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NEM 2.0: California’s new net metering policy

The original policy for net metering in California is very simple: for every kilowatt-hour (kWh) of solar electricity you feed into the grid, you get a bill credit for one kWh of utility-generated electricity. When your solar panels produce more than you need, you “bank” the excess to use when your panels don’t produce enough to meet your monthly use. If your system is the right size, net metering makes it possible for you to cover your electricity use for the entire year with solar.

Net Metering 2.0 makes a few minor changes to California’s original net metering policy, but it preserves the key element that makes solar economical for California residents: retail rate bill credits. Homeowners and businesses that enroll in NEM 2.0 will still receive per-kWh credits for their solar electricity that are equal to the value of a kWh of utility electricity. This means that the economics of solar are still very favorable under NEM 2.0.

In addition to preserving retail rate bill credits, the new California net metering program also prohibits many fixed charges for residential customers, including demand charges, grid access charges, installed capacity fees, and standby fees. NEM 2.0 will run until 2019, at which point the CPUC will look at establishing a new program that is designed to account for the benefits of solar in different locations and at different times.

There are three main differences between the original California net metering policy and Net Metering 2.0: time-of-use rates, interconnection fees, and non-bypassable charges. The California Solar Energy Industries Association (CalSEIA) estimates that the combined impact of these changes will be approximately $10/month compared to the original policy.

Time-of-use (TOU) rates 

TOU rates are designed to align your electricity costs with demand across the electric grid. Electricity is most expensive at times of high demand, like late afternoon and early evening, which means that your utility will charge you more per kWh during those “peak hours.” It also means that net metering credits will be worth more for electricity you send back to the grid during peak hours.

Under NEM 2.0, every property owner who installs a solar energy system will automatically be switched to TOU rates for their electric bills. What you pay per kWh will depend on your utility. As of November 2016, PG&E, SCE and SDG&E are still developing their solar TOU rate schedules.

Solar panel systems operating under NEM 2.0 can be just as economical as traditional net metering with the right system design. In general, TOU rates are highest in the afternoon and evening during the summer, and lowest during nights and weekends in the winter. Property owners with solar systems on NEM 2.0 can maximize net metering credits by locating panels on the west side of the roof so that they capture the late afternoon sun.

Interconnection fee

Before your solar PV system can send electricity back to the grid, a representative from your city or town will come to your property to inspect the system and sign off on the installation. Under NEM 2.0, residential and small commercial system owners pay a small one-time “interconnection fee” to connect their solar panels to the electric grid. For SDG&E customers, the fee is $132, and PG&E customers will pay $145. PG&E has not yet confirmed its interconnection fee, but it’s expected to be between $75 and $150.

Non-bypassable charges

Non-bypassable charges (NBCs) are per-kilowatt hour charges that are built into utility electric rates. They add up to approximately 2-3 cents per kWh and go towards funding energy efficiency, low-income customer assistance, and other related programs.

In the original net metering policy, system owners did not have to pay NBCs on the electricity that they bought from the utility on a month-to-month basis. Under NEM 2.0, new system owners will have to pay NBCs, but only for the kWh of electricity delivered by the utility. None of the solar electricity generated and used at home will be subject to NBCs.

SDG&E, PG&E, and SCE net metering in California

NEM 2.0 enrollment for PG&E, SCE, and SDG&E customers starts after each utility reaches its original net metering cap or by July 1, 2017 – whichever happens first. As of December 2016, the status for each utility is as follows:

  • SDG&E: Net metering reached its cap in the summer of 2016, which means that new San Diego solar system owners are currently enrolling in net metering 2.0.
  • PG&E: PG&E reached its net metering cap on December 15, 2016. All new PG&E solar customers are being enrolled in NEM 2.0.
  • SCE: The original SCE net metering program is expected to reach its cap by summer 2017, at which point all new solar customers will also enroll in NEM 2.0.

Utility customers who installed solar under the original net metering policy will be “grandfathered” in for 20 years from their original enrollment date. After that point, they will also move to NEM 2.0.

Resources for net metering in California 

About net metering in California

Net metering policies: PG&E, SDG&E, and SCE