NEM 3.0 California: What is it and How Does it Affect Solar Owners?

California solar owners have been able to take advantage of Net Energy Metering (NEM) for nearly 30 years, but that is set to change in 2023. NEM is available to residential customers of the three biggest utilities in the Golden State – Pacific Gas & Electric (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E).  The changes under a new NEM program called Net Billing Tariff will drastically reduce the financial benefits that Californians can receive from owning solar panels or a solar photovoltaic system (solar PV system). You still have time to save big under the current version of NEM (NEM 2.0) if you connect with a solar installer, like WattLogic, soon. We break down the changes and how NEM 3.0 California (Renewable Net Billing) will impact you if you’re a solar owner or thinking about going solar.

On December 15, 2002, the California Public Utilities Commission (CPUC) unanimously voted to approve NEM 3.0, or Net Billing Tariff, which will succeed NEM 2.0. While NEM 3.0 is what many have been calling the program, the CPUC no longer uses the NEM term and will refer to the rules as Net Billing Tariff.

There are three critical things to note as a California solar owner: 

• There is still time to get NEM 2.0 and be grandfathered in for 20 years.
• People who want to get on the NEM 2.0 program before the Net Billing Tariff takes effect must have a solar installer submit a valid interconnection application within four months of the CPUC issuing its final decision on the program, which was December 15th, making it April 15, 2023. 
• If you still want solar but won’t be able to install it until after the deadline, you will still be able to reap financial benefits from going solar through the Net Billing Tariff.

The new NEM 3.0 Net Billing Tariff rules will:  

• Reduce the amount utilities pay solar owners for the excess energy they generate by at least 75% compared to what they are under NEM 2.0.
• Require NEM customers to switch to specific Time-of-Use (TOU) plans with very high peak electricity rates. The CPUC says this is to encourage residents to install energy storage and to store solar energy for use later in the day during peak demand hours. 
• Measure solar power exports in real-time compared to every hour with NEM 2.0.
• Creates a mandatory Grid Participation Charge.
• Fund $900 million in incentive payments to help California residents purchase rooftop solar systems, with $630 million reserved for low-income households.
• Allow the average homeowner to pay back the cost of a solar system in ten years. This includes systems that are paired with battery storage. 

Reduction in energy credits

Under NEM 2.0, the average California solar owner receives $0.22 – $0.36 for every kilowatt-hour (kWh) of excess energy sent to the grid. Net Billing Tariff rules lower that amount to $0.4 – $0.6 for every kWh. 

Time-of-Use plans

The mandatory TOU plan pricing is shown in this chart: