What is Net Energy Metering?

Net Energy Metering or NEM refers to a utility bill credit for excess energy produced through on-site solar energy. As the meter “spins backward,” the solar facility reduces electricity bill costs for entities who have taken the step to procure solar energy.

This regulatory incentive was enacted to incentivize homeowners, businesses, and public entities to generate their own greener sources of energy. The exported solar power rate in this incentive was reduced slightly in 2016 in an iteration commonly referred to as “NEM-2” or “NEM 2.0.” This latest update (“NEM 3.0” or “NEM-3”) is significant enough that future on-site solar projects may no longer offer a cost savings to entities who install on their premises.

What Exactly Are the Changes under NEM 3.0?

The most significant changes under NEM 3.0 center around the following:

Future compensation for exported solar energy will no longer be tied to retail rates (prices at which one buys energy from the utility), but rather to the latest iteration of the Avoided Cost Calculator (ACC). The ACC is a tool designed to assess the value of avoided cost to utilities for each new addition of distributed energy infrastructure. NEM 3.0 applies this latest iteration of the ACC as the solar export rate (rather than the retail rate), resulting in a significantly decreased value from what is currently available.

Under NEM 1.0 and 2.0, electricity export value was guaranteed to be secured for up to 20 years from the time of the solar system’s interconnection application filing. Under NEM 3.0, export rates on new projects are locked in for only nine years into the future, after which point rates will be recalculated annually as CPUC updates its Avoid Cost Calculator. Visibility into what rates will be at the time of these annual recalculations is uncertain, adding significant risk to any solar investment.

NEM 3.0 involves a true decoupling of electricity imports and solar exports. Whereas the current program “nets” customer production against grid consumption within 15-minute billing intervals, this new system of “net billing,” as it’s being referred to, will do so instantaneously. This means that a customer pays the (higher) retail rate for every single electron imported from the grid and is compensated at the (much lower) ACC rate for every single electron exported to the grid.  This net effect of this change is further reduced savings.

Taken together, this makes it extremely challenging to have certainty of the potential savings for any new on-site solar energy systems.

“Public agencies are recommended to act swiftly to submit interconnection applications before April 14, 2023, after which point all new systems will be subject to less favorable NEM 3.0 rates.“

Who Is To Be Affected by The Switch to NEM 3.0?

The changes to NEM policy apply to electricity customers of the three investor-owned utilities falling under CPUC jurisdiction, including:

• Pacific Gas & Electric (PG&E)
• San Diego Gas & Electric (SDG&E)
• Southern California Edison (SCE)

By When Would My Public Agency Need to Act?

The deadline to submit an interconnection application is Friday, April 14, 2023, and there are several preliminary steps to complete. For this reason, public agencies are urged to act quickly to maximize the opportunity window. An experienced partner like ForeFront Power can help an agency quickly navigate this array of details.

How can a public agency submit an interconnection application?

ForeFront Power is prepared to help public agencies looking to submit an interconnection application do so successfully. However, our team will need a few inputs from your team.

Utilizing your historical electricity bill data, our team of experts design a solar and/or storage program from top to bottom, including system design, savings modeling, and all other necessary components. Once that is complete, our team of interconnection and utility experts complete applications on your agency’s behalf.

While this is typically a process that can be somewhat protracted, we’ve staffed up and are working around the clock to ensure that entities who are willing to act quickly to seize this final window of opportunity are able to secure up to 20 years of savings through the installation of clean energy systems on their premises.

The Advantage of a Piggybackable RFP

More than 60 public agencies in California—including schools, colleges, cities, counties and other public organizations—have piggy-backed off this JPA’s RFP to benefit from lower solar pricing and favorable contract terms that lower project risks.

Through a competitive RFP involving seven developers, ForeFront Power was selected as the exclusive developer for all public sector contracts, thanks to ForeFront Power’s financial stability, pricing, experience, and references.

Have Questions?

Schedule your quick exploratory call today to uncover your agency’s potential savings profile and whether it is possible to secure legacy rates in this final hour.