Part of why California has seen so much success in the solar market is because of its Net Energy Metering (NEM) program, in which property owners with solar systems receive credit from their utility when their solar panels produce more energy than they use. The meter runs “backward” when they overproduce and runs forward when their panels are not producing enough power for their needs. A properly sized solar system will zero a home or business’s energy bills for the year, saving the property owner tens of thousands of dollars over the life of the system.

The original net metering program was designed with a “cap” for its investor-owned utilities SDG&E, SCE and PG&E: 5% of all peak electricity demand produced by solar systems. As all three utilities approached this cap at the end of 2015, the California Public Utilities Commission extended net metering benefits with NEM 2.0. This new system has been created to ensure the solar market would continue to thrive, but there are some changes that new solar customers should be aware of.

• All solar systems using net metering will continue to receive per-kilowatt hour credits for their energy output.
• There is a 20-year “grandfather” period for enrollees of both NEM 1 and 2, enacted at time of interconnection. After the twenty year period, NEM 1 customers will be converted to the 2.0 program.
• Many fixed charges are removed from residential customers with solar systems, including grid access charges, standby and installed capacity fees, and demand charges.
• NEM 2.0 benefits are scheduled to run until 2019.

PG&E: This utility reached its cap in December 2016. All new solar systems will be enrolled in NEM 2.0.

SCE: Their cap is not expected to be reached by the end date of July 1, 2017. Systems will still be eligible for NEM 1.0 if the Permission to Operate paperwork has been submitted to the utility by 11:59PM on June 30th and the cap hasn’t been reached. (Permission to Operate paperwork is the final step of a solar installation, after inspection from the municipality.) Check the status of the cap here.

There are four important differences between the current net metering program and NEM 2.0:

NEM 2.0 solar systems will automatically be enrolled in time-of-use rates.

Previously, customers could choose between a tiered rate system or time-of-use (TOU) rates from their utility. The TOU rate plan is mandatory for solar systems enrolled in NEM 2.0, with a few exceptions. Electricity is more expensive at high demand periods, so solar credits during those peak hours will be more valuable. The right placement of a home’s solar panels can increase output at these high-demand times.

There is no longer a 1MW cap on eligible solar systems.

NEM1 was only applicable for residential and commercial systems sized at less than 1 megawatt (1000 kilowatts). To put that into perspective, the average home requires about a 5kW system, so this mostly pertains to commercial properties. Now larger systems can enroll in NEM2.0 as long as the system is appropriately sized for the property’s energy needs.

NEM 2.0 enrollees will pay a one-time Interconnection Fee.

This fee will be charged by the utility at the time your solar system is connected to the grid. For systems under 1 MW, SCE charges only $75 and PG&E charges $145.

NEM 2.0 customers will have to pay Non-bypassable Charges for any electricity delivered from the grid.

Non-bypassable charges are usually built into the electricity rate at just a couple cents per kilowatt-hour, and they help fund low-income and energy efficiency programs. NEM1 customers do not have to pay these charges for any energy taken from the grid on a monthly basis, but NEM2 customers will be required to pay them. It is important to note that any energy produced by their solar system is not subject to non-bypassable charges.

Another important note from PG&E:

“If the renewable generator is modified or repaired during the “grandfathering” period, the customer will remain eligible only if the NEM1 system does not increase in size more than 10 percent of the generating capacity in the original PTO letter, or 1 kW, whichever is greater.

However, if the capacity increase is greater than 1 kW or 10% of the original approved generator capacity, whichever is larger, the customer cannot utilize the NEM1 program for the entire system. The customer would have the following two options:

• Separately meter* the added capacity  with NEMMT to take service under the NEM2 program, or
• Elect for the entire system to take service under the NEM2 program.

The separately metered system is eligible to be grandfathered under the NEM2 program for the full 20 years. However, if the entire system takes service under the NEM2 program, it will be grandfathered under the NEM2 program beginning from the date of the issuance of the NEM1 PTO.

*This option is only available if the solar arrangement allows the added capacity to be separately metered.”
Despite a few small fees and some minor changes, California’s Net Energy Metering program will continue to bring tremendous savings to solar customers in both residential and commercial properties. It is becoming more and more clear that solar energy is a promising part of California’s future.