California is taking a new shot at designing residential solar incentives after a revision proposed in December 2021 raised the ire of nearly everyone in the solar industry and, coincidentally, almost no one at the major utilities. The critique of last year’s Net Energy Metering proposal, known as NEM 3.0, centered on concerns that the economics of going solar would be killed by substantial cuts in the rate paid for excess generation and an $8 per kW of capacity per month grid participation charge.
Months of reviewing comments and rejigging rates and California Public Utilities Commission (CPUC) Administrative Law Judge Kelly Hymes published a new proposal, being referred to as the NEM 3.0 Revisit (not NEM 3.1? Do they not know how to number revisions?). The result is more nuanced, with phased in changes and the complete nixing of the grid participation charge. Still not ideal, but not as egregiously harmful.
Here are five takeaways from NEM 3.0 proposal, take two.
Death to the Duck
The north star for the NEM 3.0 revamp is flattening the duck curve with strong price incentives to reward behavior that stabilizes the grid. It favors solar with batteries over solar-only installations, and export rates encourage self-consuming solar production or feeding back into the grid during peak hours. The industry’s argument that distributed generation can help with grid stabilization seems to have been heard. But CALSSA is wary of the dramatic change to the export rate.
The future is electrifying
The ability to size a solar system at 150% of current energy consumption is another deliberate signal. This added capacity enables homeowners to size their systems to accommodate adding EV charging, upgrading to heat pumps, installing induction stoves and more, even when the timeframe for the upgrades is unknown. Your street’s transformer can rest easy: this recognizes the role solar and storage can play in avoiding distribution upgrades as electricity powers more of our lifestyle.
Equity is important
The forces against solar have often argued that it disproportionately helps middle- and upper-income families. Solar Builder has argued that the original NEM 3.0 proposal missed the mark on equity. The proposed revision of NEM 3.0 puts a finger on the scale to benefit low-income households. The CPUC announcement said additional bill credits for low-income households “ensure the solar system payback is just as attractive as the payback for higher-income customers (nine years or less).” Commission staff said the revised NEM 3.0 will dovetail with the state’s Self-Generation Incentive Program (SGIP) which allocates $630 million of the additional $900 million residential solar and storage incentives to low-income customers.
Households on NEM 1.0 and 2.0 breathed a sigh of relief last year when rumors of grandfathering rates for only 10 years proved false: no one wants to be told the price of your meal is going up when you are part way through eating it. The revised proposal for NEM 3.0 keeps current tariff legacy periods in place. Ratepayers on existing NEM 1.0 and 2.0 programs will only face a change if they substantially increase the size of their array, commission staff said in a briefing. Adding a battery to an existing system will not trigger a change in rates.
While the new proposal addresses some of the worst problems with the first attempt at revising NEM, this dramatic change in rates, particularly for solar-only installations after the phase in period, will still be a major setback to the residential solar industry. While the decision is being handed down December 15, it’s not a fait accompli.
To get involved:
- Get connected: As the California solar industry’s leading voice, CALSSA is leading the fight and has action steps on the CALSSA site.
- Get educated: CALSSA, SEIA and Vote Solar are part of an oral arguments hearing at 10:00 am Pacific on November 16 that all can listen to. Register here.
- Get going: the clock has started ticking for getting customers in under NEM 2.0. Ensure your sales team know how to talk about the advantages of going solar as soon as they can.
Dej Knuckey is a contributor to Solar Builder. She is a journalist, author and freelance writer who has covered energy for publications in Australia and the U.S.
Listen to more in-depth conversations on Solar Builder's YouTube channel
Our most popular series include:
Power Forward! | A collaboration with BayWa r.e. to discuss higher level industry topics.
The Buzz | Where we give our 2 cents per kWh on the residential solar market.
The Pitch | Discussions with solar manufacturers about their new technology and ideas.