Solar energy installations have soared in California, making the State America’s number one in solar power; and not just because of its beautiful sunny climate! Net Metering is being updated and we will discuss it in this article.
California has had a net metering program NEM1.0 under which homeowners were given credit for the power produced by their system. NEM 1.0 has now been replaced with Net Metering 2.0 program (NEM 2.0) has come into affect for all new solar installations, and we are here to tell you exactly what that means for new solar homeowners.
What exactly is net metering?
The concept of net metering (NEM) has been around for many years. NEM allows homeowners to feed their excess solar energy generation into the electricity grid and be compensated via way of electricity credits on their utility bill. During the times when your solar energy system is not generating enough electricity to cover your needs, those credits are then available to use and can offset the electricity that you draw back from the grid.
It is possible to cover your entire annual household electricity usage by installing a correctly sized solar energy system in your home while utilizing the benefits of NEM. By exporting a larger portion of your solar electricity generation during the summer months, you can build up enough credits to cover your home’s electricity usage during the winter months when solar energy systems are less efficient.
This cycle of feeding into the grid and drawing back from the grid, ensures that any excess electricity your solar energy system generates is not wasted and you can draw back that excess production at times when your system is not producing enough electricity to cover your current needs.
How does NEM 2.0 work?
Rather than receiving your electricity credits as a simple one-out-one-in net offset as was the practice under NEM1.0, NEM 2.0 will calculate the value of the electricity you are exporting at a specific time of day and allocates a dollar value to it. This is called Time-of-Use (TOU) rates and is mandatory under NEM 2.0. TOU rates are intended to reflect the demand for electricity during certain times of the day with the cost of electricity. Homeowners will continue to receive the full retail value for the electricity which they provide to the electric grid.
It is important when choosing which electricity provider to connect with, that you consider their on-peak and off-peak periods and the rates they charge. You will want to find a company whose on-peak period falls during your solar energy systems peak production times, typically between the hours of 10am to 2pm.
Take for example the current TOU rate offered by Southern California Edison aimed at low energy users and solar energy customers. With its peak-period running from 12pm to 6pm on weekdays, you can export your excess electricity at up at 39 cents per kWh during this period and buy back for as little as 18 cents per kWh during off-peak times. That’s over two kWh for the price of one!
If you export the majority of your excess electricity during on-peak hours and draw from the grid during off-peak hours, you can start to see some real added benefits from the new net metering program.
However, with utility companies changing their tariffs as many as four times a year, it is important that you monitor your current TOU rates to ensure that they are still working in your favor.
NEM 2.0 sounds great, what are the other benefits?
New customers to NEM 2.0 will have their benefits grandfathered for 20 years. This is an important benefit as a re-evaluation of NEM 2.0 is currently scheduled for 2019. Among the changes being discussed in the re-evaluation, it is anticipated that utility company peak-periods will move to later in the day meaning less opportunity to export your excess solar power at those higher TOU rates. In addition it is possible that the reevaluation will replace the retail rate for electricity provided to the grid with more of a wholesale rate. In short, you will pay retail for any electricity that you draw from the grid but received a lesser rate for the electricity which you provide.
Now is a good time to be proactive and lock in the benefits available under NEM 2.0, before the inevitable rush!
Another benefit of NEM 2.0 is the inclusion of large-scale solar energy systems into the program. Solar energy systems over 1MW in size can now be connected to NEM 2.0 so long as the system is sized to the customers load and does not negatively impact on the utility grid. This is much welcome news for commercial and industrial solar energy consumers.
Consumer and utility safety considerations have also been factored into NEM 2.0. It is now a requirement to prove to your utility provider that your solar energy system is California Energy Commission (CEC) approved, and comes with 10-year warranty on both the equipment and installation. This ensures that only quality, approved solar energy systems are being installed on consumer’s homes.
Are there any fees and charges for using NEM 2.0?
To participate in NEM 2.0, applicants are required to pay an interconnection fee in order for a bidirectional meter to be installed on their home. This fee must be paid before your solar energy system can export electricity into the grid. This one-time interconnection fee varies between the different utility companies and currently ranges between $75 and $145.
NEM 2.0 customers will also be liable to pay the Non-Bypassable Charges (NBCs), which are already automatically calculated into electricity rates. NBCs are a 2-3 cent per kWh charge allocated to cover certain costs that utility companies may be liable for outside of selling electricity. Consumers operating under NEM 2.0 will only be liable for the NBC’s on electricity that is drawn from the grid and is not applied to electricity generated by the solar energy system.
Get onboard with NEM 2.0
With the ability to lock in your benefits for 20 years and pay back your solar energy system sooner, it is a great time to go solar. Start reaping the financial rewards now and apply to connect to NEM 2.0 through Southern California Edison, San Diego Gas & Electric or Pacific Gas & Electric today!
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Here are some good reference articles;
- Get Ready for NEM 2.0 – Southern California Edison
- NEM2 Program Introduction – Pacific Gas and Electric Company
- California’s NEM 2.0 & Hawaii’s Customer Grid Supply