California Solar New Deal NEM3.0

What is California NEM ?

California NEM, also known as Net Energy Metering, is a policy framework that governs how utilities compensate residential and commercial customers who generate their own electricity using solar or other renewable energy sources.

Under NEM, customers with renewable energy systems can generate their own electricity and sell any excess electricity back to the utility. The customer receives a credit on their utility bill for the excess electricity they produce and feed back into the grid. The credit is based on the retail price of electricity.

NEM has helped to promote the adoption of renewable energy systems in California, making it a key policy in the state's efforts to reduce greenhouse gas emissions and combat climate change. It has helped to lower energy bills for customers and has reduced the need for new fossil fuel power plants. NEM was updated in 2016 to NEM 2.0, which made some changes to the original policy, including a cap on the size of eligible renewable energy systems and new rules on how utilities must calculate the value of surplus electricity.

NEM (Net Energy Metering) is the standard for solar energy users to settle solar energy users with California power companies. NEM1.0 was implemented in 1996.

Twenty years later, California has installed nearly 600,000 solar customers. After reaching the 5% target set by the power company, it was adjusted to NEM2.0 in 2016-2017.

In just 6-7 years, California has added nearly 1 million new users, and by early 2023, the number of solar energy users has reached 1.64 million.

What is California NEM2.0

California NEM 2.0, also known as Net Energy Metering 2.0, is a policy framework that regulates the compensation utilities must provide to residential and commercial customers who generate their own electricity using solar or other renewable energy sources.

Under NEM 2.0, customers who generate excess electricity from their renewable energy systems can sell the surplus energy back to their utility at a rate that is set by the California Public Utilities Commission (CPUC). The rate is typically based on the retail price of electricity and is designed to incentivize customers to invest in renewable energy.

NEM 2.0 replaced the original NEM policy in California and made several changes, including new rules on how utilities must calculate the value of surplus electricity and a cap on the size of eligible renewable energy systems. NEM 2.0 also includes provisions for customer billing, interconnection, and system ownership.

Overall, NEM 2.0 has helped to spur the growth of solar and other renewable energy systems in California, making it a key policy in the state's efforts to reduce greenhouse gas emissions and combat climate change.

California Solar New Deal NEM3.0

The new California solar energy policy NEM3.0 will come into effect on April 13, 2023. Its main content is to reduce the price of electricity stored by solar energy users to the grid from the original market price of US$0.30 per kWh to about US$0.075, a reduction of nearly 75%.

As an example, a solar user generates 10,000 kWh of electricity per year.

He uses 5,000 kWh of electricity during the day and the remaining 5,000 kWh of electricity at night; if the user does not have his own energy storage device, the 5,000 kWh of electricity used at night will be stored in the grid. Take it back to use at night.

In NEM2.0, when a user deposits an excess of 5,000 kilowatt-hours, the market price will be charged at around US$0.30, and when the user withdraws it at night, it will also be settled at the market price of US$0.30.

This is equivalent to helping solar energy users save electricity that cannot be used up during the day for free.

The new policy has reduced the on-grid tariff for consumers by about 75%.

Reasons why California is moving forward with NEM 3.0

Solar investment in California currently breaks even in about six years,

The annual return on investment (IRR) is close to around 20%.

This is obviously relatively high, and it's a bit behind the times for solar users to enter the scale. It is expected that NEM3.0 will increase the breakeven of solar energy investment from the current 6 years to about 9 years (IRR about 12%).

Both the US federal government and the California government will continue to support solar clean energy. The high electricity price in California and the return on solar energy investment greatly exceeding the market level should be the main reasons for this policy adjustment.

Will California's new deal affect the original solar energy?

Won't. Raw solar will continue to enjoy NEM2.0 for twenty years.

How to catch up with NEM2.0

Just submit the application for grid connection before April 13, 2023, and there is no need to complete the installation before then. After submitting the application, the project has 3 years to complete the installation.

However, during the actual installation of the application phase design, the scope of engineering changes is limited.

In addition, in order to complete the materials for solar applications, design and survey work will be required, and many solar companies have contract signing deadlines of March 15 or April 1, 2023.

The response measures of California's New Deal are first to catch up with NEM2.0.

NEM3.0 encourages users to purchase solar + energy storage.

This is also the current situation in high electricity price markets such as Europe and Hawaii.

9-year investment breakeven is also a good choice.

In the future, electricity prices of power companies will continue to rise rapidly, and the economics of solar energy will also grow rapidly.