What is Net Energy Metering (NEM)?

NEM is an agreement with the utility companies (Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric) that when a solar project over produces, meaning more solar power is being produced than is needed, the utility purchases the energy and uses it where they need it. Then, the utility provides the business credits towards past or future use. This continues throughout the year, and at the end of the year the account is reconciled to determine if money is owed to the utility, or if the business receives a credit. This is called an Annual True Up.

NEM 2.0 vs NEM 3.0 –
The Utilities Are Changing the Rules

In 2016 the utility companies petitioned the California Public Utilities Commission for changes to the Net Energy Metering guidelines, which had resulted in our current guidelines of NEM 2.0. Those changes have generally been unfavorable, yet due to the high energy cost in the Central Valley solar has still been able to flourish. The California Public Utilities Commission will be making changes again to Net Energy Metering (NEM 3.0) by the end of 2021, and the proposed changes do not look good for consumers.

Proposed NEM 3.0 Changes

Grid-benefits charge

This would include additional fees to connect solar to the grid. Think of it like a “solar tax” charged monthly based on system size, and the larger the system, the bigger the tax. The amount would be $8-$13 per KW installed, which would significantly EXTEND the return-on-investment timeline for commercial solar.

Export compensation

This change would reduce the amount your energy is credited. For example, with NEM 2.0 you may send a retail credit of $0.25kWh to the grid when you produce more power than you’re using. Then, when you are under-producing you get a $0.23 kWh credit back. With the proposed changes of NEM 3.0, when you need those credits back, they would be reduced in value up to 80% ($0.04 value)!! They are simply taking some off the top. Another way the utilities’ are penalizing you for going solar under the proposed rules.

Monthly True-up period

The utilities are proposing monthly true-up periods as opposed to annual true-up periods. The challenge here is that businesses will no longer be able to roll over their energy credits monthly and any over-production would go to waste as opposed to being credited towards their annual utility costs. This will result in wasted kWh’s and value during multiple months of the year that cannot be recovered.
The terms that the utilities have proposed for the upcoming changes with Net Energy Metering are damaging to consumers and the industry. This event should create a high sense of urgency for anyone that has thought about solar. No doubt, this will change the value proposition drastically.

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