Among the buzz of solar these days is the concept of Net Energy Metering 2.0 (NEM 2.0) Update. After many campaigns by environmentalists and solar advocacy groups, the California Public Utilities Commission (CPUC) decided to grant this solar incentive an extension.
In order to encourage the growth of solar energy and to simplify the use of a solar electric system, net metering was introduced and is becoming more and more popular. It’s used for small residential and commercial systems that are tied to the grid.
Let’s look at how it works and what it can do for you.
What Is Net Energy Metering?
It’s the process by which solar electricity is fed into the grid from small residential and commercial solar electric systems. When more electricity is being produced by the system than is being used, it causes the electric meter to spin backwards, causing the account to be credited with the amount of electricity fed back into the grid.
Since most homeowners are at work during the day, when electricity is at its most costly due to the fact that that is the peak period, most of the electricity fed back into the grid occurs around this time, so that the system owner receives credit at the peak rate.
Thus, the grid acts almost like an electricity “bank” in which the system owner saves electricity.
The homeowner can then draw on that electricity at night, when rates are cheaper. If the amount of electricity used is equal to the amount “banked”, the bill will be zeroed out, and whatever “banked” electricity is not used will be credited to the customer’s account.
This provides a great incentive for people to give serious thought to joining the solar revolution and getting their share of free electricity.
A Brief History
Net metering was first introduced in California in 1995, with Hawaii and New York quickly following in 1996. Progress in other states was slow, until the passing of the Energy Policy Act of 2005 which mandated that all states’ utilities must offer net metering if so requested by a customer. There are now over 40 states offering net metering, and it is also available in several other countries.
What Are The Benefits?
The benefit to the system owner is that they get to take advantage of every watt of electricity produced by their system, either immediately or from the electricity saved in their utility “bank”, which can result in a zero bill at the end of the month.
Since the system has a ready-made storage medium for excess electricity, there is no need for the system owner to invest in an expensive battery bank to store the excess.
The utility benefits by having extra electricity fed into the grid for general usage. This is especially helpful in areas where there is an energy shortage. Since net metering uses the existing meter, there is no additional expense for the utility.
The utility may also benefit from having less demand on its systems during peak demand hours.
The cost to the utility would be lost revenue due to the customer no longer relying solely on the utility for their electricity. But, this can be offset by lower administrative costs and the fact that the utility doesn’t have to buy electricity directly from system owners.
Another major benefit is to the environment, since more electricity is coming from solar and less produced by fossil fuels.
What is NEM 2.0?
The original net metering rules put a limit on the number of CA homes that could go solar. NEM 2.0 is an update in CA energy regulations that removes barriers to going solar in PG&E, SDG&E and SCE territories. NEM 2.0 eliminates CA’s net metering cap and provides certainty for CA’s solar energy future. Now all homes in CA have the opportunity to go solar.
Changes from NEM 1.0 to NEM 2.0
- NEM 2.0 customers will have their accounts grandfathered on this successor tariff for 20 years from the date of first commercial operation.
- NEM 2.0 customers with onsite generation systems of less than 1.0 MW will now be required to pay “a reasonable fee” for interconnection, based on the utility company’s actual costs for these interconnections. We anticipate this fee will be in the range of $75-$150 depending on the electrical utility and account type. As with the current NEM regulations, NEM 2.0 customers connecting systems less than 1.0 MW will not be required to pay study fees and distribution upgrade costs.
- There is no maximum generator size for NEM 2.0 accounts.
- NEM 2.0 accounts are required to pay non-bypassable charges (NBCs) for all energy they consume. These NBCs cannot be offset by energy exported to the grid. Non-bypassable charges for NEM 2.0 are Public Purpose Program Charge, Nuclear Decommissioning Charge, Competition Transition Charge, Department of Water Resources Bond Charges.
What the New Net Energy Metering 2.0 Rules Mean for You
Even with these major changes, going solar is still a great investment. After all, utility rates continue to rise every year. In 2015, PG&E increased its prices by 7%. And it raised its rates again by 8.5% in 2016.
But under the new rules, the ROI of your solar investment won’t be as high – and the payback period won’t be as short.
Under this program, solar customers are allowed to sell their excess clean electricity into the grid in exchange for credits:
- During the day, they feed solar energy into the power network.
- At night, they buy back the electricity they need from the grid.
If you’d like an updated savings estimate or want to learn more about NEM 2.0 and Time of Use rates, please contact your Save a lot solar consultant at 510-332-4971.