California’s latest policy on solar energy, Net Energy Metering (NEM) 3.0, is set to take effect soon, replacing NEM 2.0. Under NEM 3.0, compensation rates for excess energy fed back into the grid will be reduced, and a time-of-use rate structure will be introduced.
However, solar owners who act fast can still lock in the larger export rate under NEM 2.0 before it’s too late. The deadline to take advantage of NEM 2.0 is April 14, 2023 – if you’re considering going solar or already have a solar roof system installed, now is the time to act.
By installing solar panels before the deadline, you can be grandfathered into the more favorable compensation rates for excess energy and potentially save a significant amount on your electricity bills.
In this article, we’ll take a closer look at NEM 3.0, how it will impact California solar owners, and the steps you can take to maximize your savings.
To ensure a quality installation, it’s crucial to work with a licensed and insured residential and commercial solar installation contractor like Yorkshire Roofing. Contact us at (800) 794-7444 to request your free quote and take the first step towards a more sustainable and cost-effective energy solution.
What is NEM 3.0?
Net Energy Metering (NEM) is a policy that benefits solar-powered homeowners by providing credits for excess electricity generated by their solar panels. These credits offset the cost of electricity consumed from the grid when sunlight is insufficient. California has had two previous iterations of NEM: NEM 1.0 and NEM 2.0.
NEM 1.0 was implemented in California in the late 1990s and allowed solar owners to receive a one-to-one credit for the excess energy they produced. NEM 2.0, which replaced NEM 1.0 in 2016, introduced several changes, including a cap on the total amount of energy that could be net metered and a non-bypassable charge for certain customers.
NEM 3.0, also known as the Solar Billing Plan, comes into effect in April 2023 and introduces further changes. Approved by the California Public Utilities Commission (CPUC), it applies to customers of the state’s three major investor-owned utilities:
Under the new policy, the compensation rate for excess energy will be based on the time of day when the energy is produced and fed back into the grid. This means that solar owners will receive higher compensation rates during peak hours and lower rates during off-peak hours.
NEM 3.0 uses an “Avoided Cost Calculator” instead of retail rates to determine residential solar export rates. As a result, export rates under NEM 3.0 are approximately 75% lower on average than those under NEM 2.0. This change means solar owners will receive less money for the excess energy they produce and feed back into the grid, leading to longer payback periods and reduced cost savings for solar owners.
However, it’s important to note that NEM 3.0 doesn’t apply retroactively. Solar systems installed under NEM 1.0 or NEM 2.0 will remain under their current policy for 20 years from the date they received permission to operate (PTO). By installing solar panels before the April deadline, California solar owners can lock in the more favorable compensation rates under NEM 2.0 and potentially save a significant amount on their electricity bills.
How Will NEM 3.0 Affect Solar Energy?
NEM 3.0 introduces several changes to the net energy metering policy that will affect solar energy in California. Here are five key points that California customers should know:
- Decreased value of solar electricity: With NEM 3.0’s reduced compensation rates for excess solar energy fed back into the grid, solar owners will receive less money for the surplus energy they generate, making solar investments less financially attractive.
- Increased focus on energy storage: As NEM 3.0 provides lower compensation for excess solar energy fed back into the grid, there may be an increased interest in energy storage solutions, such as home battery systems, to maximize the use of self-generated solar power and reduce reliance on grid electricity during off-peak hours.
- Slower solar adoption: The reduced financial incentives and longer payback periods under NEM 3.0 may slow down the adoption of solar energy in California, as potential solar owners weigh the costs and benefits of investing in solar panel systems.
How Will NEM 3.0 Impact Solar Power Customers?
NEM 3.0 will have a significant impact on the cost savings of solar power for California homeowners. Here are some key points to consider:
- Decreased net metering credits: One of the main changes in NEM 3.0 is a significant decrease in net metering credits for excess energy fed into the grid. This will have a substantial effect on the cost savings of solar power for homeowners.
- Extended payback period: Under NEM 2.0, the typical payback period for solar panel installation for homeowners in California is approximately five to six years. However, under NEM 3.0, the payback period will extend to nine to ten years. This means that it will take longer to recoup the upfront costs of installing solar panels.
- Reduced savings over time: Throughout the lifespan of a solar energy system, solar owners may lose approximately 60% of their savings compared to NEM 2.0 if they switch to NEM 3.0.
- Lower export rates: Under NEM 2.0, solar owners receive the full retail rate for excess energy fed into the grid. In contrast, under NEM 3.0, the compensation rate will be reduced and vary depending on the time of day.
What to Consider When Installing Solar Panels Before the Deadline
When deciding to install solar panels, there are several factors to consider:
- System Size: A solar installer can help determine the appropriate system size based on your electricity usage and available roof space.
- Cost: The cost of installing solar panels should be factored in when considering the potential savings. While solar roofing can be costly upfront, the long-term savings on electricity bills can make the investment worthwhile.
- Potential Savings: Solar panel systems can provide significant long-term savings on electricity bills. To estimate the potential savings, ask your installer for a quote that outlines the expected energy production and bill savings over time.
There are also several incentives and financing options available for California homeowners:
- Federal Tax Credits: A federal tax credit is available for homeowners who install solar panels. The tax credit covers up to 26% of the total system cost and is available through 2022.
- Local Rebates: Some local utility companies offer rebates or incentives for installing solar roof systems. Check with your utility company to see what is available in your area.
- Low-Interest Loans: The state of California offers low-interest loans through the Property Assessed Clean Energy (PACE) program for residential solar installations.
Lastly, selecting a reputable solar installer is critical to ensure a quality installation:
- Licensing and Insurance: Choose a solar installer that is licensed and insured.
- Customer Reviews: Look for a company with a proven track record of quality solar roof installations. Check their licensing and insurance, read customer reviews, and ask for references.
- Referrals: Ask for referrals from friends or family members who have installed solar panels.
- Detailed Quote: Ask for a detailed quote that outlines the total cost of the installation, expected savings, and warranties.
Lock In Your Solar Savings Before It’s Too Late
The new NEM 3.0 policy will have a significant impact on the cost savings of solar power for homeowners in California. By reducing the compensation rate for excess energy and shifting to time-of-use rates, NEM 3.0 will make it more challenging for solar owners to save money on their electricity bills.
However, by installing solar panels before the April 14, 2023, homeowners can take advantage of the grandfathered export rate under NEM 2.0 and potentially save thousands of dollars over the lifetime of the solar panels. Remember to consider the factors involved in solar roof installation carefully, such as system size, cost, and potential savings, and the available financing options.
Working with a licensed roofing company like Yorkshire Roofing can give you added peace of mind, as you’ll get a full warranty on labor and materials, and we know the ideal roof design and material to reduce your energy costs.
Don’t miss the opportunity to take advantage of the larger export rate under NEM 2.0 before the deadline. Call us at (800) 794-7444 or contact us here to get a free quote and start enjoying the benefits of solar energy today.