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Ultimate Guide to California Net Energy Metering: Everything You Need To Know About NEM 2.0

Updated: Jan 28


All of the information on California solar NEM policy and how Net Energy Metering 2.0 Impacts solar savings
Ultimate Guide To California Net Energy Metering 2.0

Introduction to Net Energy Metering 2.0:


California has long been at the forefront of the solar revolution for well over a decade now. As of Q4, in 2019, 27,405.89 MW of solar has been installed in California. Net Energy Metering has been one of the policies that have driven California's growth to its spot as the nation's number one solar state. NEM 2.0 is the next step in California's solar policy and is essential for anyone thinking about solar to understand


Key takeaways Net Metering (NEM) 2.0

  1. Solar still makes a tremendous amount of financial sense under NEM 2.0

  2. All three investor-owned utilities (PG&E, SCE, and SDG&E) in California have transitioned to NEM 2.0

  3. Customers still receive a kw for kw bill credit for the solar electricity that they export into the utility grid. 

  4. All solar customers are transitioned over to the Time-Of-Use rate structure. TOU rate structures charge varying amounts of money at different times of day connected with electricity's utility demand. Because solar is credited based on the TOU rate when the solar is exported into the grid, the solar system design is especially crucial under NEM 2.0

  5. Customers will be charged a one-time Interconnection fee to ensure that the solar system has been safely installed. San Diego Gas & Electric customers' interconnection fees are $132, $75 for Southern California Edison, and $145 for Pacific Gas and Electric.

  6. Non-bypassable charges now apply to solar customers for the electricity that is supplied to them by the utility. This adds 2-3 cents on the electricity delivered for most customers, but NBCs does not apply to the solar electricity produced and used at home.  


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What was California's Net Energy Metering Policy 1.0?


Like many other states, many California utilities implemented a Net Energy Metering policy (NEM). Net Energy Metering policies allow homeowners to receive bill credits for any extra electricity produced by a solar system that flows back into the grid.


NEM lets homeowners draw from the credited solar system power when the PV system does not produce power (at night or on cloudy days, for example).


NET Metering has allowed California homeowners to see massive savings and has helped push solar growth throughout the state. California is at the forefront of many things energy-related, with lighting regulations and solar policies that have allowed it to take a leadership position in the United States. Because of the rapid growth of solar, California's three investor-owned utilities: Pacific Gas & Electric (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E) had a "cap" on the number of California Net Metering 1.0 homes.


Towards the end of 2015, each of the three utilities approached its cap. Because of the solar industry's rapid growth and demand for continued solar access by Californias, the California Public Utilities Commission (CPUC) was called upon to create the next solar policy for the three-investor traded utilities.


The CPUC developed Net Metering 2.0 (NEM 2.0), and it ensures that California will continue to have access to solar in the years to come. 


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NEM 2.0: What is California's new Net Energy Metering policy?


California NEM 1.0 is a fairly straightforward idea: for every kilowatt-hour (kWh) of solar electricity that goes into the grid, a homeowner receives a bill credit for one (kwH) of electricity produced by the utility. Under NEM 1.0, if a system was sized correctly, excess solar power produced during the day covers a home's electrical usage when the panels are not producing. This allowed a home to cover it's entire years' worth of electricity just using solar (Again, assuming that the system was sized correctly.)


California Net Metering 2.0 keeps the basic idea of NEM 1.0 and makes a few adjustments to it. The most crucial part that the CPUC kept in place is the retail bill credits. That means that homeowners who enroll in NEM 2.0 can still receive per-kWh credits for the solar electricity their system produces that is equal to the value of a utility produced KwH. 


Despite concern about how the policy would be drafted, NEM 2.0 ensures that California's homeowners can still save substantial amounts of money by switching to solar. 


California Net Metering 2.0 also bans a list of fixed charges for homeowners. These include demand charges, grid access charges, installed capacity fees, and standby fees. 


While Net Metering 2.0 does share essential similarities with Net Metering 1.0, it does have three key differences that will be covered in more detail: time-of-use rates, interconnection fees, and non-bypassable charges.


Despite fears about how NEM 2.0 would alter solar economics, The California Solar Energy Industries Association (CalSEIA) predicts that these three additional aspects of NEM 2.0 will only lead to an approximately $10/month increase compared to NEM 1.0.

What are Time-of-use (TOU) rates, and how do they work with solar? 


Time-of-use utility rates are designed to align the electrical usage with the electrical demand on a utility grid. When electrical demand is the greatest, usually in the morning and at night, electricity rates are also the most expensive. By shifting to higher electricity rates during these times, the utility hopes that consumers will use electricity during the hours when the cost is lower. During the peak hours, homeowners with solar systems will also receive more for electricity sent back into the grid.

NEM 2.0 mandates that all homeowners who install a solar panel system will be automatically enrolled in a TOU rate structure for their utility bill. Each of the three utilities has different TOU rates and structures, so the amount a homeowner pays will vary. The critical part of this is that solar energy systems under NEM 2.0 and TOU can still be as economical as those installed under NEM 1.0.


As a result of TOU rates being highest in the afternoon and evening during the summer months, the system design is crucial to ensure that the solar system produces excess electricity/ utility credits when the utility rates are the highest. 


Interconnection fee


To ensure that every solar system is installed safely and will work with the grid before a PV system is activated, a city or town representative will inspect and sign off on a PV installation. NEM 2.0 allows each utility to charge a one-time payment to complete this process.


The payments vary from utility to utility but are $132 for SDG&E customers, $75 for SCE, and $145 for PG&E.


Non-bypassable charges

Non-bypassable charges (NBCs) are put in place by the utility to help fund low-income assistance programs, energy efficiency improvements, and other programs. A non-bypassable charge is an added per-kilowatt-hour charge that is included in the electric utility rates. Usually, they add around 2-3 cents per kWh for most homeowners. 


Under NEM 1.0, residential solar system owners did not have to pay NBCs on the utility's electricity. NEM 2.0, on the other hand, allows utilities to charge new solar customers with NBCs on the kWh that are supplied by the utility. Under NEM 2.0, new system owners will have to pay NBCs, but only for the kWh of electricity delivered by the utility.


Solar customers under NEM 2.0 do NOT have to pay the NBCs for the KwH their solar systems produce and use in their homes.

If you have any additional questions about Net Energy Metering 2.0 and how your solar savings will look under NEM 2.0, schedule a free solar consultation with Alchemy Solar.

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