NEM 3.0: A Comprehensive Guide for Commercial Solar Customers

Solar energy is the obvious choice for California businesses that aim to operate with both environmental consciousness and financial wisdom. Solar power offers numerous benefits to businesses of all sizes.

To help you make the most of your commercial solar journey, we have compiled this comprehensive guide on NEM 3.0. Net Energy Metering 3.0 is an important update for Californians looking to switch to solar energy. In this guide, we will explain what NEM 3.0 is and how it can benefit your company’s bottom line. So let’s get started!

What is NEM?

Net Energy Metering (NEM) is a series of rules and regulations that govern the rates and payments between utilities and their customers who have solar panel systems.

NEM allows solar panel owners to earn credit for the excess electricity that is generated by their panels and pushed onto the grid. This credit is then used to offset the cost of the electricity that is pulled from the grid when the solar system is not generating enough electricity to meet the customers needs.

Traditionally, NEM policies have had a one-to-one offset, meaning that the price of a kilowatt-hour (kWh) of electricity pushed onto the grid is equal to the price of a kWh of electricity pulled from the grid.

This policy allowed energy customers with solar systems to pay significantly less (or sometimes nothing) for electricity. That one-to-one offset is changing with NEM 3.0.

What hasn't changed are the long-term financial benefits of NEM, and they are significant. Over the 25-year warranted life of a solar system, you can save hundreds of thousands or even millions of dollars in energy costs.

NEM is an effective way for utilities to encourage the adoption of renewable energy sources and for you to reduce your energy costs and carbon footprint.

What is NEM 3.0 and How does it differ from NEM 2.0?

NEM 3.0, or Net Energy Metering 3.0, is a new policy approved by the California Public Utilities Commission on December 15, 2022. It applies to utility customers in the territories of Pacific Gas & Electric (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E).

It is important to note that NEM 3.0 does not apply retroactively, so solar systems installed under NEM 1 or NEM 2 will remain under their current policy.

One major difference between NEM 2.0 and NEM 3.0 is the value of excess electricity produced by solar systems.

Under NEM 3.0, residential solar export rates will be determined using an "Avoided Cost Calculator" rather than retail rates.

On average, NEM 3.0 export rates are around 75% lower than NEM 2.0 export rates. This means that solar owners may see longer payback periods and fewer cost savings under NEM 3.0.

How Does NEM 3.0 Effect Commercial Solar Customers?

For current commercial solar system owners, NEM 3.0 will not affect the rate of compensation for the excess electricity they generate. However, those who are interested in installing a new commercial solar system should take note of the changes in NEM 3.0 and consider how it may affect their return on investment.

If you wish to be grandfathered into the NEM 2.0 policy, you must submit an Interconnection Application for your solar system by April 13, 2023.

Pairing Solar With Battery Storage is More Beneficial Under NEM 3.0

An important distinction in NEM 3.0 is in the push for pairing solar with battery storage. Peak energy consumption and peak solar production generally don't align. Battery storage solves for this.

Under NEM 3.0 system owners with battery storage will be allowed to store electricity generated during the day and then have this power available for use in the evening when export prices are the highest.

This shift suggests that the ROI for solar and battery storage will be roughly equal to the ROI on solar only.

Pairing solar and battery is even more compelling when you consider the ROI is the same, but you also will get battery backup during power outages.

Federal Tax Credits and Funding

The 30% federal tax credit remains.

In addition there will be an additional $900 million in funding available for the Self Generation Incentive Program (SGIP) available on July 1, 2023.

Connect With A Vetted Commercial Solar Company

Whether you’re considering a new commercial solar system or want to upgrade your current system, it is important to work with an experienced commercial solar company that understands NEM 3.0 and can help you maximize the financial benefits of going solar.

At Transform Energy we are dedicated to helping businesses take advantage of renewable energy.

Our professional team is here to help you understand NEM 3.0 and help you find the best solution for your needs. Contact us today to learn more about our commercial solar solutions and how we can help you lower your energy costs while reducing your carbon footprint.