How Does Net Metering Impact Solar Customers in California?

California utility companies, like PG&E, Edison and Sempra, want to enact drastic changes to the Net Energy Metering (NEM) program that would negatively impact current and future home and business owners who want to go solar. In some cases, rooftop solar may be five times more expensive than it is today. 

Not only is this a detriment for consumers, it also negatively affects the environment. Power outages, blackouts, ongoing wildfires and rising energy bills will continue to plague customers and businesses. Going solar and adding battery storage can not only reduce your electricity costs, it also contributes to a future fueled by clean, green energy. 

Here’s a breakdown of what you need to know about NEM-3 tariff and what you can do to help protect your solar rights in California: 

What is Net Metering?

Net energy metering (NEM) is a solar incentive that allows customers (known as “customer-generators”) to store energy produced from solar panels in the electric grid. When those panels generate more electricity than your home or business needs, it’s sent back to the grid in exchange for financial credits on your electric bills. During the night or other times your solar panels are underproducing, you utilize energy from the grid and use those financial credits to offset the costs to use that energy. 

By installing the right size solar system, you can produce enough electricity to match your home’s electricity use for the entire year. Because the amount of electricity your panels produce can vary (most homes produce excess energy in the summer but will use more energy from the grid in the winter), net metering helps you prepare for those times by crediting you for the excess electricity your panels previously produced so you can use it later on. 

What is NEM-3?

The initial NEM 1.0 program enabled full-retail value net metering that compensated NEM customers for the electricity generated by a renewable resource (most commonly, solar) that was fed back to the utility over a billing period. After the NEM 2.0 tariff was enacted, customers had to pay charges that positioned them more closely with non-NEM customer costs. Customers had to pay a one-time interconnection fee, pay for non-bypassable charges on each kWh (kilowatt-hour) of electricity they consumed from the grid and they were required to switch over to a TOU (time-of-use) rate.

The California Public Utility Commission (CPUC) formally opened its NEM-3 proceeding in September 2020 that will redefine the rules for the NEM tariff in California, which might be the most important policy mechanism for solar customers in the last decade. The proposal to roll back net metering would make solar out of reach for most low- and middle-income consumers just when recent studies show they make up nearly 50% of today’s market. Aside from this, there are more than one million solar systems across California today on schools, farms, businesses, homes and apartments that will be affected by any changes from NEM-3. A recent study estimates that U.S. ratepayers could save nearly $385 billion over the next 30 years if more citizens added solar panels to their homes. 

A decision for the successor tariff is expected no later than December 31, 2021 and will have far-reaching consequences on the solar industry’s future and energy storage projects. While these initial effects will be seen in California, it can set a precedent for other states and utility territories to redesign their NEM tariffs in the upcoming years. 

Why are the utility companies in favor of this?

Utility companies don’t earn a profit by selling electricity or providing reliable power to their customers. They’re guaranteed a 10% rate of return for every electrical pole and wire they build and install to transmit electricity to the consumers. The bigger the wires and greater the distance that electricity needs to travel, the higher the electric bill and the more profit the utility company generates. Utility companies want to eliminate net metering because rooftop solar creates competition for them that cuts into shareholder profits and challenges them to serve the public better.

Why this matters (even if you’re not a solar customer).

Solar and energy storage projects are job intensive, with 60 full time jobs supported by each megawatt (MW) of local solar energy. California along build more than 1,200 MWs of local solar in 2019, so investing in rooftop solar creates many good jobs that stay local and can’t be outsourced. Moreover, the vast majority of solar companies are local businesses who live in the communities they serve, so it’s an investment in the economic growth of your local community as well. 

The drastic cuts to net metering will have a big impact for many Californians. Some of these changes include:

  • Reducing the economic value of going solar (for new customers) by 50-75%.
  • Adding new monthly fees for current solar users, simply because they chose to go solar. 
  • Removing the 20-year grandfathering that benefits existing customers, which ruins the investments they initially signed up for. 

What can you do to make a difference and protect your solar rights:

The NEM-3 decision could either kill the rooftop solar market in California (as has happened in other states like Nevada and Hawaii) or it could bring in a new era of solar and energy storage growth for consumer savings and a brighter, cleaner future for many generations to come. Click here to learn more about clean energy initiatives in California and find out how you can help prevent utility companies from further monopolizing the market! 

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