Solar Changes for 2022, What to Expect

UPDATE: As of Febuary 10th, 2022, NEM 3.0 and the Californnia Solar Tax has been postponed indefinitely. The current solar program, NEM 2.0, will remain for all existing solar customers and all new customers for the forseable future! Reach out to us for more info. 

Solar has evolved immensely in the last 20 years. It has become a viable option for homeowners not only looking at lowering their carbon footprint, but also lowering energy costs every month. Almost all residential solar in California is grid tied. This means even though the home is powered from solar panels on the roof, it is also hooked to the PG&E grid.

Back in 1996, the California Public Utilities Commission (CPUC) created “Net Energy Metering”, or NEM 1.0. It created a path for solar to become mainstream in California by offering a buyback program for excess solar energy created by each solar customer. NEM 1.0 offered a 1 for 1 credit for each kilowatt of excess energy created no matter the time of day or season. In 2017, the CPUC created the current system which is NEM 2.0. NEM 2.0 is similar to NEM 1.0, except the credit given to the solar customer depends on the time of day, and season of year it was generated, as well as consumed. It isn’t exactly 1 for 1, but still pretty good. It also includes a $10-$15 connection fee each month.

Now we are in 2022 and the CPUC will be changing to NEM 3.0 or “Net Billing Tariff”. If you are a current solar customer, or are thinking about getting solar, here is what you need to know.

Key Takeaways:

• Solar Credit Rate Change from $.22/kWh to $.049/kWh under NEM 3.0
• Grid Participation Charge of $50-$150/ month under NEM 3.0
• If you ever considered going solar, now is the time to ensure you are in NEM 2.0

Why Are There Changes Being Suggested To Net Metering?

Since solar customers buy much less electricity from the grid, they pay disproportionately less infrastructure fees than non-solar customers. This is because infrastructure fees are built into the energy rates. Below is an excerpt from the CPUC proposal which you can view here:

CPUC Proposal (PDF)

“Our review of the current net energy metering tariff, referred to as NEM 2.0, found that the tariff negatively impacts non-participating customers; is not cost-effective; and disproportionately harms low-income ratepayers. This decision determines that, to address the requirements of the guiding principles and the findings related to the NEM 2.0 tariff, the successor tariff should promote equity, inclusion, electrification, and paired storage and provide a glide path so that the industry can sustainably transition from the current tariff to the successor.”

What Are The Main Changes?

The full proposal presented to the CPUC is long, and the wording is very confusing. There are a few critical changes that solar customers, and people looking into solar need to be aware of.

Solar Credit Rate Change

Customers of PG&E, who normally would be paid about $0.224/kWh for excess solar power would now be paid an estimated $0.049/kWh wholesale rate. This is a major change from NEM 2.0 where solar credits are paid 1 for 1 at a retail rate around $.224/kWh. While battery storage will help offset this change, it does add a substantial barrier to being net zero with electricity costs.

Grid Participation Charge

One of the biggest changes is the proposed grid participation charge. This is based on each individual solar system size. PG&E is suggesting an $8/kw monthly charge, which would be between $50-$150 per month for the average residential solar array. This is the biggest change for the solar industry and adds a significant burden to the economics of going solar for most homeowners.

Current Solar Customers would be rolled into NEM 3.0 after 15 years

Customers that have gone solar within the last 25 years are in either NEM 1.0 or NEM 2.0. PG&E agreed to honor those metering contracts for 20 years. The new NEM 3.0 agreement will change that agreement to only 15 years from install date.

Positive Changes

There are some changes that are good news. PG&E understands that NEM 3.0 will change how solar systems are sized to ensure customers are producing enough power to offset all of their electrical requirements. The max system size will change from 120% to 150% of the home’s average electrical usage based on the previous 12 months. This is called your solar offset.

Even though these changes will be drastic for solar owners and the California solar industry, PG&E wants to provide a glide path for the monthly grid participation charge. The details are getting worked out, but there will be a 5 year grace period where a portion of the participation charge is closer to $5/kw instead of $8/kw monthly.

• Solar Credit Rate Change to $.049/kWh
• Grid Participation Charge between $50-$150/ month
• NEM 1.0 and 2.0 customers enrolled in NEM 3.0 after 15 years
• New max system size of 150% offset
• 5 year glide path with discounted grid participation charge

When Will The Changes Be Finalized?

Jan 27th, 2022 is when the CPUC will have a final vote on exactly what the changes for NEM 3.0 will be, and when they will be instituted. We will provide updates after the vote is finalized.

When Will NEM 3.0 Be Instituted?

We will know exactly when after the Jan 27th vote from the CPUC. So far we have heard NEM 3.0 will be rolled out on May 27th, 2022. Your solar install must be completed, and your paperwork submitted to PG&E for your Permission To Operate (PTO) before May 27th, 2022 to ensure you are enrolled in NEM 2.0. PTO submissions after May 27th, 2022 will be enrolled in NEM 3.0. These are tentative dates. We will update that as soon as we know more.

Conclusion

While these NEM 3.0 changes may be necessary for solar to be sustainable long term in California, it is a major economic hurdle for most families deciding on solar in 2022. The best advice is to go solar now in order to be grandfathered into NEM 2.0 for at least 15 years. Also, consider battery storage an integral part of your solar system. Even with these net metering changes, solar is still a better option than staying with traditional grid power. Solar and batteries can save families thousands of dollars a year, provide clean energy, and lower the dependency on grid power. Reach out to us for more information.