What is Net Energy Metering (NEM)?
Net Energy Metering presents a billing system between utilities and solar-powered homeowners. When the sun is shining, excess electricity generated by these homes can be transferred to the grid in exchange for credits that may then be used during times when sunshine isn’t available. This enables solar owners to save on their energy bills while helping reduce reliance on traditional sources of power.
For years, net metering policies have maintained a one-to-one offset that prices the kWh of electricity being pushed onto the grid in equal measure to those pulled off. That said, this model is highly beneficial for solar system owners who design their systems to produce an amount of energy equivalent to what they consume; it replaces utility bills with much lower monthly payments on solar equipment and subsequently yields tens or even hundreds of thousands’ worth in energy cost savings over its lifespan.
The current one-to-one ratio will change with NEM-3.
What is NEM 3.0?
On December 15, 2022, the California Public Utilities Commission approved a new edition of net energy metering policy known as NEM 3.0 that applies to customers within areas governed by three major investor owned utilities in California:
- Pacific Gas & Electrict (PG&E)
- Southern California Edison (SCE)
- San Diego Gas & Electric (SDG&E)
It’s important to remember that NEM 3.0 is not a retroactive policy, so any solar systems installed with either NEM 1 or 2 will still be governed by its original rules and regulations.
The key distinction between NEM 2.0 and 3.0 is the value of surplus electricity generated by solar systems — or export rates, as they are known. Under NEM 3.0, residential solar export rates will now be determined using an “Avoided Cost Calculator” instead of retail prices (what customers pay for power).
It is essential to note that average export rates for NEM 3.0 are, on average, around 75% lower than those of NEM 2.0.
Under NEM 3.0, solar owners face a longer payback period and diminished cost savings due to decreased export rates.
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