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.
Net Metering 3.0 Passed
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 took effect in the 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.
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 Are Doing Now
With NEM 3.0 now in effect, homeowners are adjusting their solar strategies to maximize benefits. Although the policy offers fewer incentives than NEM 2.0, there are still ways to make solar work for you.
Install Solar Panels with Storage
Solar is still a great investment, especially if paired with battery storage. With reduced credits for sending excess energy back to the grid, homeowners are opting to store that energy for personal use during high-demand hours when utility rates soar. Battery storage ensures energy security and long-term savings.
Optimize Your System Size
If you’re planning on adding to an existing solar system, consider your options carefully. Any substantial upgrades will now fall under the NEM 3.0 rules, so maximizing your system early on ensures you’re prepared for future energy needs without requiring a costly new application.
By adding battery storage and optimizing solar systems under NEM 3.0, homeowners are still finding ways to reduce energy bills and secure long-term energy savings.
Why Did NEM 3.0 Pass?
While the passing of this bill was highly controversial, the California Public Utility Commision (CPUC) has stated that the bill is meant to solve the following issues.
Grid Reliability
Utilities claim that NEM 3.0 will address the mismatch between solar generation and peak energy demand. In layman’s terms, the grid was receiving massive amounts of electricity from those with solar during peak hours while those without solar saw the highest level of demand from the grid at the same time.
Per the CPUC, this was causing stress to the grid’s infrastructure. By promoting battery storage to the solar ecosystem, the idea is to allow for solar electricity to be stored in these batteries as opposed to being fed into the grid.
Billing Inequities
Under the old system, solar customers were paid full retail price for the extra electricity they sent back to the grid, but this left non-solar customers paying more for grid maintenance. NEM 3.0 fixes this by reducing the rate solar customers get for excess electricity, making it fairer for everyone. This way, solar customers still benefit from their panels, but they now pay their share for the grid they rely on at night. Overall, it spreads the costs more evenly between solar and non-solar customers
Promoting Battery Storage
NEM 3.0 encourages battery storage by reducing the amount of money solar customers earn from selling excess electricity back to the grid, making it more beneficial to store and use the energy themselves. It promotes using that stored energy during peak hours, when electricity is most expensive and the grid is under more pressure. Early adopters of solar-plus-storage systems also get extra financial incentives and bill credits, making the investment in batteries even more attractive. This system helps balance the grid and maximize savings for solar users
Why NEM 3.0 Isn’t the End of Solar
NEM 3.0 isn’t the end of solar because rising California utility rates still make solar a smart investment, especially for those with battery storage. Even with reduced export rates, storing solar energy allows homeowners to avoid high electricity costs during peak hours, leading to significant savings. The ability to use stored energy when the grid is most stressed provides not only financial benefits but also energy security. As electricity prices continue to climb, the combination of solar and battery storage remains a valuable solution for energy independence and long-term savings.
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.
