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California Net Billing Tariff (NEM 3.0): frequently asked questions

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California’s Net Billing Tariff (NEM 3.0) takes effect for all solar systems applied for after April 14, 2023. This has naturally led to many questions from potential solar customers and installers alike. In this blog we’ll answer some of the most common ones we’ve heard as California gets ready for this change.

For more information, visit our NEM 3.0 Resource Center and read our previous pieces on the Net Billing Tariff:

We also have a full webinar on the topic, How to sell solar in 2023 despite NEM 3.0, conducted with Solar Power World, that has more information.

NEM 3.0 Applicability, Timing, and Rules

If the customer isn’t using one of the big 3 inverter-owned-utilities, are they affected by NEM 3.0 rules?

NEM 3.0 rules apply specifically to customers with PG&E, SCE, or SDG&E as their utility. Customers of other regional or municipal utilities have different net metering rules.

If a customer signs up for solar shortly after the April 14, 2023 deadline, how are they billed initially?

The utilities do not have the NEM 3.0 billing system set up yet. As a result, customers who enroll in NEM 3.0 will initially be billed using NEM 2.0 rules (credited nearly at retail rate, annual billing, and can pick any TOU schedule), and will be automatically switched to NEM 3.0 rules when the utilities finish building the new billing system. This process may take several months to a year, so customers could possibly take advantage of a summer of production and credits. 

Make sure customers are aware of a possible true-up when they are switched — this could result in a big surprise bill when the billing process updates.

What are the required electrification rates for NEM 3.0?

NEM 3.0 customers are required to enroll in a TOU rate that has a big difference between on-peak and off-peak costs. These rates encourage customers to conserve energy when the grid is highly strained and are more aligned with actual grid costs than flat rates, tiered rates, and the standard TOU rates. Right now, the available electrification rates are E-ELEC for PG&E, TOU-D-PRIME for SCE, and EV-TOU-5 for SDG&E. We expect more rates to be added in the future. Note that these rates all feature a fixed monthly fee of about $15 per month, instead of a $10/month minimum fee.

Does NEM 3.0 have a solar tax or a solar-only fee?

No, the final NEM 3.0 rules do not feature a solar tax or $8/kW/month cost. NEM 3.0 customers will have a fixed monthly fee of around $15/month as part of the electrification rates, the same as non-solar customers.

Do NEM 3.0 bill credits roll over?

Credits for exported energy (including battery exports to the grid) are carried over from month to month. They do expire at the end of a true-up period, which defaults to the anniversary of the PTO date. Customers may make a one-time election to update the true-up month, and we expect that March or April will be the best time. However, we don’t expect customers to accrue a substantial amount of credits unless they are discharging a battery to the grid during the summer, so this may not matter much.

Does Aurora model NEM 3.0?

Aurora can model NEM 3.0 rules. To quote with NEM 3.0 rates, you have to select the applicable NEM 3.0 rate in the post-solar utility rate field in Sales Mode or Design Mode. You can always verify that you’ve selected a NEM 3.0 rate by checking bill savings for a 100% annual energy offset system — bill savings will be in the 50%-60% range instead of a typical 90% in NEM 2.0

System Sizing and Orientation

What is the best system size and orientation for a NEM 3.0 solar-only system?

Our calculations indicate that a southwest facing system is the best option in NEM 3.0, while south-facing and west-facing systems are nearly as valuable to the homeowner. In terms of energy offset, having a system produce 60-70% of the annual usage minimizes the homeowner’s payback period, although they will still have to pay some balance to the utility each month.

What is the payback period for a 100% offset system? What about a 70% offset system?

We estimated that a south-facing, 100% annual offset system would pay for itself after 9-10 years, while a 70% annual offset system facing southwest would take 7-8 years to pay off. Our estimates were taken using the “All Day” load profile shape in our blog post, so the results will vary across regions and the customer’s end use profile. The system cost is also a major component of the payback period.

What happens if a house can only have an east-facing PV system?

Our analysis found that an east-facing system would result in 20% less bill savings than a southwest-facing system. The installation will still be valuable for a customer but will take longer to pay off. It’s analogous to a shaded system with 80% SAP — it’s ok to install but you should have a conversation with the customer. Be cautious though, as increasing the system size for an east-facing system can’t make up the bill savings in the same way that adding panels to a shaded system makes up for reduced production. The added panels will mostly send energy to the grid, with a low value.

Do I need to have a battery for NEM 3.0?

No, a battery is not required for NEM 3.0 customers. A battery may provide more bill savings and pay for itself if operated correctly, but even a 100% energy offset solar-only system will bring value to a customer. Payback periods of 10 years or greater are typical in nearly every other market in the US.

How do I size a solar-plus-storage system?

A battery provides the opportunity to take energy that would have been exported to the grid at a low rate (4-8 cents per kWh) and use it later for self-consumption (30-80 cents per kWh) or export it during times of high grid need (up to 3 dollars per kWh). There’s no one-size-fits-all design, but right now we think an appropriate strategy is to size the batteries to take up most of your average daily excess kWh (that’s the energy that would be sent to the grid) for the spring and summer months. For example, if the system would send an average of 10 kWh per day to the grid in April, you can pick a battery system that has 8-12 kWh of usable capacity. Ultimately, a battery design is going to require conversations with the homeowner about what they want and how much they’re willing to pay.

Is a battery worth it?

You can test out the benefits of battery sizing with Aurora’s storage self-consumption feature. A battery will result in greater bill savings, but depending on the cost of the battery system, add-on components, and interest-rate buy-down cost increases, the cost to finance the battery add-on may be too great. We recommend comparing the solar-only and the solar+battery systems in the app to see what is best for the customer.

Click above to learn more about Aurora’s self-consumption beta feature.

Interval Data

What is Green Button data?

Green Button data or interval data is a file that can be downloaded from a customer’s account on a utility website, containing hourly or 15-minute consumption data from that customer’s meter for the last year. 

Why should I use Green Button data?

Green Button data provides a better picture of the customer’s home energy usage and will give a more nuanced view of the customer’s future bills. 

To learn more about how NEM 3.0 affects your business and customers, visit our NEM 3.0 Resource Center.

Ready to learn more?