CPUC establishes new rules for solar panels

NEM 3.0 went into effect on April 14, 2023, meaning you can no longer lock in NEM 2.0 rates.

• The changes to California's net metering policy cut the value of solar energy credits by about 75 percent for PG&E, SCE, and SDG&E customers.

• This is a big one: existing solar customers – and people who went solar before NEM 3.0 went into effect (through April 14) – were grandfathered into their original net metering policy.

• Solar shoppers who submitted interconnection applications after April 14, 2023, fall under NEM 3.0. The economic outlook for their solar installations will be more favorable if they incorporate energy storage.

The changes to California's net metering policy cut the value of solar energy credits by about 75 percent for PG&E, SCE, and SDG&E customers. This is a big one: existing solar customers – and people who went solar before NEM 3.0 went into effect (through April 14) – were grandfathered into their original net metering policy.

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When the CPUC passed the NEM 3.0 in December, initial analysis showed that the payback period for solar would be eight to ten years for solar on its own and shorter for homeowners who installed a battery with solar. However, since NEM 3.0 went into effect in mid-April, the payback period for solar quotes in California has actually been much shorter than we anticipated. In January, all three of the investor-owned utilities in California raised their electricity rates significantly. San Diego Gas & Electric increased their rates by 25% over the rates in the NEM 3.0 filing. Higher electricity rates translate directly to shorter payback periods.

The second major factor that changed since early 2023 is that solar prices in California have decreased recently: quoted solar prices in California have dropped more than 5% in the third quarter of 2023 compared to their peak in April 2023. Paying less for solar translates directly to faster payback periods. Combined, these two factors have meant that solar shoppers in California are still seeing very favorable economics for solar on EnergySage in 2023.

Increased importance of solar batteries

NEM 3.0 has increased the savings potential of pairing your solar panel system with a battery. In fact, under NEM 3.0, the payback period for a solar-plus-storage installation is now faster than for a solar-only install.

As a new customer under these rules, If you install a solar battery and store excess surplus energy onsite, you can charge your battery system for use later, maximizing the value of your solar power and minimizing what you export to your utility company through self-consumption, especially when the time of use rates are higher.

While your payback period for a solar-plus-storage system may still be higher under NEM 3.0 than under NEM 2.0, it's now less than if you install solar. This means that under NEM 3.0, you'll save the most over your solar energy system's lifetime if you add a battery.

Grandfather clause

At least some consumers can still qualify for the NEM 2.0 structure, but it's a small group. If you applied for grid interconnection by April 14, 2023, you have until April 15, 2026 (three years from the date NEM 3.0 began) to make the connection and still qualify for the terms of NEM 2.0. Importantly, you can also change the equipment planned for your system between now and the cut-off date as long as it doesn't increase its size or decrease it by more than 20 percent.