California has always been at the forefront of the solar industry, from harnessing the sun for electricity in the 1970s to becoming the nation’s leading producer of solar energy today in terms of total installed capacity.
It is one of the best states to shift to clean energy because of its abundant sunlight and favorable pro-solar incentives. The Golden State’s generous local rebates and net metering programs encouraged residents to go solar.
Net metering is among the primary reasons homeowners invest in solar panels in California. But as NEM 2.0 expires, ushering in a new policy, NEM 3.0, many consumer-generators expect a turn for the worse.
Below is what you need to know about the NEM 3.0 timeline—and the changes solar customers can expect from this new net billing plan in 2023 and beyond.
When Will NEM 3.0 Go Into Effect?
When California enacted its first net metering policy in 1996, it aimed to spur industry growth and promote solar use among residents. Its second version, NEM 2.0, continued to compensate customers for sending surplus energy back to the grid. However, as it will sunset soon, the California Public Utilities Commission (CPUC) will implement new provisions for net metering under NEM 3.0.
On December 15, 2022, the CPUC voted unanimously to pass NEM 3.0. This decision will impact rooftop solar customers of Pacific Gas and Electric Company, Southern California Edison, and San Diego Gas & Electric.
The NEM 3.0 timeline began in August 2020 when CPUC initiated reform for the current version. The CPUC carried out the main proceedings in 2021, and the final ruling occurred at the end of 2022. As NEM 3.0 is now law, the new California net metering changes will take effect in spring 2023.
Here is a breakdown of the NEM 3.0 timeline:
- January 2021: CPUC finishes the study on the impact of net metering on consumers and the grid.
- February 2021: Finalizes guiding principles on NEM 3.0.
- March 2021: Opens proceedings for proposal inputs from interested groups or parties
- April to August 2021: Holds hearings for changes to include in the new policy before the final decision.
- December 2021: Issues a proposed decision to shift from net metering to a net billing structure.
- January 2022: Governor Gavin Newsom announces in a press conference that members of the CPUC “still have some work to do” on the plan; CPUC postpones original plan indefinitely.
- November 2022: CPUC releases revised NEM 3.0 proposal after almost a year of deliberations.
- December 2022: The NEM 3.0 net billing policy is unanimously approved.
- April 2023: Net metering 3.0, rebranded as a net billing tariff, goes into effect.
Upon passing NEM 3.0, the CPUC granted solar customers a sunset period of 120 days for the existing policy NEM 2.0. Until the NEM 3.0 California update in April 2023, customers are considered eligible for current tariffs. After this period, new solar owners will be subject to the terms of the upcoming net billing policy.
California Net Metering Changes Under NEM 3.0
Solar customers covered by NEM 1.0 and 2.0 policies can breathe a sigh of relief as the statewide adoption of NEM 3.0 won’t affect these programs. Under the new net metering 3.0 policy, however, new solar owners can expect a reduction in the monthly energy savings offered by the previous structure.
The upcoming net billing plan introduces significant changes to the current net metering policy, such as the following:
Lower Metering Credits
The credit for exported surplus energy currently ranges between $.022/kWh and $0.36/kWh. Beginning in April 2023, residential customers who install new solar systems will receive a significant reduction in the amount utilities pay them for excess power. Compared to current figures, new solar owners can expect a 75% cut in average surplus energy payments, so someone who had been getting a credit of $0.36/kWh will be getting approximately $0.08/kWh, determined by the state’s Avoided Cost Calculator.
The Shift in Grid Participation Plans
Under the new Time of Use (TOU) plans for solar consumers, electricity rates are now calculated under the CPUC’s Grid Participation Charge plan. With net metering 3.0, California energy regulators have introduced a monthly $8/kW charge for residences with solar capacity. This charge levels every customer’s access to the public grid. However, low-income and tribal households are eligible for discounted electrification rates.
Increased Payback Periods
Customers under current NEM 1.0 and 2.0 programs can expect an approximate six-year investment return. Under the new NEM 3.0 program, this payback period changes to about nine years for most California households.
What Homeowners Should Do Now
As the NEM 3.0 timeline reaches the point of statewide implementation, the policy’s changes have pushed back the value of going solar in supposedly one of the best states for sustainable energy. Instead of financial rewards, solar owners see fewer incentives while prospective consumers become less willing to make the switch.
So how do you prepare for NEM 3.0?
Submit a New Application for Interconnection
Thanks to the sunset period for NEM 2.0, now is the best time to go solar. New customers can apply for interconnection by April 13, 2023, to be grandfathered into the current net metering policy. Solar owners have up to three years from the date of their complete interconnection application to have their system installed and inspected.
Install Solar Panels
For the first few months of 2023, all customers can reap current solar benefits for 20 years because your system will remain under the NEM 2.0 policy. If you plan to upgrade an existing solar system significantly, it’s better to do so sooner than later. Per the new NEM system, any add-ons exceeding 1 kW or 10% of the original system size (generally more than two or three panels) will have to submit a new NEM application later on.
NEM 3.0 makes putting excess energy back into the public grid less attractive because of lower credits and higher electricity rates. So instead, use the surplus energy to power your home with a backup storage system when solar panels can’t produce energy.
Take Back the Power of the Sun
Don’t let NEM 3.0 cast a shadow on your solar system’s prospects. Instead, learn how to continue enjoying the financial rewards of shifting to solar with Current Home.