Understanding NEM 3.0 + How to succeed in a NEM 3.0 affected industry?

Effective April 15, 2023, California will officially begin the Net Energy Metering 3.0 (NEM 3.0) program. NEM 3.0 has replaced the NEM 2.0 program and brought substantial changes to the solar industry in the state. These significant changes will affect both residential and commercial solar customers in California. In this article, we will discuss what NEM 3.0 is, who it affects, and how to succeed in a NEM 3.0 affected industry.

What this article covers:


What is Net Energy Metering (NEM)? 

A regulation that enables owners of solar energy systems to receive credits for any extra electricity they produce and deliver to the grid.

What is NEM 3.0? 

This is California’s third iteration of the Net Energy Metering policy. 

What will NEM 3.0 do? 

Net metering compensation rates for new California solar customers will drop by nearly 75% under NEM 3.0. 

Who will NEM 3.0 affect? 

Utilities: As per NEM 3.0, utilities will have more discretion over the amount of money they give owners of solar energy systems in exchange for the extra energy they generate based on its value, determined by the avoided cost to the utility of buying clean energy elsewhere.

Owners of solar energy systems: 

  • First, it pays Net Billing customers for the electricity they export to the grid based on its value, determined by the avoided cost to the utility of buying clean energy elsewhere. 
  • Second, charges Net Billing customers for the electricity they receive from the grid based on high differential time-of-use rates.
  • Third, creates a Grid Participation Charge based on the size of the solar system to ensure that Net Billing customers are paying the same fixed costs of the electric grid as non-Net Billing customers.

When does NEM 3.0 go into effect? 

April 15th, 2023

Is NEM 3.0 retroactive?

NEM 3.0 isn’t retroactive. The grandfathered clients cannot be affected retroactively by NEM 3.0 now that it has passed.

Will NEM 3.0 Affect NEM 2.0 Solar Energy System Owners?

How will NEM 3.0 affect NEM 2.0 solar energy system owners? 

Users of solar energy systems who have installed and are already using their solar energy system are grandfathered into NEM 2.0. As a result, for 20 years following the date of interconnection, residential and commercial solar customers that get credits under the NEM 1.0 and NEM 2.0 programs will continue to receive the same export rate.

Can NEM 2.0 solar energy system owners increase their system size?

Solar energy system owners can make up to 10% changes to their solar systems while maintaining their current rate structure. Any increase over this point will result in NEM 3.0 rates for both residential and business users. 

If current NEM 2.0 solar energy system owners add battery storage after NEM 3.0, will that affect their rates? 

NEM 3.0 allows NEM 2.0 owners of solar energy systems to add battery storage in the future and retain their NEM 2.0 status. 

How to succeed in a NEM 3.0 affected industry?

NEM 3.0 will affect solar panel owners in several ways. Despite the changes, there are still ways for solar panel owners to succeed in the NEM 3.0 era. Here are some incentives to help combat NEM 3.0:

Install a battery: Save on Storage with the Self-Generation Incentive Program (SGIP)

SGIP provides businesses and homeowners in California an upfront rebate for installing an energy storage system. This incentive is a tiered-block program, meaning that the incentive values decline over time as more battery installations occur throughout the state. In addition, the rebate value also depends on the size of the battery installed.

Check out the current block per utility here: https://www.selfgenca.com/home/program_metrics/ 

New Solar Panel Owners: Federal Investment Tax Credit (ITC) 

ITC provides homeowners with a 30% tax credit for solar installations from 2022-2032.

Learn more about ITC here: https://www.energy.gov/eere/solar/homeowners-guide-federal-tax-credit-solar-photovoltaics 

Explore a full range of renewable energy-related incentives here: https://programs.dsireusa.org/system/program/ca 

In conclusion, NEM 3.0 is a significant change to California’s solar energy market. While the program will bring some challenges, there are still ways to succeed in the industry. Leverage federal and state incentives to lower costs and combat NEM 3.0 rates. 





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