NEM 3.0: Why NOW is the best time for businesses to go solar in California.

Pari Kasotia, Senior Director and Head of Policy, DSD
BY Pari Kasotia
Senior Director and Head of Policy, DSD Renewables

It’s no secret that utility costs have continued to rise over the years in California. Moreover, commercial customers are likely to see increased utility rates in 2023 due to the rate proposals put forth by California utilities.

It’s one of the multitude of reasons why there has never been a better time to go solar.

Between considerable improvements in technology, greater energy reliability, and the latest incentives, commercial solar is more accessible and affordable than ever before. But some of these incentives are time-bound. This holds especially true in California, as the latest version of the state’s net energy metering policy, also known as NEM 3.0, gets ready to take effect on April 15, 2023 and significantly impact the value of solar in the Golden State.

What is Net Energy Metering (NEM)?

Net energy metering (NEM) is a billing arrangement designed to compensate solar customers who sell their excess electricity from solar energy systems back to the grid in exchange for credits.

The first iteration of NEM, also known as NEM 1.0, was designed with a simple 1:1 incentive ratio. For every one kilowatt-hour (kWh) of energy generated by solar customers, customers were credited one kWh of utility-generated power that could be applied to their energy bills.

In 2017, the California Public Utilities Commission (CPUC) adopted NEM 2.0 that replaced NEM 1.0. Under NEM 2.0, incentives were re-designed to include non-bypassable charges, which decrease the value of solar. In 2020, the CPUC initiated the process to reform NEM 2.0, and the findings from that process culminated in the new structure, NEM 3.0.

What changes should I expect for NEM 3.0?

On December 15, 2022, the CPUC passed NEM 3.0, which will reduce the value of the bill credits for excess solar exported to the grid by roughly 20-40% of energy retail value. Essentially, the solar customer pays a retail rate for energy purchased from the grid but gets a much lower credit when exporting it back, reducing the overall value of solar.

Another significant difference between the two policies is that under NEM 2.0, customers can lock in retail rates for 20 years, versus under NEM 3.0, where customers will lock their rates in for nine years. After that, the rates will be calculated annually using the Avoided Cost Calculator (ACC), in which the cost is unknown, but historically, utility prices are notorious to increase year over year.

Simply put, you will save considerably more money on your utility bills for a longer period of time under NEM 2.0 than NEM 3.0.

The good news

Your organization still has time to reap the benefits of NEM 2.0, but you must act fast. Commercial solar customers who don’t already participate in NEM 1.0 or NEM 2.0 have the opportunity to submit an interconnection application by April 14, 2023 to be grandfathered into NEM 2.0’s benefits and lock in exported rates for the next 20 years.

DSD can help your organization lock in NEM 2.0 and increase your energy savings!

NEM 3.0 officially starts April 15th. With the deadline to take advantage of NEM 2.0 quickly looming, DSD Renewables is prepared to take the necessary steps and secure your interconnection application with the best utility rates. If your organization has been considering going solar, DSD encourages you to contact us by mid-March to ensure we have ample time and minimize risk delays in advance of the deadline.

The process is straightforward. DSD’s team of commercial solar experts will need the historical electricity bill data to design your solar energy solutions and complete the interconnection application on your behalf.

Once the application has been completed and accepted, systems will need to be built within three years to keep NEM 2.0 eligibility.

With DSD Renewables, you will work with a design and engineering team that has extensive experience with national companies and the capital in place to develop and construct a wide range of projects. While some developers may outsource their solar energy projects, which leads to changes in design, pricing, and construction timelines, at DSD, everything stays in-house. We are the ultimate owner of the project so what’s beneficial for our customer is beneficial for us. You can rest assured what we propose at the onset won’t change considerably throughout the lifespan of the project.

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Interested in learning more?

Reach out to a DSD team member to see how you can take advantage of NEM 2.0.