Net Energy Metering 2.0 in California

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Taking a Closer Look at NEM 2.0

Net metering is a program that helps with managing the total energy production and consumption of a household. Ideally, a household’s solar power system would be able to provide enough energy to supply its monthly energy needs. Unfortunately, electricity consumption is rarely steady and solar power generation is often variable. Sometimes a household may consume more energy than its solar panel system is capable of providing, and at other times the solar system may generate an energy surplus.

Net metering connects a home’s solar power system to the energy grid so that these variations can be managed. If a household needs more energy than it produces, it can be drawn from the grid and billed to the consumer. If the system produces more energy than is needed, the excess can be sent to the grid to be sold and the consumer can be given credits in return. Because this helps to better manage energy and offset utility costs, net metering is a critical factor when considering the question, “Does solar make sense in California?” 

Moving to Net Metering 2.0 in California

Net metering in California is mainly provided by SCE, SDG&E and PG&E. Before net metering 2.0 was launched in California, net metering followed a different policy.  There was no interconnection fee, no non-bypassable charges, and time-of-use rates were optional. A policy was set for investor-owned utilities to move to net metering 2.0 once five percent of the grid had moved to solar energy. With more and more households converting to solar energy, the five percent cap was reached at an earlier date than expected for the utility companies.

As a result, California net metering 2.0 was implemented, bringing an interconnection fee on new applications and non-bypassable charges on electricity taken from the grid. Time-of-use rates were also implemented for the pricing of electricity.

How Net Metering 2.0 Works

Net metering 2.0 implements a defined system for solar power management. As more people are turning to solar energy, interconnection fees are required in order to be connected to the NEM 2.0 in California. Interconnection fees vary from $75 to $145 depending on the utility provider. The time-of-use rate, meanwhile, defines how much the cost of electricity is based on the time and peak hours. Electricity during peak hours costs more, so if a household takes energy from the grid during peak hours, it is charged at a higher rate compared to energy taken during off-peak hours. Supplying energy works the same way. A household with an energy surplus receives a higher value of credits for electricity when it’s supplied during peak hours.

Whereas net metering 1.0 does not levy non-bypassable charges for the electricity consumption of net metering users, NEM 2.0 implements non-bypassable charges for electricity used from the grid. These charges help fund energy efficiency initiatives, low income customer assistance and other related programs.

NEM 2.0 enrollment started once the cap for the utility providers had been reached. SDG&E launched NEM 2.0 during the summer of 2016. SDG&E net metering 1.0 vs 2.0 both comply with the state requirements. SDG&E NEM 2.0 is also called NEM-ST (successor tariff). An interconnection fee of $132 is charged to new applicants with a system generating less than one megawatt. If the system exceeds one megawatt, the fee rises to $800 and the applicant must shoulder the cost of interconnection study and grid upgrade costs. An applicant may be exempted from the interconnection fee if they are a part of the Single Family Affordable Solar program. The customer’s equipment must also have a warranty of at least 10 years. Non-bypassable charges are billed on SDG&E NEM 2.0 to cover the Public Purpose Program and other low income programs.

PG&E NEM 2.0 and SCE NEM 2.0 follow the same pattern. PG&E follows a tier level when charging for interconnection fees. Fees may range from $50 to $150 depending on the tier level and the net metering facility’s capacity. SCE, on the other hand, charges a flat interconnection fee of $75 for systems with a capacity of one megawatt or less and $800 for systems exceeding one megawatt.

The different utility providers offer similar services, but they differ when it comes to the programs that they provide and the rates they charge. SCE, for instance, offers programs that may accommodate an upgrade for the systems of existing subscribers provided that they qualify and stay within a certain capacity limit.

NEM 2.0 California is similar to other net metering programs implemented in other states, but it provides full credits for energy sent to the grid as opposed to the wholesale value of energy being provided in other states. NEM 2.0 also supports other NEM programs, such as Virtual Net Energy Metering, NEM Aggregation, Renewable Energy Self-Generation Bill Credit Transfer and NEM Fuel Cell. These programs support causes dedicated to promoting community-based renewable energy initiatives.

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