Understand Net Metering and NEM 2.0
What is Net Metering?
Net Metering is an incentive for solar power system owners that allows you to store extra energy in the electric grid. You receive credit from the utility company for the extra power you create. You can use the credit to buy power for your home when your system is under-producing (i.e. nighttime).
“Net”? “Metering”? “NEM”?
“Net” as in net energy, is excess total energy. The (energy you produce) minus the (energy you use) is equal to your (net energy). And “Metering” as in calculating the amount of something. Thus, “Net Metering” is a system that calculates the “total amount of energy” your system creates. It is also how your utility company can track the excess energy you produce. Net Metering is also called “net energy metering” , or by the acronym “NEM”.
How Does Net Metering Work?
Net Metering tracks the excess electricity created by your solar power system. They use this electricity to power other buildings on the electric grid. Your local utility company gives you credit for the excess electricity you give to the grid. The credit given to you varies based on time of day.
For example, a solar energy system is producing the most electricity in the afternoon, when most people are away at work. By contrast, people are usually at home and using more power in the mornings and evenings, when your system is producing less energy. With net metering, you can use the credits you earned during the afternoon on the power you would normally pay for in the evenings. Thus, net metering helps even out the daily changes in production.
Why Would My Meter Run Backwards?
Usually, the utility meter moves forward to keep track of the electricity you use. In net metering, the excess electricity is fed into the grid, causing the utility meter to run in reverse. If you need to use electricity from the grid, the meter will use credits and run forward again. When you create excess again it will run backwards again.
What Is Time Of Use?
You have probably heard of Time of Use on the news or from your utility company. Time Of Use, or TOU, is a system that uses demand to determine the rate charged for electricity. When electricity is in high-demand (being used a lot), like the afternoon/evening the rate goes up. When electricity is in less-demand (being used less), like nighttime, the rate goes down. Prices are predetermined for each time period and don’t adjust according to day-to-day changes.
Please note: Net metering/NEM 2.0 does not limit a customer’s eligibility for any other rebate, incentive, or credit provided by an electric utility.
Find out more about the basics of Solar on our Solar Power 101 page.
Net Metering 2.0 in California
California is the number one solar state in America. Almost 6 million homes use solar power and there are over 100,000 Californians employed by the solar industry. Excitingly, California has plans to make its energy fifty percent from renewable sources, like solar, by 2030.
What is NEM 2.0?
NEM 2.0 is the second-edition program by the California Public Utilities Commission (CPUC). As of 2017, all three major utility organizations have adopted the NEM 2.0.
The Big Changes in 2.0 vs 1.0
There are a few big changes in NEM 2.0. The first major change is Non-bypassable charges (NBCs). Previously, system owners were not charged additional fees for the electricity bought from the utility company. With NEM 2.0, system owners will be charged NBCs of approx 2-3 cents per kWh used on a monthly basis. The next is time-of-use, systems installed from now on will purchase electricity based on time of use rates. Lastly, NEM 2.0 requires a new one-time interconnection fee to connect your new solar power system to the electric grid.
NEM 2.0 Is Still Good For Homeowners
NEM 2.0 homeowners will still receive per-kWh credits for their solar electricity at retail rates, like with NEM 1.0. Other area utility companies will pay you lesser wholesale rates, which is worse for the homeowner. If your monthly energy production is more than total usage for the month, you will receive a credit based on the net kW hours you gave to the grid for your next month’s bill. If your total month’s production is less electricity than you use, you must buy electricity from your utility to make up the difference.
Do I Get A Check?
In short, no you don’t get a shiny check with your name on it. You get charges deducted from your energy bill. You get issued credit from your utility company for giving them the excess energy you produced. On a month-to-month basis, bill credits for the excess electricity created are applied to a customer’s bill, making your bill lower. NEM 2.0 literally saves you money on your electric bill.
NEM 2.0 Fees
There are three small fees for those customers participating in NEM 2.0. The purpose of these fees is to help offset the cost for non-NEM utility customers.
1. One-time interconnection fee. NEM 2.0 customers with systems under 1 MW must pay a pre-approved one-time interconnection fee based on historic interconnection costs. At the time of this article: PG&E’s fee is $145; SCE is $75; SCE is $75, and SDG&E is $132. Customer-generators with systems over 1 MW must pay $800 interconnection fee and pay for all transmission/distribution system upgrades.
2. Pay NBCs. NEM 2.0 customers will pay small charges on each kilowatt-hour (kWh) of electricity they consume from the grid. These charges fund important programs such as low-income and energy efficiency programs.
3. Transfer to a time-of-use rate. If not already on a time-of-use rate with the utility company, NEM 2.0 customers will be required to pay per local time-of-use rates, when buying electricity.
How Can I Make The Best of NEM 2.0?
The new fees associated with NEM 2.0 are a bit of a let down for new solar customers. However, PetersenDean is here to help! You can make the best of the transfer to time-of-use rate by adding an Energy Storage Battery to your system. NEM 2.0 will cause many solar power owners to have a leftover bill because of the increased time of use rates. Time of use allows the utility company to charge you more for power when your system isn’t as effective. If you add energy storage with a backup battery, you can help offset these costs. Your home will be able to use the energy stored in your battery before getting it from the utility company. This will lower overall electricity you have to purchase.
To find out more about backup batteries visit our Energy Storage page here.
You can also make the best of NEM 2.0 by purchasing your system from a reputable company. The average lifespan of a solar company is only three years. PetersenDean has been around since 1984 and is here to stay. We have installed over 1 million roof and solar power systems and strive to bring the best quality products, service, and warranty to our customers.
Other Important Things to Know
What are NSCs?
Net Surplus Compensation, or NSC, is when excess electricity made by a solar power customer gets reconciled at the end of the customers 12-month billing period with the utility company. The rate for NSC is based on the average rate of energy over the same 12-month period. Check with your utility company about their NSC policies.
NEM and Going “Off-Grid”
Net Metering without the grid, or being “Off-Grid” is like locking the barn door after the horse ran away. It doesn’t make a lot of sense. You lose the ability to earn credit from the “Grid”. You can still use solar with an external energy storage system or backup battery, but it is likely not enough energy to power your home at all times, all year round.
To find out more about backup batteries visit our Energy Storage page here.
Outside of California? Discover the NEM policies in your state with the Database of State Incentives for Renewables and Efficiency Map.