By Emily Walker (EnergySage)
If you’re a California homeowner, your window to maximize solar savings is closing quickly. On April 15, 2023, California’s new solar policy – net metering 3 (NEM 3) – takes effect, decreasing what you could save from solar energy by tens of thousands of dollars. The good news: you still have time to lock in higher savings for 20 years! All you have to do is sign a contract with an installer and get the necessary paperwork submitted before April 14 at 5PM PT. After that, you’ll still have three years to actually install your system. Let’s explore the basics of NEM 3, including what it means for you and how to become grandfathered into California’s current solar policy so that you can save more with solar.
What is NEM 3?
Net metering 3 is California’s third iteration of a net metering policy, which was approved by the California Public Utilities Commission (CPUC) in December 2022 and goes into effect on April 15. Net metering – or NEM – is a foundational solar policy that allows you to earn credits for the excess electricity your solar energy system generates and sends to the grid. But importantly, your utility doesn’t always pay you the same price for the electricity you send to them as they charge for what you purchase from them.
Under NEM 3, this price will drop by about 75% compared to the current policy, NEM 2. Luckily, as long as you sign a contract with a solar installer, they submit your interconnection application before the deadline, and you get your system installed within three years of that submittal date, you’ll be grandfathered into NEM 2 rates for 20 years. Also, keep in mind that NEM 3 only impacts Investor Owned Utilities (IOUs), which includes PG&E, SCE, and SDG&E – if you don’t receive your electricity from one of these three companies, you don’t need to worry about NEM 3.
It’s important to keep in mind that you consume the majority of the electricity your solar panel system produces. So, because this reduction in compensation only impacts what you’re exporting, solar will still be worth it under NEM 3 – you’ll just save a lot less over time.
What you’ll miss if you don’t meet the deadline
Let’s say you’re thinking about installing a solar-only system (meaning it doesn’t include a battery) – what happens if you wait until after April 14 to submit your interconnection application? Right now, it takes about 5-6 years to completely recoup the cost of your solar installation (known as your “payback period”) in California – this is based on what you save on electric bills by generating your own electricity and earning net metering credits. After this point, your system effectively generates free electricity for you to use.
Under NEM 3, this payback period will be extended to 9-10 years, meaning it will take 4 more years to pay off your solar investment. And, over the course of 20 years, what you save from going solar will drop from about $50,000-$65,000 under NEM 2 to $20,000-$25,000 under NEM 3: meaning you’ll miss out on $30,000-$40,000 savings.
Now, what about if you’re looking for resiliency or more grid independence and are already planning to install a solar + battery system? Assuming your system is connected to the grid and you can export excess electricity, waiting until NEM 3 isn’t quite as bad – but you will likely still miss out on some savings. On average, the payback period for solar and a battery will increase from 7 years under NEM 2 to 7-8 years under NEM 3 and your 20-year savings will decrease by about $7,000 (from $60,000-$72,000 to $53,000-$65,000).
The bottom line: In both cases, your best bet is to go solar now; if you miss the April 14 deadline, solar only makes sense in California with a battery – otherwise, it will take longer to pay off your investment and you’ll save less over time.
How to lock in higher solar savings
Now that you understand what’s on the line, how can you ensure you meet the deadline? There are already great incentives to go solar in California right now, so starting the process as soon as possible is key. Here’s what you need to do:
- March 3, 2023: decide if you should go solar and get quotes – preferably from multiple installers so you can compare your options
- March 17, 2023: choose an installer and sign your contract
- March 31, 2023: schedule your site visit – this can be conducted either in person or virtually (depending on your installer). Learn how to prepare for a virtual site visit.
- April 14, 2023: get your interconnection application submitted before this date – your installer will be the one to hit “submit,” but you’ll need to sign some paperwork in the process
You have three years after your interconnection application is submitted (by April 14, 2026 at the latest) to install your solar energy system!
Common questions about NEM 3
Net metering 3 comes with a lot of changes – so it’s normal to have questions! Here are some of the top questions California homeowners are asking:
Can I increase the capacity of my solar panel system after NEM 3?
You can increase the capacity of your solar system up to 1 kilowatt (kW) or 10% (whichever is higher) above what’s included in your interconnection application. However, if you want to add additional capacity to an existing system, you’ll need to submit a separate interconnection application, which will cause you to lose your NEM 2 grandfathering status.
What happens if I sell my house?
If you’ve locked in NEM 2 rates and you sell your home, your grandfathering status will transfer to the new homeowners. Previous studies have shown that solar already increases your home value by about 4% on average, so you should feel confident in your solar investment even if you’re planning to sell your home in the next few years.
Can I add a battery to my system after NEM 3?
Yes! If you decide you want to add a battery to your existing solar panel system in the future, you’ll still remain locked into NEM 2 rates.
Why does my installer need my electric bill?
Your installer needs your electric bill to accurately size your system. So, if you have it on hand when you get quotes, you’ll expedite the process of going solar! Learn about how to quickly access your previous electric bills in California.
I’m part of a Community Choice Aggregation (CCA) program – will NEM 3 still impact me?
If one of the three California IOUs – PG&E, SCE, or SDG&E – is the company that actually delivers your electricity, you will still be impacted by NEM 3 even if you’re part of a CCA program.
Still have more questions? Register for a webinar led by solar experts to get them answered.
How to go solar with confidence in CA
Going solar in such a compressed timeline may feel daunting, but the steps to lock in NEM 2 rates are actually quite simple – especially if you know where to turn. EnergySage, the Nation’s leading online solar marketplace, can help. We take the guesswork out of going solar by gathering custom solar quotes for your home from reputable installers in your area. EnergySage provides transparent information (including pricing, equipment quality, and installer reputation), so you can compare all your options from the comfort of your couch – and it’s entirely free to use! Get started today with EnergySage.