NEM 3.0

Net metering 3.0: what does it mean for you, and how can you help?

If you look at the best solar markets in the US, they all have one thing in common: a strong net metering policy. Net metering–or NEM–allows you to earn credits for any excess solar electricity you send to the grid when your solar panel system generates more than you need. 

Over the next year, California will be releasing the third iteration of net metering, or NEM 3.0. In February 2022, the state of California decided to delay making a final decision on net metering until further notice. As of May 2022, the earliest the California Public Utilities Commission (CPUC) could issue a draft decision is July, which would mean a final decision in August. We don’t know exactly how credit values will change, or what they’ll change to, but we do know that whatever happens will have large implications for the country’s leading solar market. We’ll continue to keep this article updated with the most recent news on NEM 3.0, and in the meantime, discuss some of the proposed changes to the state’s current net metering policy, along with timelines.

Key takeaways

  • The California Public Utility Commission has not yet finalized the new NEM 3.0 policy yet
  • The state of California has delayed making a decision on NEM 3.0 until further notice.
  • Proposed changes to CA’s net metering policy could cut the value of solar credits by up to ~75 percent
  • Utilities are recommending two fees for solar customers that, combined, could cost new PG&E, SCE, and SDG&E solar customers more than $100 per month on average
  • This is a big one: existing solar customers will be grandfathered into their original net metering policy

Californians considering solar should go solar sooner rather than later to lock in more favorable net metering credits (click here to get started)

What’s in this article?

First, a quick history of net metering in CA

Robust solar incentives, plenty of sunshine, high electricity rates, and existing net metering policies have helped CA become the national leader for solar. And as more and more people installed panels in the state, the three biggest investor-owned utilities–Pacific Gas and Electric (PG&E), San Diego Gas and Electric (SDG&E), and Southern California Edison (SCE)–inched closer to their net metering “cap,” each respectively hitting it between 2016 and 2017. This prompted the California Public Utilities Commission (CPUC) to create their next generation net metering policy, known as NEM 2.0.

Compared to CA’s original net metering policy, NEM 2.0 provides solar credits at a slightly reduced rate: ~2 cents less per kilowatt-hour (kWh) to be specific – you have non-bypassable charges to thank for that one! But considering what was at stake, NEM 2.0 was a win for rooftop solar; the industry has continued on a strong growth trajectory since, and homeowners taking advantage of this policy today continue to see thousands of dollars in savings on their electricity bills.

We won’t deep dive into the technicalities of NEM 2.0 here, but if you’re interested, we have a whole separate article about its history and mechanisms. With respect to the upcoming changes, though, it’s important to know that this isn’t the first time that California has instituted a new net metering policy. However, some of the proposed changes for this third iteration could significantly impact the economics of rooftop solar, more so than past modifications.

What’s next: NEM 3.0 & how proposed changes impact solar savings

Implementing new net metering policies is no small feat; there are a lot of stakeholders involved, and the process involves many steps, including studies, proposals, testimonies, and hearings – all before the actual decision! 

As of May 2022, major parties have submitted their proposals for the NEM 2.0 successor program and in February of 2022, CPUC decided to postpone the NEM 3.0 proposal indefinitely. In May, CPUC reopened the record of proceeding to obtain additional information before issuing a draft decision, which would now come in July at the earliest – meaning the earliest possible date for a final decision would be sometime in August. We wish we had a crystal ball and could tell you exactly how all of this will pan out, but we can’t. While we wait for decisions from the CPUC, all we have to go off of are the submitted proposals. And although we consider ourselves solar-optimists here at EnergySage, we figure the best thing we can do to prepare you is to present some of the least solar-friendly recommendations on the table coming out of the joint proposal from PG&E, SCE, SDG&E. 

Reduced net metering credits

First, export compensation for solar electricity sent to the grid: many states offer a credit equal to the retail value of electricity. This is known as one-to-one net metering where you are credited at the same rate for solar exports as what you’d pay to use electricity from the grid. The big three utility companies in CA are asking the CPUC to set a new credit rate, shifting the structure from net metering to net billing, which is much lower in value–and by lower, we mean…lower.

Their recommendation to the CPUC asks for export credits based on “avoided cost” rates, which–though variable depending on the season and time of day you export the energy–typically come out to about 25 percent of current rates. This means the value of net metering credits could diminish by up to 75 percent.

Importantly, this would only impact the value of the extra energy you send to the grid – if you install a solar battery and store excess solar energy on-site, you can first charge your battery for use later instead, maximizing the value of your solar energy and minimizing what you export to your utility company through self-consumption.

Grid benefits charge & customer charge

In addition to reducing the value of solar credits, utilities are asking the CPUC to implement two monthly charges for solar customers: a grid benefits charge, and a customer charge. Both are intended to help the utility recover costs associated with the upkeep of transmission and distribution infrastructure, meters, general billing costs, and non-bypassable charges, all you still use as a solar owner but which you may not explicitly pay for under one-to-one net metering.

Assuming the CPUC moves forward with the utility company’s recommendations, your grid benefits charge will be a monthly fee based on the size of your installed system, ranging anywhere from $7 to $11 per kW per month depending on your utility company. To put that into perspective, the average quoted system size in California on the EnergySage Marketplace is about 8.2 kW – for a system this large, you would need to pay an extra $57 to $90 on your utility bill each month, or $700 to $1000 per year (!!) for the right to have solar.

The second suggested monthly fee–the customer charge– would tack on an extra $12 – $24 to your bill, regardless of system size.

Solar savings: how NEM 3.0 could impact solar payback periods

Taken together, the two fees and the reduced net metering credits would have a significant impact on solar savings: under NEM 2.0, most homeowners in California have a solar payback period of roughly 6-8 years. Should the utility proposal come to fruition, that number would shift closer to 10 to 15 years, and may mean that smaller systems (i.e., those under 5 kW) would make no financial sense for homeowners. This distinction is an important one: about half of all residential solar installs in the state of California to date are 5 kW and smaller, meaning all of those solar panel systems would not have made sense under the proposed changes to NEM 3.0.

Timeline for changes to net metering

Again, we know that California will certainly be transitioning to a new net metering program, but the official policy is yet to be determined. What we discussed above were some of the proposed changes from the utility companies, but other stakeholders in the process have also submitted proposals of their own. The CPUC will now hold hearings with official testimony from interested stakeholders, as well as a vote, before making a decision around January 2022. Given this timeline, any official changes will likely not be in place until spring 2022.

Fortunately, customers who have solar under NEM 1.0 or NEM 2.0 benefit from a grandfather clause that will lock in their net metering rates for 20 years; this means if you already have a solar panel system in CA, you’re unlikely to be affected by NEM 3.0 for a long time.

A quick note about NEM grandfather clauses

When the CPUC approved both NEM 1.0 and NEM 2.0, they included grandfather clauses that lock you into your net metering credit structure for 20 years. However, it’s worth noting that some of the NEM 3.0 proposals ask for these grandfather terms to be reduced to 5-10 years. Whether this occurs or not, you’ll almost certainly save more by locking in NEM 2.0 rates for as long as you can by going solar now.  

How you can take action to support solar in CA

The final decision of the CPUC won’t only impact California, but the solar industry as a whole; California is the first domino in line for all things solar, and whatever we witness here will undoubtedly influence net metering policies in states across the country.

First, if you’re considering going solar in CA, it’s in your best interest to do so sooner rather than later. While we don’t know exactly what the final decision will be, it’s safe to assume that NEM 3.0 won’t be as beneficial for solar customers as NEM 2.0. So the longer you’re locked into the existing net metering incentive, the better.

Next, whether you’ve gone solar yourself or are simply a fan of renewable energy, you can support the solar industry by advocating for strong, fair net metering policies. The Solar Rights Alliance and Vote Solar are just two groups fighting the good fight, and both provide resources for taking action, including petitions, call scripts for contacting legislators, and more.

Will NEM 3.0 impact community solar?

There is currently no mention of Community solar being reduced or cut in any of the proposals for NEM 3.0. So, community solar will still present a great alternative to rooftop solar if you can’t or don’t want to install solar on your property: in most cases, you’ll save annually on your electric bills! If you’ are a resident of California, you can visit our Community Solar Marketplace to find solar farms near you.

Other resources to learn more about net metering

Solar and net metering in California

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

Frequently asked questions about NEM 3.0

Has NEM 3.0 been approved?

NEM 3.0 has not yet been approved and lawmakers have decided to postpone making any decision on NEM 3.0 – the earliest CPUC could release a draft decision is July 2022.

Is NEM 3.0 retroactive?

NEM 3.0 could make retroactive changes to existing versions of net metering in California by reducing grandfather terms to 5-10 years. However, under certain proposals, people who go solar before changes are implemented  would be able to lock in their current net metering rates.

What is NEM 3.0 California?

NEM 3.0 would require new solar customers to switch to Time of Use tariffs that are currently only available to customers with electric vehicles or batteries.

Is NEM 2.0 still in effect?

NEM 2.0 is still currently in effect but could be replaced if lawmakers choose to make a decision to shift to NEM 3.0 in 2022.

Exploring solar options in California

On the EnergySage Marketplace, you can receive up to seven quotes from local, pre-screened installers. These quotes will include cost information and savings estimates tailored to your property and current net metering incentives. If you’d prefer to start out with a quick ballpark estimate on solar savings, try our Solar Calculator.

Posted on by .
Categories: Policy
Tags: , ,

About Kerry Thoubboron

Kerry is an expert in all things solar! She's worked in the industry for more than 6 years, starting her career as an Energy Advisor dedicated to helping customers compare their options and make well-informed solar decisions. She graduated from Boston University with a degree in Environmental Analysis and Policy. Outside of work, you can find Kerry snowboarding, watching The Office, or having passionate debates about which New England state is best (spoiler: it's Vermont).

12 thoughts on “Net metering 3.0: what does it mean for you, and how can you help?

  1. Joanna

    Just got a bunch of solar quotes to go solar, but doesn’t seem worth it to invest, if PG&E is gonna screw any benefit, so they can recoup costs of paying fines and settlements for their failure to maintain their systems. We need better “off-grid” solar solutions.

  2. john smith

    What can be worst than the lack of a clear and concise contract if the BIg Energy Companies continually change at will the contract solar energy owners participated in? How many NEM 1’s and NEM 2’s and NEM3’s will there be?? WHY TRUST THE SPECIAL ENERGY INTEREST AND OUR REGULATORY BODIES (wake up Gov. Nuisance) AT ALL if they pull this off!!!

  3. James Hanely

    when I purchased my system in 2009 it was with the thought that any excess power in the summer time would provide a saving to pg&e as they would not need to build new power plants and today due to new state electrical polices when the sun goes down there in a electrical shortage. As a solar owner I have maintained my system to get the most power from my system. Has PG&E done their part to maintain their System? If they had maintained their systems would they have all the wild land fires that were started by their equiment?

  4. Patrick D Jenning

    If you are forced to move to NEM 3.0, is there a way to inhibit power from being sent to the grid after your own consumption, including charging your batteries, is satisfied? I wouldn’t want to provide power to the grid for free!

  5. Karen LeitnerDulin

    Net metering 2.0 is necessary to have solar panels be a benefit to homeowners. If California wants to move towards renewable energy without negatively impacting lower income households then net metering 2.0 should be maintained and homeowners should be better educated on the savings available if they own the system. California should help lower income households to secure loans for the systems. Incentives to apartment building hoa owners if they rent to low income etc. The power company isn’t losing currently because they are purchaseing power surplus at 1/3 of what they resell it for.

    1. John smith

      NEM 3.0 would lower solar investment by pushing the payback period to 10-15 years. Not many homeowners would be willing to wait that long to recover their cost. This is a a contradiction to going ‘Green Energy’. The only way to beat the Utility companies is to GET OFF the grid!

  6. Paul B Kramer

    How can we stop these Electric Company’s from giving us the screw you? I have net 1 but when I installed a battery they tried to put me in net 2. How can the average Joe stop this? The electric companies buy electricity from outside our grid and then up charge the price. Let them pay us the same.

    Thank you
    Paul B. Kramer

  7. R.D.

    Having been an early adopter – I installed my system in 2000 under NEM1.O – I’m only grandfathered in for 20 years. I’m completely screwed as I’ll now be forced into NEM3.0. Between the potential fees and lower credits for excess generation, it’s possible I’d just be better off decommissioning my system altogether!

  8. Sabin Shrestha

    Hi Jerry.
    Your Payback period would have been based on what you paid for your system. Mine will be close to 5 years. It is worth mentioning that Solar prices vary wildly among installers who are somewhat to blame for this debacle as well. They are trying to make hand over fist money when they can simply take a decent profit while making it really attractive to homeowners to switch to solar.
    My advice to homeowners is to compare quotes. Get your pay back period down to at least 7 years. It can be done with some savvy negotiations. Energy Sage itself provides a good way to compare vendor prices and proposals. I would encourage everyone to use it.

    1. john smith

      Jerry you are very fortunate to have a 5 year payback when the average is 7-10years? I am a DIY and it will be next to impossible to to make that payback. And my labor was free!

      Trying to blame the solar installers for the $gouging$, irresponsible, unaccountable Energy companies(SCE, PG&E) is laughable!.


  9. Jerry Hughes

    I am trying to understand the logic of Net-Metering. Installing solar panels at homeowner’s expense is supposed to provide the homeowner a lower monthly electric bill to offset the solar system investment. Under the Net-Metering 2 plan it would take between 9 and 11 years to recoup my investment. If Net-Metering 3 is adopted as stated, I would always be in a loss position as compared to the costs I am currently incurring from my utility company for electric power. The Net-Metering approach seems counter to the objective of reducing the use of fossil fuels through maximizing solar energy capture. If the maximum KWH generation exceeds my household needs, that power should be forwarded elsewhere.
    I understand that utility companies exist to provide a service and make a profit. But rather than placing the financial burden for power conversion on the homeowner, maybe utility companies should install their own systems on the roofs. They could pay the homeowner a ‘roof usage fee’ and maintain the solar power systems to an area-wide-standard as part of their utility operation. Homeowners would continue to be billed for the electricity provided regardless of source of electricity generation. Everyone wins but the biggest winner is the planet.

    1. Sarthak K Nayak

      Great suggestion but installing/maintaining solar panels on roof top is more expensive per watt compared to large fields of solar panels. In next 10-15 years, we should be able to save the energy for 6 months with a reasonable cost, thats all we need to go off grid. In case Nema-3 becomes effective as of the current proposal, then it makes more sense go on-grid with import only and no net-metering. That will be cheaper than giving free electricity to utility and solar tax above that.


Leave a Reply

Your email address will not be published.