Tips for California Homeowners to Take Advantage Before Changes Take Effect on April 13, 2023


Net Energy Metering (NEM) is a policy that allows residential and commercial solar panel owners to receive credits on their utility bills for the excess electricity they generate. In California, NEM has played a significant role in promoting the growth of solar energy, but as more and more people adopt solar power, the existing NEM policy has become unsustainable. To address this, the California Public Utilities Commission (CPUC) has an update to the NEM policy, known as NEM 3.0.


On December 15, 2022, The CPUC unanimously voted to approve NEM 3.0 designed to promote grid reliability, incentivize solar and battery storage, and control electricity costs for all Californians. Under NEM 3.0, customers of Pacific Gas & Electric (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E) with solar systems will receive about a 75% reduction for the excess power they generate and move onto the grid, as compared to customers with solar systems under NEM 2.0. However, customers have until April 13, 2023, to be grandfathered into NEM 2.0 by submitting a complete interconnection application for a new solar system.

If you’ve been considering adding solar to your rooftop, now is the time to act.

California's NEM 3.0 Changes Solar Energy Compensation for Homeowners
NEM 3.0, or "Net Energy Metering 3.0," is an update to the existing net energy metering policy in California. It is designed to provide more equitable and sustainable compensation for excess electricity generated by solar panel systems on residential and commercial properties. NEM 2.0 and NEM 3.0 are different versions of this billing arrangement that have been implemented in California. The main difference between NEM 2.0 and NEM 3.0 is the way that customers are compensated for the excess energy they generate.

Under NEM 2.0, customers are credited for the full retail value of the electricity they send back to the grid. This means that if a customer generates more electricity than they use, they will receive credits on their utility bill that can offset the cost of the electricity they purchase from the grid.

Under NEM 3.0, customers are credited for the excess energy they generate at a lower rate, known as the "avoided cost rate". This rate is intended to reflect the cost that the utility company avoids by not having to generate or purchase excess electricity. This means that customers will receive fewer credits for the excess energy they generate, which means the financial benefit of solar energy will be reduced.

Additionally, NEM 3.0 also includes additional changes, including:

  • Adding a monthly minimum charge, which can be a fixed fee or a percentage of usage, and a demand charge based on the customer's peak usage.
  • Limiting the rollover of excess credits indefinitely, with an annual expiration “true-up date”, after which customers will either receive a bill for the remaining credit balance or receive a credit for the remaining credit balance.
  • Requiring a one-time interconnection fee to connect to the grid, expected to range from $75 to $150.

NEM 3.0 reduces the financial incentives for solar energy by giving fewer credits for the excess energy generated and adding additional charges such as a monthly minimum charge and a demand charge.

What Can You Do to Maximize Your NEM Credits?
The implementation of NEM 3.0 is still ongoing, and the details of the policy may change over time. However, the exact date of implementation of the new NEM 3.0 policy varies by the utility company and it's currently April 13, 2023, for utility companies in Southern California. Therefore, it's important for homeowners to stay informed about the latest developments and understand how the changes will impact them specifically.

Check with the California Public Utilities Commission and local utilities for the most recent information.

Homeowners who submit their NEM Interconnection Application package before the deadline will be able to continue to receive credits for the excess energy their solar panel systems generate under the terms of NEM 2.0, rather than being transitioned to NEM 3.0, as long as the solar installation is completed within three years. While these changes may seem daunting, it is important to note that NEM 3.0 is still a net metering policy and will continue to provide a financial incentive for solar panel owners.

At August Roofing and Solar, our consultants are ready to help you sort through the confusion and take full advantage of the latest incentives for adding solar energy to your home. Keep in mind that preparing the application for NEM 2.0 will take some time, so contact us now to get the process started. We’re happy to work with you to submit the necessary documentation on your behalf.

What does NEM 3.0 mean for Current Solar Homeowners?
In California, current solar owners who have already installed solar panels will generally remain under their existing net metering policy, known as NEM 1.0 or NEM 2.0. This means that they will continue to receive credits on their utility bills for the excess electricity their solar panel systems generate, and these credits will roll over indefinitely unless the homeowner opts to switch to NEM 3.0.

However, there are some exceptions to this rule.

  • Customers that have reached the cap of their NEM 1.0 or 2.0 program
  • Customers that have reached the end of their interconnection agreement with their utility company

Customers with these exceptions will have to switch to the new NEM 3.0 policy.

It's also worth mentioning that even though the current solar owners will remain under their existing net metering policy, the credits for the excess energy will be less than under NEM 1.0 or 2.

How You Can Take Advantage of Net Energy Metering With Solar for Your Home?
Under NEM 3.0, the credits for the excess energy generated by solar panel systems will be less than under NEM 1.0 or 2.0, which means that the financial benefits of solar energy will be reduced. However, adding a battery storage system to a solar panel system can help to increase the value of the excess energy generated by the solar panels, by allowing it to be stored and used when it's needed most, rather than being sent back to the grid for a reduced credit. Additionally, battery storage systems also provide the benefits of energy independence and can protect the homeowner from power outages.

The addition of a battery storage system can help to offset the reduced credits for excess energy under NEM 3.0, and make the payback period for solar and battery storage systems more favorable. The payback period will depend on the cost of the battery storage system, and how much the homeowner uses the battery storage system, if they use it mostly during the peak hours, the payback period will be faster, but if they use it mostly during the non-peak hours, the payback period will be longer.

Net Energy Metering (NEM) can be a worthwhile investment for homeowners interested in solar energy. It allows them to receive credits on their utility bills for the excess electricity their solar panel system generates. However, the financial benefits of NEM will depend on a number of factors, including the cost of electricity in your area, the size and efficiency of your solar panel system, and your energy consumption patterns.

To determine whether NEM is worth the investment in solar for your home, consider the following:

  • Cost of electricity in your area
    The higher the cost of electricity, the greater the potential savings from NEM.
  • Size and efficiency of your solar panel system
    Larger, more efficient solar panel systems will generate more excess electricity, which can result in greater savings from NEM.
  • Energy consumption patterns
    If you consume a lot of electricity during the day, when your solar panel system is generating the most electricity, you will be able to take full advantage of NEM.
  • Location and weather conditions
    The amount of sunlight your area receives and the weather conditions will affect the production of the solar panel system.
  • Specific details of the NEM policy in your area
    NEM policies can vary by state and even by utility company within a state, so it's important to research the specifics of NEM in your area and consult with a solar energy expert to determine whether NEM is worth it for your specific situation.

Ultimately, homeowners should weigh the potential benefits and costs of NEM and solar energy, and consult with a solar energy expert to determine whether it's a worthwhile investment for their specific situation.

It's recommended to consult with a solar energy expert to determine the specific payback period for a solar and battery storage system in your area and to assess if it's a worthwhile investment for your specific situation.

Homeowners can take advantage of California’s Net Energy Metering in many ways.

  • Maximize energy self-consumption
    Under NEM 3.0, solar panel owners will only be compensated at the wholesale rate for the excess energy they generate beyond their own use. To maximize the financial benefits of NEM 3.0, solar panel owners should aim to use as much of the energy they generate as possible. This can be done by investing in energy storage systems, such as batteries, or by using appliances and devices that consume a lot of energy during the day when the sun is shining.
  • Minimize interconnection fees
    One of the changes under NEM 3.0 is that solar panel owners will be required to pay a one-time interconnection fee to connect to the grid. To minimize this fee, solar panel owners should aim to install smaller solar panel systems that fall within the lower end of the fee range.
  • Take advantage of community solar programs
    Community solar programs allow multiple households and businesses to share the benefits of a larger solar panel system. These programs are designed to make solar energy more accessible to people who cannot install their own solar panels due to physical or financial limitations. By participating in a community solar program, solar panel owners can take advantage of NEM 3.0 while minimizing the interconnection fee.

Keep in mind that NEM 3.0 is a dynamic policy, and it's still in the process of being implemented. It's important for solar panel owners to stay informed about the latest developments and understand how the changes will impact them specifically. Additionally, it's always recommended to consult with a solar energy expert like August Roofing and Solar to understand the best options for your specific case.