What is Net Energy Metering for Solar?

By Sam Baker
05 April 2018
Net Energy Metering 2 Complete Guide

Net energy metering (NEM) is a system that allows solar panel owners to store their solar energy in an existing electrical grid.

Through NEM, a resident can earn credits for the excess energy they produce and exchange these credits for an equal amount of energy to use at a later time. This is especially beneficial for when you need to use energy at night while your solar panels are not producing any power.

NEM is very common throughout the US and is particularly popular in California.

California is the country’s leader in solar with a total of 18,296 MW of solar installed through 2016. For reference, the second ranked state, North Carolina, only installed a total of 3,016 MW through 2016.

With such a significant presence in the solar industry, it makes sense that California would also be one of the most innovative states for programs and systems like NEM. This can be seen through California’s NEM 2.0 initiative, which several of California’s electric companies have became a part of.

Before we go into the newer programs however, let’s go over some NEM basics.

Net Energy Metering Basics

At its basic level, NEM is very simple.

NEM is a solution that addresses the variations in a solar panel’s energy production throughout the year. Because a solar panel system generates much more energy during the summer months than the winter and no energy at night, NEM allows for excess energy to be converted into credits to be used during these later times.

So, instead of sending a check to a solar panel owner when they produce more energy than they consume, they are instead given credits to be used for an equal amount of energy.

With NEM, the existing electric grid serves as a giant battery for your solar array.

NEM 2.0 In California

NEM 2.0 was introduced by 3 California utility companies when either 5% of the electricity generated during peak hours was sourced from customers with NEM arrangements, or by July 1, 2017. These rules are based on the NEM tariff, which states the conditions for the current programs in place.

Two of these companies, PG&E and SCE, transferred to the current NEM tariff on December 15, 2016 and July 1, 2017, respectively.

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These changes are likely to impact the customers of these companies and revolve around 3 key areas:

  1. Interconnection fee
  2. Non-bypassable charges
  3. Time-of-use (TOU) rates

Although each company includes these changes, the details of each can be different from company to company. Let’s take a look at the details of both companies.

NEM 2.0 - PG&E and SCE

The changes that came with PG&E and SCE’s NEM 2.0 are not too drastic, but they do introduce some restrictions and rules that make the ROI slightly worse.

  1. Interconnection Fee
    An interconnection fee is based on the work required for connecting a solar panel system to the grid. Once it is connected, it also needs to be inspected before it can be approved for the NEM payment system.
    • For PG&E, NEM 2.0 now requires a one-time interconnection fee of $145. With NEM 1, this was completely free.
    • SCE has a charge of $75 for systems that are 1 MW-AC or less, and a $800 charge for systems greater than 1 MW. This was also free for NEM 1.
  2. Non-Bypassable Charges
    California mandated that there should be non-bypassable charges based on the amount of kilowatts that a consumer takes from the energy grid.
    • For NEM 2.0, PG&E charges ~2-3¢ for each kW taken from the grid. This charge is even for the electricity that you are redeeming with earned credits. You are not charged however, if you immediately use your produced electricity. This is also the case for SCE.
    • NEM 1 did not charge for energy taken from the grid if it came from excess production at an earlier time, so this will increase the amount consumers are paying.
  3. Time-Of-Use (TOU) Rates
    One of the requirements to participate in NEM 2.0 is to include TOU rates. SCE’s is planning on launching their TOU rates in 2019, and PG&E currently has these rates in place as a plan option.
    • TOU rates are good for consumers who can control their electricity consumption. It allows these individuals to pay at varying rates depending on the time of the day — lower at off-hours and higher at peak-hours.
    • TOU rates are very beneficial for NEM 2.0 because it allows you to sell your excess electricity at a high rate (if generated during peak hours), and then purchase electricity at a low rate during off-peak times. If done right, this can lead to significantly more savings than a traditional rate structure.

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Flexibility And Savings

Overall, NEM is a great solar incentive that allows solar panel owners to maximize their electricity production. Without such a system, people who have a grid-connected solar array would be paying a normal rate for all of the electricity that otherwise would have been covered by these credits.

NEM is a continuously evolving system that is updated every couple of years, as we have seen with NEM 2.0. For California residents that are customers of PG&E and SCE, NEM 2.0 is introducing new rules that have monetary effects, so it is important to take the time to understand the terms. Hopefully, this post will help you along the way.

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