NEM 2.0 vs NEM 3.0 What does mean for solar in California?

Solar Power for businesses and homeowners

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As the demand for renewable energy grows, California continues to lead the way with progressive policies that incentivize solar power adoption. Net Energy Metering (NEM) is a crucial component of California’s solar energy landscape, allowing homeowners and businesses to offset their electricity costs by feeding excess solar energy back into the grid.

In this blog, we will explore the differences between NEM 2.0 and NEM 3.0 and delve into what these changes mean for solar energy in California, particularly in relation to battery storage.

What is NEM 3.0?

Net Energy Metering 3.0 (NEM 3.0) is an updated framework that aims to enhance the benefits of solar energy and promote further solar adoption in California. The California Public Utilities Commission (CPUC) approved NEM 3.0 in early 2022, and it is set to replace NEM 2.0 for new solar customers starting in April 2023.

Also, it applies to utility customers in the territories of California’s three major investor-owned utilities (IOUs):
.-Pacific Gas & Electric (PG&E)
.-Southern California Edison (SCE)
.-San Diego Gas & Electric (SDG&E)

What is NEM 3.0 California?

NEM 3.0 California is the latest iteration of the Net Energy Metering program specific to the state. It builds upon the successes and lessons learned from NEM 2.0 and its goal is to unlock further benefits for solar customers. With the evolution of the program, NEM 3.0 California emphasizes a shift towards time-based compensation, increased system size flexibility, and the integration of battery storage systems.

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What Does NEM 3.0 Mean for Solar?

NEM 2.0 has been the prevailing program, but now, with the introduction of NEM 3.0 California, significant changes are on the horizon. Most of them will be beneficial to the major businesses and homeowners, such as:

  • Fairer Compensation: One of the significant changes in NEM 3.0 is the transition from the traditional retail-rate compensation to a time-varying compensation structure. Under NEM 3.0, solar customers will be credited based on the specific time of energy generation, aligning compensation more closely with the value of electricity during that time. This means that solar customers can maximize their savings by generating and using electricity during peak-demand periods when the rates are higher.
  • Increased Flexibility: NEM 3.0 California introduces greater flexibility in system sizing and removes the previous restrictions on the maximum system capacity. This allows solar customers to install larger solar systems, catering to their energy needs more effectively. Additionally, there will be no cap on the aggregate capacity eligible for NEM 3.0, fostering more significant solar deployment across the state.
  • Battery Storage Integration: NEM 3.0 incentivizes the integration of energy storage systems, such as batteries, with solar installations. By coupling solar panels with battery storage, solar customers can store excess energy generated during the day and use it during the evening or during times of high electricity demand. This enables greater self-consumption and reduces reliance on the grid, providing additional savings and enhancing energy resilience.

How to Take Advantage of NEM 3.0 Through Battery Storage?

Now that you know what NEM 3.0 is, it is important to discuss its advantages.
Solar customers can consider integrating battery storage systems with their solar installations. Energy storage systems allow homeowners and businesses to store excess solar energy for later use, reducing reliance on the grid and maximizing self-consumption. During times when electricity rates are higher or during power outages, the battery can supply the stored energy, providing savings and increased energy resilience.

By coupling solar panels with battery storage, solar customers can optimize their energy usage, store excess energy generated during the day, and utilize it during peak-demand periods. This strategic energy management helps to lower electricity bills and increases energy independence.

take advantage of NEM 3.0 through battery storage

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NEM 2.0 VS NEM 3.0, What is the difference?

Note that, while NEM 3.0 California introduces several advantages and opportunities for solar customers, the transition from NEM 2.0 to NEM 3.0 is not automatic, and each customer’s specific circumstances should be considered. However, this chart can help you understand the main differences between both programs:

  Compensation Structure: System Sizing and Capacity: Integration of Battery Storage Transition Period and Eligibility
NEM 2.0 Under NEM 2.0, solar customers were compensated at the retail rate for the excess energy they fed back into the grid, regardless of the time of generation. Customers were limited to installing solar systems that were sized to meet no more than 100% of their historical annual electricity usage. Did not explicitly incentivize the integration of battery storage systems with solar installations. Following the replacement system in 2023, existing NEM 2.0 customers are not required to transition to NEM 3.0 but have the option to switch voluntarily.
NEM 3.0 Customers will be credited based on the specific time of energy generation, earning higher credits for this during peak-demand periods when the rates are higher. Solar customers can install larger solar systems that adapt better to their energy needs. Additionally, there is no cap on the aggregate capacity eligible for NEM 3.0, allowing  greater deployment of solar energy across the state. By coupling solar panels with battery storage, customers can store excess energy generated during the day and utilize it during periods of high electricity demand or in the evening

In conclusion, when comparing NEM 2.0 and NEM 3.0, the latter represents an evolution in California’s net energy metering program, offering fairer compensation, increased system size flexibility, and an explicit emphasis on the integration of battery storage.

These changes are designed to further incentivize solar adoption, maximize savings, and enhance energy resilience for solar customers in California. Learn more about how NEM 3.0 can impact your business and home with Solar Symphony today!

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