Is California Net Metering reverting to its former state?

California’s Net Energy Metering (NEM) is at a pivotal juncture with the introduction of Assembly Bill (AB) 2619. Furthermore, signaling potential changes to the state’s solar energy landscape. Let’s delve into the evolution of NEM and the impact of recent regulatory decisions like NEM 3.0. Let us note the implications of the proposed legislation for the future of solar energy in California.

Key Takeaways

Make sure to watch our video about how the changes in the policies for solar affected the solar industry:

What is Net Metering?

Net energy metering (NEM) is a billing arrangement that enables individuals with solar systems to receive credits from their utility company. This is in exchange for the surplus solar energy generated by their panels and contributed to the power grid. These credits are commonly utilized to reduce the expenses of the electricity consumed from the grid when solar panel production is insufficient, such as during nighttime. NEM and other initiatives offer homeowners the opportunity to accumulate energy savings through solar power.

How does NEM 3.0 work?

California’s new NEM 3.0 regulation will change how solar customers are compensated for their excess energy. Instead of traditional net metering, they will now be eligible for net billing. Net billing is similar to net metering but differs in different ways. Moreover, the surplus energy produced by solar customers will be “sold” to the utility at predetermined export credit rates. Under NEM 3.0, this export credit will be calculated based on the avoided-cost rate per hour, which is the amount the utility would have spent to generate the same amount of power or purchase it from a power plant.

Net billing calculates the monetary value of solar energy sent to the grid using the wholesale electricity rate for the specific month and hour. In California, the avoided-cost rate is typically 75% less than the average retail rate for over 30 cents/kWh in 2023. This is logical because wholesale product prices are generally lower than retail prices. The utility company provides a valuable service by supplying electricity to homes without generating solar energy. Therefore, it cannot give credits for exported energy at retail prices.

History of net metering in California: From NEM 1.0 to NEM 3.0

In 1995, California implemented NEM 1.0, their first net metering policy. This policy aimed to promote investment in renewable energy and boost the economy. Moreover, it aims to increase the variety of energy sources in the state. Under NEM 1.0, homeowners with solar power could sell any excess energy they produced back to the grid and receive credits on their bill at the same rate as retail electricity. Initially, not many people took advantage of this program due to the high costs of installing solar panels. However, as technology improved and prices decreased, there was a significant increase in installations. NEM 1.0 remained in effect until residential solar generation accounted for 5% of utilities’ power demand. This milestone led to the introduction of NEM 2.0 in 2016.

NEM 2.0 kept important factors intact but slightly increased expenses for solar energy customers. It introduced rates based on the use time, eliminated the maximum size limit for solar systems in homes, and implemented a fee for connecting to the power grid. NEM 3.0, the most recent version, aims to improve the grid’s reliability and encourage solar energy combined with battery storage, but this comes at the cost of rooftop solar. It significantly reduces the credits for exporting solar energy, extends the amount of time it takes to recover the investment in solar energy, and requires customers to add batteries or reduce the size of their systems to offset the decrease in compensation.

Despite attempts to eliminate undesirable provisions, like a proposed tax on solar energy and a shortened period of eligibility for current solar energy customers, this policy still brings about significant changes, including replacing net metering with net billing and moving customers to rates for using electricity.

What damage did NEM 3.0 bring?

California’s net energy metering (NEM) policy, known as NEM 3.0, significantly reduces the compensation solar owners receive for the surplus electricity they contribute to the grid. Thus resulting in export rates decreasing by approximately 75%. This decrease leads to extended periods for recouping the investment and diminished overall savings for homeowners with solar systems. Despite its goal of promoting battery storage in conjunction with solar panels to improve grid stability, this policy adversely affects customers who rely solely on solar energy.

Solar systems after April 15, 2023, will be impacted by the revised billing system introduced in NEM 3.0. This updated structure determines the export rates for solar energy using a tool called the “Avoided Cost Calculator.” As a result, the rates will be more aligned with wholesale prices rather than retail rates. Consequently, the financial benefits for owners of solar systems will be significant at a lower price. This is due to the lower value of exported solar electricity compared to previous policies.

New Bill Aims to Repeal NEM 3.0

Assemblymember Damon Connolly has introduced Assembly Bill (AB) 2619 to address the adverse impacts caused by California’s NEM 3.0 decision on residential solar projects. The reduction in incentives for solar homeowners under NEM 3.0 has decreased the adoption of solar energy and has put jobs in the solar industry at risk.

AB 2619 aims to overturn NEM 3.0. Thus, reinstate incentives for generating clean energy and align with the clean energy objectives outlined in Senate Bill (SB) 100. The bill prohibits imposing new charges, taxes, or fees on customers who use solar energy and mandates that the California Public Utilities Commission (CPUC) develop a fresh solar tariff by 2027. The Solar Energy Industries Association (SEIA) supports the proposed bill, emphasizing the significance of maintaining a thriving residential solar market in California to achieve net-zero emissions targets.

What does AB 2619 mean?

Assembly Bill (AB) 2619, introduced by Connolly, focuses on regulating and expanding California’s net energy metering (NEM). The bill directs the Public Utilities Commission to supervise the development of standard contracts or tariffs for NEM for renewable energy facilities. It extends current requirements to ensure service to all eligible customer-generators of large electrical corporations. This is under a specified tariff developed through commission rulemaking. AB 2619 also mandates the creation of a new standard contract or tariff for NEM available to new eligible customer-generators starting January 1, 2027, with electric utilities required to adjust their contracts accordingly.

The goal is to foster sustainable growth in customer-sited renewable distributed generation, particularly in disadvantaged communities, aligning with the state’s solar generation resource objectives. The legislation imposes new obligations on local publicly owned electric utilities, establishing a state-mandated local program and introducing potential new violations of commission orders. It clarifies that no reimbursement is necessary for the costs mandated by the state.

What is the effect of AB 2619 on California’s net metering?

The primary objective of AB 2619 legislation is to enhance and control the growth of net energy metering (NEM) in California. Additionally, it addresses the need for standardizing tariff contracts after the bill’s implementation.

Expansion and Regulation of NEM

Expanding and regulating net energy metering (NEM) is mandatory by AB 2619 in California’s Public Utilities Commission. This involves overseeing the creation of standardized contracts or tariffs for renewable energy facilities.

The bill aims to encourage renewable energy generation development on customer premises, focusing on improving access for disadvantaged communities. This could lead to higher adoption of clean energy technologies and help the state achieve its objectives.

Standardization of Contracts or Tariffs

The bill focuses on making contracts or tariffs for NEM consistent and clear for eligible customer-generators of large electricity companies. This could potentially simplify the process of participation.

AB 2619 also demands the development of a fresh standard contract or tariff for NEM, which will be available to new eligible customer generators starting January 1, 2027. This demonstrates a forward-thinking approach to accommodate future participants.

Future of California Net Metering

AB 2619 corresponds with the solar energy requirements of California. Therefore, showcasing a dedication to utilizing NEM as a component of the state’s approach to renewable energy. Moreover, the legislation places additional responsibilities on local publicly owned electric utilities. Thus indicating possible alterations in their handling and implementation of NEM programs. Also potentially affecting their functioning and customer associations.

As California continues to work towards its ambitious goals in clean energy, NEM is expected to remain an essential part of its renewable energy plan. However, it might need adjustments to adapt to changes in the market and technological advancements.

Know more in our video here:

Conclusion

California’s journey with Net Energy Metering reflects its commitment to clean energy adoption and sustainability. As AB 2619 navigates legislative channels, stakeholders eagerly anticipate its potential to revitalize the solar industry, drive economic growth, and advance the state’s renewable energy goals.

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Frequently Asked Questions (FAQ)

What is NEM 2.0?

NEM 2.0 is California’s previous version of net metering rules and policies. It was replaced by NEM 3.0 in 2022. NEM 2.0 allowed solar customers to receive bill credits for excess solar energy at the retail electricity rate.

What is the California Public Utilities Commission (CPUC)?

The California Public Utilities Commission (CPUC) is the regulatory agency responsible for overseeing the utilities in California. It is responsible for setting policies and regulations related to net metering and other aspects of energy.

What utilities are under NEM 3.0?

The California utilities under NEM 3.0 are Pacific Gas & Electric, South California Edison, and San Diego Gas and Electric.