by Mike Kleeman
Jan 6 2023
Jan 6 2023
1. SOLAR HOMES EARN 75% LESS FOR POWER EXPORTED TO THE GRID
Most homes in California export 40-50% of their solar production to the grid during the day and in return collect NEM credits, which offset the cost of importing power at night when there’s no sunlight. NEM 3 homes will receive an average of $.08/kWh, far less than the $.30/kWh rate NEM 2 customers receive. This 75% cut is the biggest drawback of the CPUC’s NEM 3 decision
2. MONTHLY DELIVERY CHARGE REMAINS FIXED AT $14-16 PER MONTH
Mercy, this one is a big relief. The original proposal for NEM 3 included eliminating the Monthly Delivery Charge, commonly referred to as the “Grid Access Fee” and replacing it with a punitive solar tariff. The new fee was designed by the CPUC to be a direct solar tax; the monthly fee tied to solar system size in kilowatts (kW). Customers under the earlier NEM 3 proposal would have witnessed their monthly delivery charge skyrocket towards $80-$140 per month.
3. SUBMIT YOUR PG&E INTERCONNECTION APPLICATION BEFORE APRIL 13 OR PAY THE PRICE
Customers that hire a solar company and swiftly turn in their application to PG&E before the April 13 2023 deadline will be grandfathered into NEM 2. No building permit is required and solar panels do NOT need to be installed by the deadline. Customers have up to 3 years to complete the installation of their solar but must have their interconnection application submitted before the deadline. The application includes a solar provider contract, single-line diagram and endorsed consumer protection guide.
4. THE ASSAULT ON NEM 1 AND 2 SOLAR HOMES IS OVER
Part of the original NEM 3 proposal included an attack by the CPUC on existing solar homes that would have enabled PG&E to retroactively breach NEM 1 and 2 agreements. It allowed the utility to reduce the 20-year NEM term to just 8 years. An outlandish attack by PG&E that certainly would have tied up NEM 3 in further litigation for at least a year, but the CPUC has decided against pursuing this overreach, instead opting to preserve existing NEM 1 and 2 agreements. Sort of.
5. BUYING AN EXISTING SOLAR HOME TRIGGERS NEM 3
This is what I mean by ‘sort of’. This newly inserted change has gone relatively unnoticed by most in the industry, but not me. It’s a sneaky play by the CPUC. Currently, homeowners with solar under NEM 1 and 2 umbrellas are able to sell their property and pass along their NEM status to the new homeowner. If you invested in solar 5 years ago but are now listing your home for sale, no problem. The new buyer would be grandfathered into NEM 2 for an additional 15 years. Those days are gone now thanks to NEM 3. The purchase of an existing solar home will automatically trigger enrollment in NEM 3.
6. EXISTING SOLAR HOMES MAY ADD BATTERY STORAGE WITHOUT PENALTY
Originally, the CPUC proposed existing solar homes opting to add battery storage would be forced into accepting NEM 3. As part of their ploy to sucker us, the plan was to dangle a carrot in front of homeowners by offering a small cash rebate to add battery storage, but bury in the fine print automatic enrollment in NEM 3. Undoubtedly, PG&E would have slickly marketed this farce in monthly billing statements, duping existing customers into buying a battery. I wrote about this deft attempt by PG&E to get rid of existing NEM agreements last year when the CPUC announced their first NEM 3 proposal. The good news is they have now backtracked, agreeing to grant existing solar homes the option to add battery storage AND maintain current NEM status.
7. ADD NO MORE THAN 2 SOLAR PANELS TO AVOID NEM 3
Currently, NEM 2 customers may petition PG&E to add more panels to their home, as many as needed, and still keep their NEM 2 status intact. In my experience, this is common amongst customers who have bought an EV well after going solar and require more solar electricity to charge their car at home. All that is required is to submit a new interconnection agreement with PG&E. Those homes have until April 13 to file an application to add more panels to their system. After the deadline, NEM 3 stipulates customers may add up to 1kW (about 2 ½ solar panels) of solar and still preserve their NEM 2 status. Adding any more than 1kW of solar initiates enrollment in NEM 3.
8. BATTERY STORAGE WILL BECOME MORE VALUABLE
The high upfront costs of battery storage in conjunction with new solar systems has deterred many homeowners from investing in a battery. Since the only real benefit is that batteries provide partial backup power in the event of a grid outage, I’ve wholeheartedly agreed with this sentiment over the years. However, now that PG&E will significantly reduce the amounts paid for power exported to the grid, batteries may prove far more valuable under NEM 3. Harvesting a portion of daily solar kilowatt hours (if PG&E is to pay just $.08/kWh) to use or discharge to the grid later in the afternoon or evening when TOU rates are at their peak, may significantly reduce yearly PG&E True Up Bills. Dig deep into NEM 3 and we find a new ‘Avoided Cost Calculator’ (ACC) which calculates 576 different NEM values spread over the calendar year, a few early summer evening values surprisingly exceed a credit/debit rate above $2.10/kWh. Discharging battery power to the grid during those hours of the day will certainly be lucrative and help keep True Up Bills in check. Further good news may be coming for battery storage. The SGIP program (Self Generation Incentive Program) could be back soon with as much as $620 million in rebates reserved for low-income customers and $270 million for non-low income customers. Combine those rebates with the 30% solar tax credit (which was extended for 10 years in Sep 2022) and battery storage may prove to be economically viable under NEM 3.
9. DOES INVESTING IN SOLAR STILL MAKE SENSE?
Absolutely! The biggest hit to net metering in California is the 75% reduction in credits for energy exported. Most everything else that was frightening about the earlier version of NEM 3 has been averted. The payback period on solar won’t be 4-5 years like we’ve been accustomed to, instead perhaps 6-8 years such as it was between 2009-2012. We have to concede the glory days of owing $0.00 - $100 on a yearly True Up Bill may be over. But what’s the alternative? Pull the covers over our heads and ride it out with PG&E? Already approved for 2023 is a PG&E rate hike of 18% on both electricity and gas bills. More increases loom for 2024 and beyond. PG&E recently transitioned most of us to Time Of Use (TOU) pricing which resulted in an average $.33/kWh price charged to my 2022 customers, pre-solar. This year we’ll approach $.40/kWh and it’s only going to get worse. The choice is still an easy one: Take command of your energy needs with a solar microgrid or keep purchasing 100% of your electricity from PG&E at whatever price the CPUC dictates.