California's NEM 3.0

The government of California has voted to do away with Net Metering. What does this mean for perspective home owners looking to invest in solar, and what does this mean for homeowners who have already made the investment in Solar power? 

 

First, what is Net Metering? 

What "net metering" means is that your relationship with the power company is an equal two way relationship. Meaning that if you have excess solar power available, not only can you use it to power your home directly, but you can also export your extra solar energy available. In other words, you can send that excess energy back out through your electric meter for full price credit. What happens is that your excess energy will flow out of your meter and the utility can sell it to one of your neighbors homes. In turn the electric company will give you full price credit for that energy. Having that full price credit is important because after the sun sets, during evening hours you're going to be pulling energy back in from the utility company. Assuming of course that you don't already have your own battery storage. So you'll want to use those credits that you've built up during day time ours. 

This is a full true 1 for 1 net metering credit. You send them a full credit, and they send you a full credit. It all balances out evenly. 

Now, Nem 3.0 means to move away from a net metering program to what's called an avoided cost program. So what that means is this. 


Let's say during daylight hours, your solar system is producing at full power and you have more electricity than what you need to power your home, the excess that you send back to the power company, instead of crediting you at the full retail price, which in parts of California is now around .30 cents per kilowatt hour. That's what they charge YOU, when their selling it to you. Well, their now going to pay you a much lower rate, of only .08 cents per kilowatt hour.  Their rational is, When they buy they buy wholesale power from the power plant, they are only paying that lower wholesale rate of around 6, to 7 cents a kilowatt hour. Then they sell it to the resell customer at .30 cents and they make the margin in-between. That's of course how they make their profit. 

And so the utilities commission has agreed with the utilities as said that if homeowners have excess energy, the power companies don't have to give homeowners that full credit. Now they can just pay you, the homeowner, that lower rate. Just like they would buy power from the power plants. 

 

So what this means is that, if your making an investment in rooftop solar for your home, this is going to cut  your return on investment. In some cases, it could cut it in half. 

Now, this is not the end of the world, but if you're just purely making your decision on whether or not to go solar based on financial projections that a solar salesperson told you or based on your own financial analysis, then the pay pack period for rooftop solar in California, your payback period can now double. This goes for a {Specifically if you're talking about just a straight net metering system with no batteries.) This could mean instead of, let's say a 4 year pay back, you'll be looking at around an 8 or 9 year pay back on your system. So there are serious implications here. 

 

Now, the new rules take effect starting in about 116 days. This means that if you want to take advantage of the current 1 for 1 net metering program that's still in effect right now. You have 116 days, (depending on when you read this,) to get a contract signed. So if you're still in the market to look at your options for solar power for your home. We must get the process started and have all documents signed before that time frame is up. 

 

For those who are already an existing homeowner who has solar energy and who is already leveraging the current net metering program. They don't have to worry these changes affecting them. Existing California net metering customers are grandfathered in for the next 20 years. 

 

For those who have not made the investment into solar yet, what this means is that you're really going to want to take a look at the battery storage option. What battery storage allows you to do is, instead of having to sell your excess solar to the power company at a significantly  discounted rate, you can just store your excess solar energy in a bank of batteries at your home, so that when the sun goes down and you don't have any solar being directly produced, you can then power your home of the battery using the stored energy in the battery from what you charged during the day time hours. So this still allows you to have full solar coverage of your home without relying on the power company to be the battery for you, or that without relying on them to give you full price credit for any excess solar energy that you can't use, or store yourself. 

 

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