The End of Home Solar in California? (NEM 3.0 Explained)

If you’re a California homeowner, you’ve probably heard the news that on December 15th, 2022, the California Public Utilities Commission (CPUC) officially passed NEM 3.0.

NEM 3.0 is going to change solar in California as we know it… and not for the better. So, how is it going to change home solar in California, and what can you do to prepare for it?

What is NEM and How Does it Work?

NEM stands for Net Energy Metering.

To keep it simple, it’s just when homeowners with solar panels on their roofs sell their excess energy production back to the utility company through the grid, and they receive a credit for it on their utility bill.

This is important because, during the nighttime when the solar panels aren’t producing electricity, those homeowners use those credits, which offsets their utility bill.

The goal is to size your solar system appropriately so that you don’t have to pay anything back to the utility company at all.

NEM 2.0 Program

The graph below shows the typical energy usage and solar production for homeowners in California.

During the morning, there is a small bump in energy usage because that’s when people usually get up and get ready for work.

Then, there is usually a dip in energy usage throughout the middle of the day because most people are away from home and not consuming as much electricity.

Finally, there’s an increase in energy usage towards the end of the day as people come back home to watch their favorite TV shows, plug in their devices, cook dinner, etc.

Obviously, solar panels don’t produce electricity at night, but they produce the most power when the sun is at its highest. That’s why the majority of solar production happens in the middle of the day.

So, when the solar panels are producing electricity throughout the day, when most people aren’t home, all of the excess electricity (blue) gets sent back into the grid, and they get a 1:1 credit from the utility.

That’s important because during the morning and evening times when homeowners are typically using more power than their solar panels are producing, they use those 1:1 credits to offset their energy bill so they don’t owe the utility company anything.

In California, the average homeowner is paying around 30¢/kWh. So, all of the excess electricity solar owners send back into the grid, they get around 30¢/kWh.

This is the exact reason why solar in California has been so beneficial for most homeowners because they don’t have to spend any money on battery storage as they get those 1:1 credits.

NEM 3.0 Program

NEM 3.0 officially takes effect on April 13th, 2023 and it will reduce the amount that homeowners get compensated for the excess electricity they send back into the grid.

The average California homeowner pays around 30¢/kWh for their electricity, but under NEM 3.0, solar owners will only be compensated around 8¢/kWh for the excess electricity they send back through the grid.

That’s a reduction of about 75%!

Important Notes

• Current solar owners will be grandfathered into NEM 2.0 for 20 years after the anniversary date that their solar system was officially turned on.

• If you don’t have solar, you just need a signed solar agreement and a submitted NEM application before April 13th, 2023 in order to be grafathered into NEM 2.0.

• Adding a solar battery to your system after April 13th, 2023 won’t affect your NEM status.

NEM 2.0 vs NEM 3.0

Savings & Payback Period

What’s Recommended if I HAVE Solar?

If you already have solar, it’s highly recommended that you take a look at your system and see what it’s producing, and compare that to what your home is consuming. If you’re still pulling electricity from the grid and receiving bills from the utility, then you may want to consider adding more solar panels before April 13th, 2023.

What’s Recommended if I DON’T HAVE Solar?

If you haven’t installed solar yet and have been considering making the switch, it’s time to start seriously looking into it. As mentioned before, NEM 3.0 will take effect on April 13th.

You don’t need to have your solar panels installed before April 13th to be grandfathered into NEM 2.0 for the next 20 years. You just need a signed solar agreement and a submitted NEM application before that date.

How Much Will Solar Panels Cost Me?

There are many factors to consider when figuring out how much solar would cost your home specifically because every home is unique and has different electricity needs.

Enter your zip code below to calculate the cost & savings you’re likely to get from installing solar on your home: