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We deliver real-world energy solutions today to build a sustainable tomorrow. - See more at:
We deliver real-world energy solutions today to build a sustainable tomorrow. - See more at:

Net Energy Metering 2.0 - Freedom in the Electricity Markets

March 02, 2016


NEM 2.0: What it Means for California Solar Owners

Net Energy Metering (NEM) is a market access mechanism that allows businesses and individuals to compete in the electricity market. It creates competition and choice on the electricity grid.

Many in the solar power industry have been talking about California’s recent decision, known as NEM 2.0, which updates the regulations and future of self-generated solar electricity. As a current or future California solar owner, you may wonder how this update will affect your solar investment

What will stay the same?

NEM 2.0 maintains the ability to offset the full retail cost of grid-supplied electricity from an independently owned solar array. This is a big win for solar owners and we won’t see a huge difference in this key NEM feature. However, there are other changes that you can expect under the new ruling.

What will change?

Nonbypassable charges:

As an owner, you will now be required to pay for certain “nonbypassable” charges that will appear on your electric bill. These are the fees per unit of energy that fund energy efficiency incentives, nuclear decommissioning, etc.  The fees generally add up to two to three cents per kilowatt hour (kWh).

System changes:

For systems less than 1MW, utility companies have the right to charge for interconnection costs due to upgrades on the distribution system, which they own and maintain as part of our electron highway.

For systems greater than 1 MW, NEM customers will not only fund the distribution upgrades, but will also pay for network upgrades. This means you will need to plan your schedule and budget accordingly. In the past, these network upgrades were usually covered by the utility.

Systems greater than 1MW will be allowed to offset the grid energy consumption on a single meter. Many years ago the cap was 2MW, then it was reduced to 1MW. Now the cap is gone. Know anyone who has their own meter in a substation? Yes, you can build a 2MW, 5MW, 10MW or larger Net Metered solar facility now.

Time of Use:

Solar owners will also be required to switch to a Time of Use (TOU) rate structure. The rate structure required will charge variable rates for electricity depending on the season and the time of day. In some cases this can be very beneficial for solar owners, but in other cases it may hinder the return on investment. It will simply depend on the energy consumption patterns at the site.

10-year guarantee:

Under 2.0 rules, the solar contractor will be required to provide a 10-year guarantee on all equipment and installation, as a consumer protection to the customer/solar owner. This warranty does not refer to ongoing maintenance once the system is installed, but rather is a consumer protection added to ensure the solar owner obtains a quality product that will deliver. We view this as a positive step, although it really is not that different from what California and many other states currently require.

NEM 2.0 in a nutshell

In summary, NEM 2.0 preserves, in large part, the former credit structure of Net Energy Meter customers in California, while also adding potential fees for larger solar generation projects. These rules will go into effect as early as September 2016, depending on the utility. Whether the changes affect you or not, it is a good idea to keep an eye out for these and any other new requirements, especially if you have a solar project coming down the pipe.


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