Editor’s Note: This blog is based on a webinar of the same title, hosted by Greentech Renewables and Schneider Electric on July 27, 2023 .
It’s no secret that NEM 3.0 has changed the landscape of residential solar in California. Experts suggest pairing solar with storage systems, but is that enough? As an installer, how can you make the best financial case under NEM 3.0?
A Brief History of NEM in California
Net Energy Metering (NEM) 3.0 in California made headlines this year, but let’s look back and see the brief history of NEM in California.
Pioneered in the early 80s in Arizona and Idaho, NEM legislation, more commonly known as NEM 1.0, was brought to California in 1996 to stimulate economic growth after the recession of the early 90s. NEM 1.0 also intended to diversify the energy resource mix, adding more renewables to the energy portfolio and encouraging investment in renewables.
Since then, we saw an incredible decrease in system cost, which has driven the exponential growth of solar adoption. In 2016, NEM 2.0 was approved by California Public Utilities Commission (CPUC). The changes included addressing residential time-of-use (TOU) rates for all new NEM 2.0 customers, one-time interconnection fees, and repayment rates. If you were already in the solar industry, you would remember that the introduction of NEM 2.0 shook the industry. Nonetheless, under NEM 2.0, homeowners could receive almost a full retail rate for their excess generation of solar energy.
Now we’re in 2023, and NEM 3.0 has rolled out. With significant changes in net metering credits, many installers are worried. But, changes are also opportunities – how do we make NEM 3.0 financially feasible for the end customers? And, how do we move forward in this new environment?
NEM 3.0 Requires Storage
Most California installers are familiar with NEM 3.0 by now, but here is a quick refresher on the three main changes with NEM 3.0:
- Solar-only owners will earn 75% less for the excess electricity they push to the grid.
- The payback period for solar-plus-storage will be faster compared with for solar-only installations.
- Solar-plus-storage systems do not lose as much savings as solar-only systems do.
Now, let’s look at some of these figures. As EnergySage research shows, under NEM 3.0, the payback period for a solar-only installation will be nine to ten years. Meanwhile, a solar-plus-storage installation will take seven to eight years to recover the initial investment. Interestingly in Southern California, the average payback period for a solar-plus-storage system has not significantly changed between NEM 2.0 and NEM 3.0.
An even more significant difference is expected when you look at the 20-year savings. Using San Diego as an example, solar-only customers could save $58,000 under NEM 2.0. However, under NEM 3.0, they can expect only $25,000 in savings over 20 years, over a 60% decline from NEM 2.0. Meanwhile solar-plus-storage customers in the same area can see $65,000 in savings under NEM 3.0. This is an important element when you, as an installer, think about storage.
Assumes an 8 kilowatt (kW) solar panel system at $3/Watt. Source: EnergySage
Why Do Homeowners Want Storage?
Solar-plus-storage has been a growing market, and California already has the 2nd highest residential storage attachment rate in the US (8% in 2020). Hawaii has by far the highest residential storage attachment rates of 80%, driven by net metering reforms that incentivize self-consumption. That’s precisely what we see right now in California with NEM 3.0, where utilities do not favor exporting excess energy.
When we look at why homeowners want storage, savings is the primary driver for consumer interest. While backup power is important, the latest EnergySage report shows over 50% of consumers pointed to financial savings on utility rates as their main driver for their interest on purchasing storage.
How should installers maximize the savings homeowners are looking for? Storage will allow the homeowners to manage their usage through grid arbitrage, making the financial case for NEM 3.0. But is that enough? With load management paired with home electrification, homeowners will manage not only their production and storage, but also their consumption. This way, they are turning their home into a smart, sustainable home.
A Smart and Sustainable Home
What does a smart, sustainable home look like? It manages energy and home automation, monitoring and controlling energy consumption at the device level. So, every home appliance, whether at the device level or the breaker level, is monitored and controlled. This will allow you to orchestrate the home’s energy production and consumption, a key element of a smart home. If the homeowner also has an electric vehicle (EV), it’s critical to integrate utility power, solar backup battery, and EV charging as it’s one of the largest electrical draws on a modern house. Utilizing the TOU rate and managing loads automatically, homeowners can maximize savings.
When you manage your loads, you can optimize your energy usage and control connected appliances resulting in savings. Most large loads can be managed at the breaker level while smaller devices can be controlled at the circuit level by using smart receptacle management. Load control devices should be using smart AI to leverage data-driven insights.
Another advantage of using load control is extending the battery’s backup power. Using intelligence and letting homeowners select what to power and when during an outage, load management helps extend battery runtime. What does that mean? Many solar-plus-storage systems in California include 30 kWh of storage. With load management, potentially, you will need less storage because home loads are controlled. Considering storage is often the highest cost of your system, this will offer homeowners savings and make you a more competitive installer.
Introducing Schneider Home
Early this year, Schneider Electric unveiled Schneider Home, a first-of-its-kind home energy management solution. Controlled by a single intuitive app, this innovative solution integrates a high-power solar inverter, home battery for clean energy storage, a smart electrical panel for load control, electric vehicle charger, and connected electric sockets and switches – making homes more efficient and sustainable.
- Schneider Pulse panel is the heart of the electrified home, a smart electrical panel that connects all your home’s energy sources.
- Schneider Inverter is a high-power hybrid inverter for solar and storage that can be used for both solar-only installations and solar with storage.
- Schneider Boost battery stores solar energy during the day so you can use it during peak rates for utility bill savings and reliable power during an outage.
- Schneider Charge can use your home’s solar to charge your electric vehicles sustainably and reduce charging costs.
- Schneider Touch connected switches and outlets provide convenient control and monitoring of your lights and appliances remotely.
- Schneider Home app controls it all, giving you the power to monitor, control, and automate your entire home’s energy system all through one simple app.
Designed for all home energy needs, Schneider Home allows homeowners to save money by optimizing energy use with energy-saving settings and real-time monitoring while keeping them comfortable. Stay powered longer with fewer batteries by choosing where power goes during an outage. To learn more about Schneider Home, please visit schneiderhome.com.