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NEM 1.0, 2.0 & 3.0 Will Bring Major Changes to Solar


If you’re a solar panel user in California, it’s critical to understand the latest Net Energy Metering (NEM) 3.0 proposal from the California Public Utilities Commission (CPUC). If approved, the proposal will create the highest tax on grid-tied solar in the country.

Combined with a drastic bill credit reduction for customers who sell electricity back to the grid, this proposal all but eliminates the benefits of solar energy as we know it. The NEM 3.0 proposal could go into effect in 2022.

NEM 1.0 vs. NEM 2.0 vs. NEM 3.0

Net Energy Metering started in 1996 with California Code SB 656. The original idea was to stimulate solar growth by incentivizing renewable energy installations with bill credits for selling energy back to the grid.

NEM 1.0 applies to any customer who signed up for Net Energy Metering before July 1, 2017. It includes:

  • No by-passable charges
  • $1 monthly connection fee
  • $0.25 per kilowatt-hour (kWh) bill credit
  • Average savings of $245 per month for a 10 kilowatt (kW) system
  • The average return on investment (ROI) of six years

NEM 2.0 was designed to increase solar installations and create jobs by locking customers into a 20-year rate plan. It applies to customers who signed up after July 1, 2017, and includes:

  • By-passable charges of $0.02 per kWh
  • $75 one-time interconnection fee
  • $10 to $20 monthly connection fee
  • $0.25 per kWh bill credit
  • Average savings of $204 per month for a 10 kW system
  • Average ROI of six years

NEM 3.0 attempts to incentivize solar-plus-storage systems that focus on consuming energy onsite rather than selling it back to the grid. The proposal includes:

  • By-passable charges of $0.04 per kWh or higher
  • $8 per kW monthly connection fee, plus $12 to $16 per month for Southern California Edison (SCE) and San Diego Gas & Electric (SDG&E) customers, or roughly $48 to $64 per month for a typical system
  • $0.05 per kWh bill credit
  • Average savings of $70 per month for a 10 kW system
  • Average ROI of 17 years

NEM 3.0 Could Remove the Economic Incentives of Residential Solar Installations

If passed, NEM 3.0 will:

  • Raise grid access charges: The significant increase in fees required to access the grid negates a substantial portion of the energy savings solar customers currently enjoy under NEM 2.0.
  • Reduce net metering bill credits: NEM 3.0 would reduce the average $0.25 per kWh bill credit to about $0.05 per kWh, an 80% reduction.
  • Extend ROI: With substantial monthly savings under NEM 2.0, current customers can expect to break even on their solar investment after just six years. New customers with identical systems operating under NEM 3.0 will take 17 years to see a return on their investment.
  • Increase installation costs: Reducing the value of grid-exported energy forces solar-only systems to be built smaller to maximize onsite energy consumption. Unfortunately, this wipes out the cost-effectiveness of large-scale projects and leads to higher installation costs.
  • Diminish the overall value of solar: To contextualize the NEM 3.0 proposal, Sage Energy Consulting created a model showing the value of residential solar for customers with a 90% energy offset. The model demonstrates that customers would see an overall 55% to 75% loss in value.

Over time, the monthly fees and reduced credits proposed by NEM 3.0 could exceed the solar panels’ value altogether. The export energy credits would be reduced from roughly $0.25/kWh to around $0.05/kWh. This means that when the system produces more power than the household uses, the energy generated will be $0.20/kWh less than it is today, an 80% reduction.  

As a result, solar could struggle to compete with utility energy prices in all customer classes, slowing clean energy deployment in the process. This is especially true if the current 26% Federal Investment Tax Credit (ITC) for solar decreases to 10% for commercial customers and 0% for residential customers by 2024, as currently scheduled.

NEM 1.0 & 2.0 Grandfathering

It’s no surprise that many current NEM 1.0 and 2.0 customers want to avoid moving to the NEM 3.0 system. Regarding grandfathering, this reduction may affect all NEM participants no matter when the application is submitted. We won’t know until they decide.

Customers who submit Interconnection Applications before CPUC’s final decision are eligible for 20 years of grandfathering. For applications submitted between the final decision and the sunset date, 15 years of grandfathering applies.

If passed, NEM 3.0 will take effect in 2022. In other words, the time to go solar is now!

Contact TENCO SOLAR at 888-507-6937 today to start the process. We’ll help grandfather you into NEM 2.0 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.