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NEM 3.0: WHAT IT IS AND HOW IT AFFECTS CALIFORNIA HOME SOLAR


NEM 3.0: WHAT IT IS AND HOW IT AFFECTS CALIFORNIA HOME SOLAR


WHY BATTERY STORAGE IS SO IMPORTANT

Published 11/7/2023




OVERVIEW

NEM 3.0 replaced the previous net metering tariff in California, and went into
effect in April 2023. 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 draw upon
these credits when your panels don’t produce enough electricity to match your
use; most commonly at night when the sun is down. NEM 3.0 results in
substantially lower compensation for electricity customers who don’t install
battery storage along with their solar. Still, homeowners can save money on
their electricity bills under the new tariff simply by knowing how it works1.


WHAT IS NEM 3.0?

On April 15, 2023, the California Public Utilities Commission enacted the new
net billing tariff (NBT), more commonly known as NEM 3.0. The regulation has a
new payment and compensation structure, which reduces the value of installing
only solar panels across California. To create the most value, homeowners must
install battery storage. 


NEM 3.0 VS. NEM 2.0

California investor-owned utility customers (PG&E and SDG&E for example) pay the
highest electricity rates in the United States2. 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. This includes financial compensation for victims as well as
undergrounding of powerlines to try to prevent these tragedies from occurring
again. 

California’s electricity system continues to evolve, and with that came recent
changes to net metering. 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?

NEM 3.0 drastically changes the compensation that customers receive when they
sell their excess solar energy. 

The change works similarly to Time of Use (TOU) rates; customers receive less
credit for selling during off-peak hours and more during peak hours. While these
rates generally offer less than retail, some periods offer quite a bit more.
Here’s how PG&E (one of the three major utilities in California) compensates
throughout the year.



Source: PCUC

In this chart, you can see that the utility company offers its lowest rates
around noon and its highest around 6:00 pm. In fact, those selling electricity
during peak times in the summer can earn an average of $0.52 per kilowatt hour,
which is nearly double the payout with NEM 2.0. The best way to capture this
value is with battery storage. 

Alongside the new avoided cost compensation, NEM 3.0 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 with a system designed to offset 100% of their
energy consumption3. When you use the new NEM 3.0 billing tariff correctly, 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

Here’s how to get the most out of NEM 3.0. People with solar and battery storage
can get the most value and have more independence from utility companies. Let’s
take a look at how to use home solar under 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. On NEM 3.0, people that install a battery will save more money
than those that don’t install a battery. 

By collecting energy during the day, homeowners can use their own power during
peak periods instead of paying for it at high rates. 

Concerned about purchasing a new battery? As America’s #1 home solar & battery
installer, you can trust Sunrun’s expert Solar Advisors to guide you through NEM
3.0, financial incentives, warranties, and more.


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.


ENROLL SOONER RATHER THAN LATER

One of the features of NEM 3.0 is an “adder” that homeowners can take advantage
of when they install battery storage with their solar panel system in some
markets. This adder, however, depreciates every year by 20%, ending in 20284. To
take full advantage of this program benefit, it’s important to apply for NEM 3.0
as soon as possible. Here’s how the adder breaks down4:

Customer Segment

PG&E

SDG&E

SCE

Residential Non-CARE

$0.018/kWh

$0.000/kWh

$0.040/kWh

Residential CARE

$0.087/kWh

$0.000/kWh

$0.093/kWh



For more information about how to maximize savings from NEM 3.0, watch this
video.


MAKE THE SHIFT™ WITH BACKUP AND NON-BACKUP BATTERIES

Californians can still save tens of thousands of dollars with NEM 3.0, 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.

However, if you’re not ready to commit whole home backup power, Sunrun’s
non-backup battery, Shift, takes care of the energy management without the cost.
When power rates fluctuate throughout the day, you’ll know that this system is
working to balance them out. This way, you pay an affordable price whenever you
use power with little noticeable impact to your lifestyle.


FAQ (FREQUENTLY ASKED QUESTIONS)


IS NEM 3.0 RETROACTIVE?

NEM 3.0 is not retroactive. This means that the new tariff only applies to
homeowners who submit their interconnection applications after the April 14,
2023 deadline.


CAN I BE LOCKED INTO NEM 2.0?

If you applied for interconnection before April 14, 2023, you can utilize the
old rate (tariff) for up to 20 years. However, this legacy period ends if you
add new equipment or opt to switch to NEM 3.0.


IS SOLAR STILL WORTH IT IN CALIFORNIA AFTER NEM 3.0?

While NEM 3.0 results in a longer payback overall, homeowners can still see
energy cost savings. In some cases, people can cover 70-90% of their utility
bills under NEM 3.0. 


DO I HAVE TO INSTALL A BATTERY FOR NEM 3.0?

Homeowners can choose not to install a battery with their system under NEM 3.0,
but overall savings drastically decrease without one. Consider purchasing a
backup battery, such as Tesla’s Powerwall, or a non-backup battery, such as
Sunrun’s Shift, to help regulate power usage and save money during peak hours.

Sources:

 1. California New Net Metering Policies 

 2. 2022 Electric Rates Report 

 3. An installer's guide to unlocking the full potential of California's new net
    billing tariff (NEM 3.0)

 4. Decision revising net energy metering tariff and sub-tariffs 

 5. Net Energy Metering

 6. California's New Solar Program

 7. CALSSA Statement on CPUC’s Revised Proposed Decision on Solar Net Metering —
    CA Solar & Storage Association

 8. Proposed decision revising net energy metering tariff and subtarrifs




TAKE CONTROL OF YOUR ENERGY BILLS


1
Avoid unexpected energy bill hikes
2
Get a cutting-edge solar and battery system
3
Rely on expert installation from America's #1 provider
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