If you are living in California, the impacts of utility
charges are difficult to miss, especially of you reside in territories covered
by the large providers like PG&E where monthly charges can rival a car payment. Without wading into the politics, it is safe
to say that California has been a leader in the photovoltaic solar industry. Attractive energy payback rates have been at
the core of the booming market, but those rates are about to materially change
on April 14, 2023. This will very-significantly
increase up-front system costs under the new program, but you still have time to
“hold your place” under the current pricing structure for up to three years if
you file the right paperwork by the April 13 deadline.
WHY THE RATES ARE CHANGING: New solar installations currently fall under
the Net Energy Metering 2.0 (NEM 2.0) regulations. Those regulations dictate that these roof-top
generating owners are compensated at 30 cents per kilowatt-hour (kWh). These rates were established to encourage new
installations but ran contrary to the fact that large energy providers could
otherwise source energy elsewhere as low as 4 cents per kWh on the open market
during the same hours those rooftop solar systems are most heavily
producing. The bottom line is that these
NEM 2.0 (and previous NEM 1.0 installations at an even more favorable set of
pricing) are being heavily subsidized by forcing energy providers to first buy
this expensive rooftop energy before any other.
The unfortunate byproduct of this policy is that non-solar ratepayers
are indirectly absorbing these costs as providers spread them across the entire
population that are purchasing off of the grid.
The disparity between the costs absorbed by those without solar is
arguably much greater than this simple line item, as there are additional grid
fees that can’t be passed onto rooftop generators under any NEM program. With regards to costs, the objective bottom
line is that those without solar are becoming a smaller subset, they are typically
the less financially secure residents of the state who need the most help, and
they are footing a disproportionate share of energy producing costs.
NEM 3.0 DIFFERENCES AND EFFECTS: While NEM 3.0 does not fully balance the
cost-sharing, it is a big step in the right direction. Under NEM 3.0, the rate payback will change
from a static 30 cents per kWh to a variable “time-of-day cost-avoidance” model. Essentially, the providers will pay a rate
for this additional energy that more closely aligns with what they could
otherwise source that energy elsewhere.
It also means that roof-top households will receive significantly less
for the energy they typically add to the grid during the middle of the day when
they aren’t home than the same amount of energy pulled off the grid when they
get home from work or school and their rooftop system generation is waning or
idle. The overall blended generation rate
under this variable pricing is estimated at 8 cents per kWh, a huge drop from
the aforementioned 30 cents. The
financial by-product is that in order to have the system “pencil out”, new
installs will need to include battery systems to store that mid-day generation
and sell it back to the grid when pricing is much more attractive during peak
demand in the evenings. The addition of
the batteries are expected to bring the overall payback period to be similar to
the returns under NEM 2.0, but at a much steeper upfront cost. The upside is that same energy can be held and
used during a power outage. This change
is also expected to drive consumer behavior to help solve one of the biggest
issues with green energy – the ability to store it and use it later (again, just
the facts without additional political commentary).
HOW TO HOLD A SPOT UNDER NEM 2.0 AND INSTALL LATER: As previously mentioned, homeowners have until
April 13 to file paperwork and retain billing rights under NEM 2.0. That paperwork is a complete interconnection application
that typically includes the following:
• Signed contract
• Single Line Diagram (SLD)
• Contractors State License Board (CSLB) disclosure
• Consumer protection guide
• Oversizing attestation (if applicable)
DISCLAIMER AND WHERE TO FIND OUT MORE: Obviously, Guidant Realty is in the business
of helping clients find and sell their homes, not installing rooftop solar. While we stay closely aligned with upcoming
rules and regulations, including helping drive these regulations and laws with
a seat on the Board of Directors at the California Association of Realtors who
work extensively with regulators and politicians, we ultimately do not have
attorneys on staff tracking the final regulations, bills, and their ultimate rules
and implications. If you are interested
in holding your spot under NEM 2.0, we highly recommend speaking to a solar
installation company who is running a daily business subject to these
restrictions. For more detail, there
appears to be a solid online article with much-greater detail at:
https://www.solar.com/learn/nem-3-0-proposal-and-impacts-for-california-homeowners/