solar panels tou net metering 2.0 california

Solar and time-of-use electricity rates: what you need to know

Reading Time: 4 minutes

California’s new net metering policy, commonly referred to as net metering (NEM) 2.0, brought some big changes to the Golden State’s solar market in 2017. NEM 2.0 is now active for customers of all three investor-owned utilities in California: Pacific Gas & Electric, San Diego Gas & Electric, and Southern California Edison.

The biggest change for California solar homeowners is that everyone who installs a solar system from now on will have to switch to time-of-use (TOU) electricity rates. NEM 2.0 also adds some “non-bypassable charges” that solar system owners under the original net metering program didn’t have to pay.

Electric utility customers who switch to time-of-use rates pay different rates for their electricity throughout the day. Many utilities offer optional time-of-use rates for solar system owners and owners of electric vehicles. For anybody considering installing solar under a time-of-use rate, including California homeowners and business owners, there are two main questions to be answered: how should your solar system design change, and how will your long-term savings be impacted by a TOU rate?

What makes solar time-of-use rates different

Before California implemented TOU rates for solar system owners, net metering was a very simple calculation: every net metering credit was worth the cost of one kilowatt-hour (kWh) of energy from the utility, which was fixed.

In a TOU rate structure, the cost of electricity varies throughout the day based on electricity demand. The highest electricity prices come in the afternoon and evening, when air conditioners are running at top speed and customers are returning home from work.

PG&E TOU-B schedule summer
Example of a summer time-of-use rate from PG&E.
PG&E TOU pricing B winter
Example of a winter time-of-use rate from PG&E.

Solar system owners on TOU rates still receive a credit worth the cost of one kWh for every kWh they generate. However, because the rate changes throughout the day, the value of net metering credits is also variable. One kWh of solar electricity sent back to the grid at 10 am, during “off peak” hours, will be worth less than a kWh sent back to the grid in the afternoon and evening “peak” hours. As a result, there are some changes to system design that solar homeowners on TOU rates should consider.

Solar system design for TOU rates 

Aurora Solar, a company that develops solar system design software for solar installers, conducted a study to determine the financial impact of California’s new net metering policy. The company examined the effects of the new policy to identify the best design for California solar shoppers.

If you participate in net metering without TOU rates, solar panel systems that face south are the best option to maximize your electricity production. However, if you install solar under a TOU rate with a late afternoon “peak,” you may want to install solar panels that face west to improve your afternoon electricity production. Remember – electricity in the late afternoon and evening is more expensive, which means that your net metering credits in those hours will be more valuable.

That being said, solar panel systems that face west will have higher production during peak hours, but they will also have lower overall production over the course of a day. You may need to build a slightly bigger solar panel system – approximately 10 percent larger than you would have under the previous net metering policy – to account for that. 

How do solar savings change under time of use rates? 

Now for the biggest question for many solar-interested Californians in 2017: will net metering 2.0 result in lower solar savings for your home?

Aurora Solar’s analysis found that, all other things being equal, switching from the previous net metering policy to net metering 2.0 will reduce average utility bill savings by about 3.5 percent. In the scenario that they analyzed, the expected utility bill savings dropped from 89.5 percent to 86 percent, and payback period increased by about four months, but remains under seven years.

In short: while solar savings are slightly lower under net metering 2.0, system design improvements can minimize the impact of the changes. Installing solar panels in California is still one of the best investments that homeowners can make in 2017.

Work with a qualified installer to maximize your solar electricity production

If you want to install a solar panel system in California, knowing where to start can be a complicated question. Choosing a qualified installer is one of the most important decisions you can make during the solar shopping process, particularly under NEM 2.0. The EnergySage Solar Marketplace makes it easy for you to compare quotes from pre-vetted solar installers near you. Homeowners who go solar through the Solar Marketplace typically save 10 percent or more on their installation simply by comparing all of their options.

8 thoughts on “Solar and time-of-use electricity rates: what you need to know

  1. Vic Borgogno

    Consider a Solar system with a lot of surrounding trees, such that the system only get sun on the Solar modules during April thru Sept.
    The question: is there a best time for a person to have PGE turn on their system and start their PGE year?

    In other words, is there an optimum time in terms of TRUE UP?

    The thought experiment may be made easier by assuming that ALL your energy is obtained in a 1 month period, let’s say the month of June.
    This means that we put all of our energy onto the GRID in June and hopefully get to use it up during all the other non-producing months.

    Now, assume I turn ON my system on June 1 and my PGE year begins. During this 1 month I put all of my energy onto the GRID; then during the rest of my PGE year I can pull my energy back off the GRID and run my home off my stored Solar energy.
    If I have optimized the size of my array, then on average I will use up all the stored energy put onto the GRID before True Up.

    Now consider the alternative, I turn ON my system on July 1 and begin my PGE year. I have no stored Solar energy, so I run on PGE energy until June 1, when I begin generating and using Solar power, but putting all my extra power back onto the GRID for storage. That is until the end of June, when TRUE UP occurs and I’m paid back at, let’s say $0.05 per kWh. Of course, I can still get power from PGE, but at a much greater cost.

    To summarize, should one wait to turn ON your system, and begin your PGE year, just as your GRID starts being productive?

    In our shadowing example, should we have PGE come out in April, so that TRUE UP doesn’t zero out my extra unused energy?

    Appreciate any feedback that can clarify my understanding or misunderstanding.

    Thanks, vic

  2. maria nova

    so if you have solar panels does your air conditioning go into an energy conservation mode for peak hours automatically? Thats what seems to be happening to us. Our air changes to 85 degrees and its over 100 outside and its HOT in the house!

  3. Ryan

    Here in the Central Valley the impact is looking to be much more significant than stated here. During summer we have temps reaching 110 in the afternoon and stay over 100 through peak when edison is charging 43 cents per kwh. Earlier (until 4pm) when our solar is generating electricity we get credited only 21 cents per kwh.

    The result is during summer months, with a system sized 10% over our raw usage, because of the rate differences were actually still paying almost the same for our electricity as we did before solar, plus we have the solar payment. Yay, we actually ended up doubling our electricity costs. Screw you PUC.

    Maybe it will average out over the winter, but these TOU plans so far look like a very bad deal. If I had calculated the impact better up front I would have NEVER bought solar.

    1. JUAN C

      I totally agreed with you this is BS, but I really dont blame SCE I blame our our representatives they are the bigges idiots I dont know how and why would you let a multibillion company like SCE get their way all the time we the people are the ones getting screw all the time and our representavives our morelikely getting pay under the table and thats the reason they let it fly all the time is BS

  4. Kelly Jean Hood

    If your nice a year I get money back should I go to the higher rate they charge so I can get more money back?

  5. Ed Ison

    So, if you have solar generating at a peak time for which the cost of energy is .39 cents per KWh and you don’t use energy at that time, but use it off peak when the cost is .13 cents per kWh, you will be able to use three off peak KWh for every on peak KWh generated?

  6. David Neufeldt

    I’ve been searching the internet off and on for days attempting to understand TOU rates and their impact on residential solar. You’ve painted a very clear picture and helped me much more than any other sources that I’ve looked to. Thank you so much for this article! !


Leave a Reply

Your email address will not be published. Required fields are marked *