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California’s NEM Proposal Impact on Solar Value Fees


If you’re a Southern California resident, now’s the time to learn more about Net Energy Metering (NEM) 3.0 and how this proposal could impact solar value if state regulators pass it.

What Is NEM 3.0?

NEM 3.0 is the third iteration of California’s Net Energy Metering program, which launched in 1996. The original idea with NEM 1.0 was to incentivize renewable energy installations with bill credits awarded for selling energy back to the grid. NEM 2.0 focused on locking customers into 20-year rate plans.

NEM 3.0 attempts to incentivize solar-plus-storage systems by drastically reducing net metering credits. This change, combined with enacting the highest proposed tax on grid-tied solar in the country, could devastate the value of solar energy in California.

The overall public response to the proposal has been negative. Only investor-owned utilities seem to welcome NEM 3.0. At the same time, solar advocates criticize it for its potential to devalue residential solar and eliminate many of the benefits that drive people to go solar in the first place.

How Does NEM 3.0 Impact Solar Value?

As California works toward lowering its carbon emissions, it’s critical to switch from coal, gasoline, and natural gas to electricity. Electricity can’t merely be affordable to drive this change — it must be cheaper than competing fossil fuels. Otherwise, consumers won’t have an incentive to move away from polluting energy sources to clean electricity produced by solar, wind, and hydropower.

Unfortunately, NEM 3.0 does nothing to make solar more attractive to consumers. As it stands, the proposal could cut California’s solar market in half by 2024. The problem is that NEM 3.0 lowers the value of rooftop solar by 55% to 75% for the average residential system. It does so in two ways:

  • Increased monthly grid access fees: NEM 2.0 customers pay $10 to $20 in monthly connection fees. NEM 3.0 would raise the fees to $8 per kW, plus $12 to $16 per month for Southern California Edison (SCE) and San Diego Gas & Electric (SDG&E) customers. In all, this comes to roughly $48 to $64 per month for a typical residential system. The fees negate a substantial portion of the energy savings solar customers expect.
  • Decreased net metering bill credits: NEM 2.0 customers earn $0.25 per kilowatt-hour (kWh) of electricity they sell back to the grid in the form of a bill credit. If NEM 3.0 passes, this will decrease to $.05 per kWh — an 80% reduction.

Over time, the increased fees and reduced credits could outweigh any monthly savings from solar energy systems altogether. Current NEM 2.0 customers with a typical 10 kilowatt (kW) system save an average of $204 per month and recoup their original investment in about six years.

Under NEM 3.0, those same customers would save only $70 per month and fail to see a return on investment for 17 years.

The Decision on NEM 3.0 Has Been Postponed

The California Public Utilities Commission (CPUC) was scheduled to vote on NEM 3.0 on January 27, 2022, but the decision was later removed from the agenda.

When asked about NEM 3.0 at a press conference on January 10, Governor Gavin Newsom said, “That draft plan that was recently released, I just had a chance to review, and I’ll say this about the plan: We still have some work to do.” Later he told a reporter, “Do I think changes need to be made? Yes, I do.”

Keep Up With the Latest Updates on NEM 3.0 from Sage Energy Consulting

Considering Newsom’s comments, the lack of NEM 3.0 discussions at the January 27 meeting, and an email saying the vote has been postponed “until further notice,” it seems likely we won’t know the final decision anytime soon.

The delay is good news because it gives you more time to submit an interconnection application. If you act fast enough, you can have your solar project grandfathered into NEM 2.0!

Don’t wait to find out if the NEM 3.0 proposal passes — contact TENCO SOLAR at 888-507-6937 today to learn more about going solar.

We’ll help you get in under the NEM 2.0 program to maximize the benefits of your solar panels for years to come.

our process

We Make Switching To Solar Simple
Consultation

Begin your switch to solar energy by starting with a TENCO SOLAR consultation. Our team will schedule a pre-site inspection to understand your needs and identify solutions helping you save on your energy expenses while reducing your carbon footprint. We make the process simple by completing permitting on your behalf.

Installation

Working around your schedule, our team will make a solar panel installation appointment that’s convenient for you. We will professionally install all the necessary equipment for setting your home or commercial business up with solar energy access in one day.

Activation

Our team will guide you through the new features and functions of your solar energy equipment in addition to setting you up through Net Energy Metering allowing you to sell your excess energy produced to the grid. We will provide you any service or maintenance solutions you need to enjoy solar connectivity for years to come.

our process

We Make Switching To Solar Simple
Consultation

Begin your switch to solar energy by starting with a TENCO SOLAR consultation. Our team will schedule a pre-site inspection to understand your needs and identify solutions helping you save on your energy expenses while reducing your carbon footprint. We make the process simple by completing permitting on your behalf.

Installation

Working around your schedule, our team will make a solar panel installation appointment that’s convenient for you. We will professionally install all the necessary equipment for setting your home or commercial business up with solar energy access in one day.

Activation

Our team will guide you through the new features and functions of your solar energy equipment in addition to setting you up through Net Energy Metering allowing you to sell your excess energy produced to the grid. We will provide you any service or maintenance solutions you need to enjoy solar connectivity for years to come.