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  • Writer's pictureSteven Villa

New NEM 3 Regulations: An Overview

What is the meaning of NEM in Electricity?

NEM, or "Net Energy Metering," is a system that allows customers with renewable energy sources, such as solar systems, to send excess electricity back into the grid. Sending excess electricity into the grid helps offset the customer's electric bill by providing credits for future usage. NEM is essential because it encourages customers to adopt renewable energy sources and contributes to a greener and more sustainable electricity industry.

NEM works by taking readings from two meters: an existing household meter, which measures how much electricity a consumer consumes from the grid, and a second meter installed at the consumer's home, which measures how much power their renewable source produces.

New NEM 3.0 Regulations

California has always been a leader in the solar energy movement, and the introduction of NEM 3 is the newest step forward in its efforts to promote clean, renewable energy. However, The California Public Utilities Commission (CPUC) has approved the latest version of the Net Energy Metering program, NEM 3.0. It is expected that the main alterations will include the following:

Flat Monthly Fee:

The grid access fee for interconnected participants will be flat at $10-15 per month.

Battery Storage:

Another critical aspect of NEM 3.0 is its focus on combining solar and battery storage due to the mismatch between peak solar production and peak energy consumption.

Under this regulation, homeowners with battery storage can take advantage of the high export rates of up to $3.32 per kWh during peak demand hours. By storing solar electricity generated during the day, they can release it onto the grid in the evening when export prices are highest.

Avoided Cost Calculator:

From 15-Dec-2022 onward, residential solar export rates under NEM 3.0 will be determined using an "Avoided Cost Calculator" instead of being based on retail electricity prices. It will reduce electricity export rates from an average of $0.30/kWh to $0.08/kWh. It means lower export rates lead to more extended payback periods and reduced cost savings for solar owners under this system.

Reduction in the minimum size of solar systems :

Other important changes include reducing the minimum size of solar systems that qualify for net metering from 1 kW to 0.5 kW. Furthermore, customers who install systems larger than 10 kW now have a new "Customer Self-Generated Credit" program.

Decreased ROI:

Solar customers under NEM 2.0 usually get a payback of their investment in six years. With NEM 3.0, those with the same systems will need to wait seventeen years for a return.

Option to grandfathered into NEM 2.0:

NEM 3.0 offers a 120-day grace period for interconnection by April 15, 2023. In this way, the customers can benefit from the prior version of the Net Energy Metering (NEM) program, NEM 2.0.

How NEM 3.0 is Different From NEM 2.0/or NEM 1.0

Net Energy Metering (NEM) began in 1996 with California Code SB 656. It intended to spur the use of solar power through incentives such as bill credits for energy sold back to the grid.

NEM 1.0, applicable to customers before July 1, 2017, included no by-passable charges, a $1 monthly connection fee, and a $0.25 per kWh bill credit, resulting in an average monthly savings of $245 for a 10 kW system with a six-year ROI.

Later on, NEM 2.0 was introduced to boost solar installations and employment opportunities by establishing a 20-year rate scheme available to customers from July 1, 2017, onwards.

It consists of: a 0.02 cent per kWh by-passable charge; a one-time interconnection fee of $75; a monthly connection fee ranging from $10 to $20; a 0.25 cent per kWh bill credit; a 10 kW system providing a regular savings of $204 per month; and an average Return on Investment of six years.

Recently introduced NEM 3.0 main focus is on promoting solar-plus-storage systems that prioritize using the energy on-site instead of selling it to the grid. The plan consists of the following:

· a bypass fee of $0.04 per kWh or more,

· a connection fee of $8 per kW per month for SCE and SDG&E customers, or $48-$64 per month for a standard system,

· a $0.05 per kWh bill credit, and an average of $70 in monthly savings for a 10 kW system,

· with a 17-year ROI( return of investment) on average.

This comparative analysis gives us a clear picture of how NEM 3.0 could significantly reduce the economic incentives of installing solar panels. The rise in grid access fees, reduction in net metering bill credits, and extended ROI (return on investment)are all discouraging factors.

Moreover, the current 30% Investment Tax Credit(ITC) is expected to be reduced by 10 % for Commercial and zero for residential customers by 2024.

Positive Side of NEM 3.0

It would be wrong to just focus on the negative aspects of NEM 3.0. It has many positive aspects. For example,

· NEM 3.0 encourages consumers to have battery storage systems. But we all know that Cost is the biggest obstacle to battery storage. The 30% federal tax credit and SGIP rebate are available to eligible California homeowners to address the issue.

· NEM 3.0 also offers a high export rate of electricity during peak hours. It means the customers can send their stored electricity to the system at better rates.

· Previously, there was an expectation of a $60 monthly charge on solar owners' utility bills; however, this has now been removed. It means no more solar taxes under NEM 3.0.

· Another positive side is that it allows customers to submit a complete Interconnection Application before NEM 3.0 becomes effective on April 14, 2023. in this way, they can reap the benefits of NEM 2.0.


To sum up, with all discussion, we may safely assume that implementing new NEM 3 regulations will remove the existing benefits of NEM 2.0. Therefore it is pertinent to go for a solar solution now to get the maximum benefits. And if you already have a system, then add storage now. In this way, you can use surplus energy to power your home when your solar panels cannot actively produce electricity.

Act now to beat the upcoming NEM 3 transition!

Make the most of your finances and go solar now before New NEM 3.0 Regulations kick in!

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· Tailored packages to fit any budget

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What is the status of NEM 3.0 in California?

California Public Utilities Commission (CPUC) took a collective decision to pass Net Energy Metering 3.0 (NEM) On December 15, 2022. However, NEM 3.0 provides more flexibility and options for customers who want to participate in the NEM 2.0 program till April 14, 2023.

Is NEM 3.0 retroactive?

NEM 3.0 is not retroactive and applies only to homeowners submitting solar interconnection applications after April 15, 2023. Homeowners that offered a complete interconnection application before NEM 3.0 will be grandfathered into NEM 2.0 for 20 years.

What is the estimated time to get a solar permit in California?

Approval of solar permits can take up to six weeks for the utility company and city planning agency to approve the submitted documentation.

What is the average Cost of solar panels in California?

The Cost of installing solar panels in California depends on many factors, including the size and type of system you choose, your location, and the installer you use.

Generally speaking, the Cost of installing solar panels in California typically ranges from $12,155 to $16,445 on average. However, suppose you're considering investing in solar panels for your home in California. In that case, it's important to research and compares quotes from different installers. This will help ensure you get the best deal possible for your investment.

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