Back in 2006, California enacted a policy known as net energy metering (NEM), in which homeowners and business owners who installed solar and wind-powered energy generation systems could transfer the electricity they generated into the local grid, and be paid an energy credit for every kilowatt-hour (kWh) of electricity they transferred.
This system was particularly useful for homeowners and small businesses, as it gave them the ability to bank their excess electricity in the local electricity grid when they didn’t need it, and then use it later. Without this ability to essentially ‘save’ electricity for later, excess electricity would be wasted without the installation of expensive energy storage systems.
In January of 2016, the California Public Utilities Commission (CPUC) voted to continue the NEM program, but with some modifications. This program, known as NEM 2.0, will continue to offer solar energy system owners the opportunity to reduce their energy costs by transferring their excess electricity to the local grid. However, for those considering the purchase of a solar system, it’s important to understand the changes that NEM 2.0 will impose.
✔ Interconnection Fees
Previously, having your system connected to the local grid was free. But with the advent of NEM 2.0, PG&E will charge a one-time $145 application fee for systems under 1 MW, and a larger fee for those above the 1 MW threshold. This fee will cover some of the costs of interconnection.
✔ Additional Non-Bypassable Charges
Under the previous version of the NEM system, a percentage of generators’ energy credits were deducted to pay for a variety of state programs ranging from assisting low-income households with their energy bills to funding conservation efforts. Under NEM 2.0, these charges will increase in order to support other programs, such as supporting the cost of drinking water infrastructure.
The net result is a 2-3 cent deduction from the credit for each kWh of electricity transferred to the grid.
✔ Forced Adoption of Time-of-Use (TOU) Pricing
Under NEM 2.0, anyone who signs up for the program will be obligated to transition to time-of-use (TOU) pricing for their electricity consumption. TOU rates are higher during peak periods of electricity consumption, typically from the late afternoon to early evening, and lower during periods of low consumption, such as the middle of the night and weekends.
It should be noted that TOU pricing will soon be the new norm for all electricity consumers. In 2019, all PG&E customers will be transitioned to the TOU pricing system.
✔ Lifting of System Size Cap
Previously, the NEM program was not available for systems with generating capacities larger than 1 MW. Under NEM 2.0, this cap has been eliminated. However, owners of these systems will have to bear the entire cost of interconnection, as well as any upgrade costs.
✔ 20 Year Grandfathering Period
The CPUC’s decision requires that they revisit the NEM program in 2019, when more changes may be made. However, to provide a measure of security to those considering connecting their solar system to the grid, the CPUC decided to institute a 20 year moratorium on program changes for those who choose to do so before 2019. This means that the NEM agreement you sign with PG&E cannot be amended until between 2036 and 2039, depending on when you sign an NEM agreement with PG&E (or whoever your local utility company is).
This may be the most important change of NEM 2.0: You have a three year window to take advantage of the benefits of NEM and enjoy 20 years of guaranteed energy savings.
While NEM 2.0 has had a mild impact on the net benefit of connecting your solar system to the grid, it’s still a fantastic opportunity to lower the cost of your electricity bill and get the best possible benefit from your system. Call Gilmore today to find out more about how solar power can help save you money!