stop the utility power grab and save California solar! Put pressure on Governor Newsom by signing a petition or calling the governor’s office. You can also post a message on social media, write a letter to your local newspaper, or provide a verbal comment to the CPUC. 

Today’s one million solar systems produce nearly 13 billion kWh of clean energy each year, avoiding 5 million metric tons of CO2 annually – the equivalent of two coal-fired power plants. We’re optimistic that we can continue to work with our clients to help them save money and the environment by going solar. If you have any questions about your current solar system or would like to ensure you can benefit from NEM2, contact us!

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