Updates on the court case trying to invalidate NEM 3.0: On May 4, 2023, three environmental organizations filed an appeal against NEM 3.0, alleging that the CPUC ignored to look into all of the benefits of rooftop solar. After oral actions on December 13, 2023, the Court of Appeal of the First Appellate Division affirmed the CPUC's decision to allow NEM 3.0 solar billing. As a result, future solar owners in SCE, PG&E, and SDG&E service zones will continue to be billed using NEM 3.0.

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Following years of policy discussion, changes, and a frenzied rush to grandfather setups into the previous net metering scheme, California's three investor-owned companies have gone live with a new solar billing structure known as NEM 3.0.

NEM 3.0 includes a 75% fall in export rates (the value of extra power supplied to the grid by solar systems), lowering total savings and extending the payback period for household solar. This new policy was created, in part, to promote homes that combine battery storage with solar panels in order to become more financially independent while contributing to a more robust electricity supply.

While NEM 3.0 is definitely less beneficial to solar-only customers than prior net metering rules, it is crucial to point out that NEM 3.0 solar systems in California continue to produce far higher energy savings in costs than in any other state, especially when combined with home battery storage.

What Does NEM Stand For?

The abbreviation NEM stands for "net energy metering." This electricity bill structure allows homeowners with grid-tied PV systems to get credits for extra electricity generated by their rooftop solar panels.

Utility suppliers track how much strength clients with solar arrays create vs how much they consume from the grid. Many energy suppliers also utilize time-of-use (TOU) pricing, requiring extra power consumed during peak hours.

California's previous net metering laws permitted households to earn the retail rate for surplus solar energy output. NEM 3.0 is an essential change from these prior rules.

What Is NEM 3.0 In California?

NEM 3.0, formerly Net Energy Metering 3.0, is the third version of California's net metering guidelines, which will take force in April 2023. Solar users who look for connections after that date are subject to NEM 3.0, which restricts payment for excess power supplied to the grid.

California's NEM 3.0 concerns investor-owned utility (IOU) businesses, including:

  • Pacific Gas and Electric Company (PG&E) covers northern and central California.
  • San Diego Gas and Electric (SDG&E) covers San Diego and southern Orange County.
  • Southern California Edison (SCE) is a power company that serves Southern California.

Similar to SMUD and LADWP, publicly owned utilities have not joined NEM 3.0 while operating according to their current net metering regulations. Customers in these areas continue to experience traditional net metering rules because utility companies in these locations have not implemented the NEM 3.0 changes.

However, these companies might think about embracing NEM 3.0 in the future, possibly altering their solar policy to line with the new framework.

NEM 2.0 vs NEM 3.0

The main difference between NEM 2.0 and NEM 3.0 is the worth of solar export rates. Under NEM 2.0, extra solar energy was refunded at the cost of retail, and this meant the value of energy pushed onto the grid was equal to the value of energy implemented off it. In contrast, NEM 3.0 uses an "Avoided Cost Calculator" to determine export costs, which are around 75% less costly than NEM 2.0 charges. This implies that solar owners under NEM 3.0 will have a longer return on investment and smaller savings owing to reduced payment for surplus electricity.

What Are the NEM 3.0 Export Rates?

NEM 3.0 pricing ideas significantly limit California solar households' reimbursement for extra power. According to PV Magazine, as of April 14, 2023, when NEM 3.0 entered into force, export rates fell by 75%, from a median of 30 cents per kWh to only 8 cents per kWh.

Under NEM 3.0, the value of credits for surplus solar energy supplied back to the grid is determined using an Avoided Cost Calculator (ACC) that differs from the retail prices for electricity used in NEM 1.0 and NEM 2.0. As a result, new exports are considerably lower.

These charges differ based on the period of week, season, and utility. However, during the first 5 years of NEM 3.0, PG&E and SCE customers may benefit from more export rate incentives. These adders start at 2.2 cents per kWh for PG&E and 4 cents per kWh for SCE in the first year, decreasing gradually each year thereafter. These incentives aim to encourage early solar uptake under the new framework.

What Are Homeowners Doing Now?

With NEM 3.0 now in force, homeowners have to reconsider their solar plans to optimize profits. Even while the policy provides fewer incentives than NEM 2.0, there are still techniques for making solar work for you.

1. Install Solar Panels With Storage
Solar is still a great investment, especially when combined with battery storage. With fewer credits available for returning extra energy to the grid, homeowners decide to keep it for personal use during times of high demand when electricity prices skyrocket. Battery storage offers both energy security and long-term savings.

2. Optimize Your System Size.
If you intend to broaden an existing solar system, you should carefully analyze your alternatives. Any major shifts will now be governed by NEM 3.0 rules, so optimizing your system early on ensures that it is prepared for future power needs without requiring a costly new application.

Under NEM 3.0, residences may continue to reduce energy costs while generating long-term energy savings by installing battery storage and improving solar installations.

Important Technical Requirements for NEM 3.0 Interconnection Approval

Here's an outline of the main technical criteria for NEM 3.0 interconnection clearance.

  • Advanced Inverter Functions: Solar systems require smart inverters for grid stability because these devices perform voltage ride-through operations while providing reactive power regulation.
  • Anti-Islanding Protection: Anti-islanding protection is a critical requirement for solar systems since this feature enables system shutdowns during grid outages while protecting utility workers.
  • Compliance with IEEE Standards: Systems must adhere to the IEEE 1547 standards, which set grid connectivity criteria for distributed energy resources, allowing secure and reliable grid integration.
  • Energy Storage Compatibility: Systems with battery storage must follow precise rules to allow seamless communication between the solar array, storage, and the grid, thereby enhancing energy management.
  • System Monitoring and Communication: Real-time monitoring and communication abilities are necessary for solar systems, allowing utilities to track efficiency and ensure regulatory compliance.
  • Dynamic Grid Offer: Solar systems must be able to respond to grid situations in order to offer voltage regulation and frequency stabilization, which helps ensure overall grid stability under NEM 3.0.

Benefits of Net Metering 3.0

Although California NEM 3.0 has multiple drawbacks, it also has sure positives.

  • Financial Benefits of Solar Panels and Batteries: Under NEM 3.0, the monetary advantages of integrating solar energy and batteries have risen significantly.
  • Grandfathering Provisions: Existing solar owners are grandfathered into the NEM 2.0 program and can continue to profit from its advantages for 20 years from when they get a license to operate from the utility.
  • Adding Energy Storage to Existing Systems: Solar owners who join NEM 2.0 before the end of the year may be able to install solar batteries while keeping their NEM 2.0 status.

Why Did NEM 3.0 Pass?

The California Public Utility Commission (CPUC) implemented NEM 3.0 to address an array of significant issues:

  • Grid Reliability: NEM 3.0 aims to solve the disparity between solar power and peak energy demand, putting stress on the grid's infrastructure. Excess solar energy may be stored for later use rather than sent into the grid by promoting battery storage.
  • Billing Inequities: Under NEM 2.0, solar customers were paid full retail pricing on extra energy, raising costs for non-solar users. NEM 3.0 reduces payment for extra energy, distributing costs more equitably.
  • Promoting Battery Storage: NEM 3.0 endorses battery storage by lowering payments for extra solar energy, making it less expensive to store and consume energy at peak times. Early solar-plus-storage adopters get extra incentives and credits.

The NEM 3.0 plan offers major changes for California homes contemplating solar installation or those who are already enjoying the advantages of solar power. While the plan cuts compensation for extra energy and creates more grid connection costs, it also emphasizes equality and the future viability of sunlight in California. Understanding these advances and planning your photovoltaic array correctly will allow you to make more educated decisions about your energy future.

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Stay up to date on the latest NEM changes, and engage with skilled solar experts who can help you negotiate the installation procedure in this novel regulatory context.