NEM 2.0: An Update on Changes in California’s Net Metering

In the past, SDGE&E solar customers could choose between tiers and time-of-use (TOU) rates. However, as California’s three major investor-owned utilities – SDG&E, PG&E and SCE advanced toward hitting their net energy metering cap at the end of 2015, the California Public Utilities Commission (CPUC) established new net metering regulations called NEM 2.0.

Although July 1, 2017 was the official expiration date for NEM 1.0, NEM 2.0 was triggered as soon as the utilities had met the cap. The ending of the original net metering policy instigated a lot of questions. If you want to become an SDG&E solar customer but are unsure about the return on investment, read on to find out what has changed.

The purpose of NEM 1.0

Net energy metering was launched in California in 1996. Being the first law of its kind, NEM was created with the intention of encouraging investment in solar power and self-generation. At the time, solar panels were a costly addition to a home and a novelty reserved for those who could afford it and those environmentally committed.

Under the original net metering mechanism, SDG&E solar customers would earn a credit on their electricity bill for excess kWhrs they fed into the grid at the same retail price they pay when buying electricity from SDG&E.

Solar energy system owners throughout sunny California could end up with zero or even negative energy consumption depending on their energy production and usage. As solar power started booming, the cost of solar panels began going down. Thus, the California Public Utility Commission (CPUC) decided it’s time to modify the existing rate structure.

The net energy metering cap

California’s first net energy metering program set a cap at 5 percent of aggregate customer peak electricity demand that could come from solar panels. As SDG&E, PG&E and SCE were approaching the cap on net metered capacity by the end of 2015, the CPUC approved a new set of net metering regulations for the future – NEM 2.0 or NEM Successor Tariff.

This next-generation program was created to ensure the continued solar growth in California. The ending of NEM 1.0 also meant the ending of the generation cap for net metering. NEM 2.0 made other important changes as well. On the other hand, the new tariff preserved the basic NEM structure so that Californians could still benefit from switching to solar. Want to find out more about NEM 2.0? Read on.

How NEM 2.0 works

Any new customers in the service territory of SDG&E, PG&E and SCE could get in on NEM 1.0 until July 1, 2017 in case the utility hadn’t already hit its 5% cap, when the updated net metering rules took effect. NEM 2.0 applies to all solar installations completed by the end of 2019, when the CPUC will adopt new regulations.

The three key differences between the original NEM program and Net metering 2.0 are time-of-use rates, non-bypassable charges and interconnection fees.

  • Time of Use: TOU rates. Under NEM 2.0, timing is everything. Solar customers now pay a higher rate during on-peak hours (4 p.m. – 9 p.m.). This is when electricity demand is the highest so the grid has to work harder than usual to generate electricity.

This also means that the excess electricity you send to the grid during that period is worth more. However, solar panels generate the most electricity during the day, which is considered the off-peak window. Therefore, SDG&E customers can’t receive as many bill credits as before.

  • Non-bypassable charges, NBCs. Customers now must pay non-bypassable charges for the consumed electricity that comes from the grid.
  • A one-time interconnection fee. NEM 2.0 requires that solar system owners pay a one-time interconnection fee. For SDG&E customers that fee is at least $75. However, NEM 2.0 enrollees with systems under 1 MW won’t have to pay for future distribution/transmission system upgrades.

The ending of NEM 1.0: Don’t miss NEM 2.0

We have transitioned to the net metering program 2.0 but the ending of NEM 1.0 doesn’t mean the ending of all those benefits solar users in California can enjoy. After all, an ending can easily become a new beginning for you as a solar system owner! SDG&E customers who enroll under NEM 2.0 still see their utility meter spinning backward when their solar panels are producing more electricity than they can use.

We encourage you to seize your opportunity to go solar as soon as possible. The costs of grid electricity will only go higher. Make the most out of California’s green incentives and the current net energy metering regime before it’s replaced with the new tariff.

Going solar is still cost-effective

If you install solar panels by the end of 2019, you will earn a federal solar tax credit worth 30 percent of the installation cost. All customers who get interconnected under NEM 2.0 will be grandfathered on this tariff for the next 20 years (from the enrollment day).

Action Solar is a reputable company in San Diego, CA that provides homeowners throughout Southern California with top-quality solar panel design and installation. Feel free to give us a call! Let’s start planning today!