California's Net Energy Metering 2.0 Program Explained

In January 2016, California regulators voted to extend Net Energy Metering (NEM) in its current form for California solar customers, with some modifications. Commercial, industrial, and public customers in PG&E, SCE, and SDG&E service territories can continue to invest in solar energy solutions that deliver positive economic returns, while simultaneously providing clean energy to the grid. This historic decision underscored the important contribution distributed solar provides to California and its electric ratepayers and ensures the state will continue to be a leader in North America’s growing renewable energy sector. California continues to lead the nation in installed solar capacity and progressive clean energy policies.

The original NEM program ends for the three utilities when penetration of distributed solar generation in its territory reaches 5% of the utility’s highest aggregated peak customer demand. San Diego Gas & Electric (SDG&E) hit its cap in April 2016, and Pacific Gas & Electric (PG&E) reached its cap in December 2016. Both utilities are now offering NEM 2.0. Southern California Edison (SCE) has enough remaining capacity under its NEM 1.0 cap to reach the statutory deadline of July 1, 2017, after which point SCE will also offer NEM 2.0.
The new NEM 2.0 program will largely maintain the same favorable design as the current NEM program with a few modifications.

Interconnection Application Fees: While current NEM customers have historically been exempt from paying a one-time interconnection application fee, customers installing solar under NEM 2.0 pay that fee, which is utility specific and for systems under 1 megawatt (MW) is $132 for SDG&E, $145 for PG&E, and $75 for SCE. The cost increases for systems larger than 1 MW. This one-time fee goes to the utility to cover some of the interconnection costs associated with a solar power installation and are paid when the system owner applies to interconnect their solar power installation to the utility grid.

Non-Bypassable Charges (NBC): Customers continue to receive a full retail credit for all energy exported onto the grid, although they now have to contribute more to public programs through NBCs than they were previously paying. NBCs fund public purpose programs considered by law to benefit society, such as low-income ratepayer assistance, Department of Water Resources bond charges, nuclear power plant decommissioning, and energy efficiency activities. These charges are approximately a 2 to 3 cent reduction per kilowatt-hour of credit for exported energy.

Grandfathering: The decision calls for a re-evaluation of NEM 2.0 starting in 2019. However, it provides customers who decide to install solar before that time a 20-year grandfathering of their specific NEM mechanism. This provides customers with confidence to install solar in the next few years knowing that they will maintain NEM 2.0 for the lifetime of their investment.

System Size: Another positive change in the NEM 2.0 program is the lifting of the 1 MW system size cap, so long as the system is sized to customer load. This change will have the greatest impact on larger energy consuming entities in the commercial, industrial, and public sectors. Under NEM 2.0, a single solar array can be larger than 1 MW and tied into a single utility meter as long as the installation does not have a negative impact on the utility grid. California regulators determined that in order to ensure this, customers of systems larger than 1 MW are responsible for all interconnection and upgrade costs. The Net Energy Meter Aggregation (NEMA) program will also continue, and the lifting of the 1 MW system size cap will apply to NEMA customers as well.

California solar customers have benefited from a variety of successful progressive state programs and policies that were implemented to jump-start the deployment of solar. Thanks to the NEM 2.0 decision, California regulators are enabling customers to continue to benefit from an affordable, viable way to save on energy costs and reduce their environmental impact. California will continue on its path to transition its energy supply away from an aging polluting infrastructure to one that can support the capacity needs of our growing economy in a sustainable and environmentally conscious way.

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