Net Energy Metering (NEM) and Net Billing are mechanisms that allow solar energy system owners to receive credit or payment for the excess electricity they produce. These billing arrangements can significantly affect the financial benefits of going solar, especially in regions like California, where policies have evolved from NEM to Net Billing.
You can learn about the utility rates offered by some of the more common utility providers we work with here.
Net Energy Metering (NEM):
What is NEM?
NEM is a billing system where solar customers receive credits for excess electricity generated by their solar panels and fed back into the grid. These credits are applied to their utility bill to offset the cost of electricity they consume from the grid.
How Does NEM Work?
Under NEM 1.0 and 2.0: Customers were credited at or near the retail rate for the electricity they exported to the grid, which could offset future bills or be paid out at the end of the billing cycle.
NEM Billing: The net difference between energy consumed from the grid and energy exported to it is calculated, and customers only pay for the net amount used.
Current Status in California:
NEM 2.0 closed to new customers on April 15, 2023. Existing customers under NEM 1.0 or 2.0 are grandfathered for 20 years from their PTO (Permission to Operate) date.
Net Billing:
What is Net Billing?
Net Billing, introduced with NEM 3.0 in California, changes how solar customers are compensated for excess energy. Instead of receiving credits at retail rates, customers are now paid or credited based on the "avoided cost" of the energy, which is generally lower than retail rates.
How Does Net Billing Work?
Instant Offset: Like NEM, self-consumed energy is used to offset your electricity bill in real-time.
Excess Energy: Any surplus energy exported to the grid is credited or paid at a rate that reflects the value of that energy to the grid, which can vary by time of day.
Key Differences:
Compensation: Under Net Billing, the compensation for exported energy is typically less than under NEM 1.0 or 2.0, altering the financial return on solar investment.
Time-of-Use (TOU) Rates: Net Billing encourages aligning energy consumption with solar production times due to the variability in export compensation rates, which are often lower during off-peak times.
Strategies for Net Billing:
Battery Storage: Storing excess solar energy for use during high-rate times can improve savings.
Energy Consumption Timing: Use energy when production is high or store it for when rates are higher.
Impact on Solar Savings:
Savings Potential:
With NEM, savings are higher due to better compensation for excess energy. Under Net Billing, savings might be lower unless strategies like battery storage or consumption timing are utilized.
System Design Considerations:
The orientation of solar panels impacts when energy is produced, which is more critical under Net Billing where timing can affect savings.
Conclusion:
Understanding the shift from NEM to Net Billing is crucial for solar customers, especially in regions transitioning to these new models. While Net Billing can reduce the financial incentive for excess production, strategic planning around energy use, system design, and possibly integrating battery storage can still lead to significant savings. Always review your utility's specific rates and policies, as these can change and impact your solar investment's profitability. If you require personalized advice, consult with a solar installation expert who can tailor solutions to your specific circumstances.