What is Net Metering and How Does It Work in California?

Net metering is a system that allows residential solar panel owners to receive credits for any excess electricity they generate and feed back into the utility grid. This system benefits both the grid and solar panel owners, as it maximizes the value of solar power that is produced. However, recent changes in policies, particularly in California, have introduced more complexities and challenges for solar owners.

Understanding Net Metering

Net metering operates on the principle that when you generate more electricity from your solar panels than you are using at any given time, the excess power is fed into the utility grid. This excess power is measured and credited to your account. When you use more power than you generate, you draw electricity from the grid, and these credits act as a reimbursement. Essentially, you end up paying only for the net amount of electricity used during a billing cycle.

Challenges with Time of Use Billing

In response to the increasing number of solar panel installations, utility companies have introduced time-of-use (TOU) billing. This means that the credit you receive for excess power generated during daylight hours is lower compared to the higher electricity rates during peak times, such as evenings. This shift can significantly impact the profitability of solar installations.

Example of Current Policy (NEM 2.0)

Currently, under Net Energy Metering (NEM) 2.0 in California, you receive a full credit for the excess power you export to the grid, but these credits are valued at the lower, off-peak rates. This makes it financially viable for solar panel owners to generate and store power during peak production times, which can then be used during higher consumption periods.

Upcoming Changes (NEM 3.0)

Effective April 2023, the new Net Energy Metering (NEM) 3.0 will significantly change the dynamics of net metering. Under these new rules, the credit for excess power exported to the grid could be drastically reduced, potentially to as low as 25% or even zero credit. This means that solar owners will need to carefully consider their strategies to maximize the benefits of their solar panels.

Benefits of Adding Battery Storage

One practical solution to the drawbacks of time-of-use billing is the addition of battery storage systems. These batteries store the excess electricity generated by solar panels during off-peak times and use it during peak electricity consumption periods. This not only helps balance the grid but also significantly reduces the financial burden on solar owners.

Example Calculation

For instance, if you are currently under NEM 2.0 and have a grid-tied solar system, you generate 12 kilowatt hours of energy on a sunny day and sell it back to the grid. However, when NEM 3.0 comes into effect, you might only get 25% of the credit for that energy if sold during peak hours. By storing this energy in a battery and using it during peak times, you can save approximately $2 per day, or $700 annually, purely on reduced electricity costs.

Conclusion

Net metering in California has been a game-changer for solar panel owners, but the changing policies are making it increasingly important for individuals to consider battery storage systems. While the current system is beneficial, the upcoming NEM 3.0 could significantly decrease the profitability of solar energy unless a storage solution is integrated. It is crucial for potential solar users to plan ahead and understand the latest regulations to ensure that they benefit fully from their solar investments.