California Net Energy Metering 3.0 (NEM3)

on January 20, 2022

California is updating its Net Energy Metering policies in 2022, commonly referred to as NEM 3.0. Genability customers can rely on Genability providing full support for them. Ahead of the publication of the final NEM 3.0 tariffs and rates, Genability (now part of Arcadia) has published a set of tariffs with the latest proposed rate structures for customers to use. Once details are available, the finalized tariffs and rates will be published for all to use.

In this blog post, we track updates as the policies and rate changes firm up. We recommend checking back here from time to time to get the latest.

February 3, 2022 - UPDATE

The California PUC has postponed review of NEM 3.0 indefinitely.

January 20, 2022 - UPDATE

Genability has just released NEM 3.0 tariffs based upon the 12/13/2021 Proposed Decision from the California PUC. There is one NEM 3.0 tariff for each affected utility.

Switch customers can now use these tariffs to estimate savings for their customers under the rules outlined in the Proposed Decision.

The most complex feature of the NEM 3.0 tariffs is the export price that varies according to the hour of the day, weekday vs. weekend, and the month of the year. As outlined in the decision, each climate zone will have its own, specific export price schedule that is specific for that climate region.

In the interest of making the NEM 3.0 tariffs available to our customers now, Genability is initially making only one export price schedule per utility available.

  • Pacific Gas & Electric - Climate Zone 3B (San Francisco Bay Area)
  • Southern California Edison - Climate Zone 9 (Inland Orange County, Santa Ana)
  • San Diego Gas & Electric - Zone 10 (Inland San Diego County)

We will be building support for territory-specific price schedules in the future. Once built, the Switch API will use the address set on the customer account to determine the appropriate export price schedule for that customer.

How Genability will support the proposed NEM 3.0 tariffs

Genability has modeled the California NEM 3.0 tariffs outlined in this CPUC Proposed Decision. We will soon be publishing the most recent proposed NEM 3.0 version of the following tariffs:

  • EV-2A-TOU for Pacific Gas & Electric
  • D-TOU-PRIME for Southern California Edison
  • EV-TOU-5 for San Diego Gas & Electric

You will see “Proposed” in the tariff name, and these NEM 3.0 tariffs will incorporate the change to hourly export rates resolved in real-time, the grid access fee, and the market transition credit. The hourly export rates will vary by territory in accordance with the proposed decision.

What is NEM 3.0?

With NEM 3.0, the California PUC requires new solar customers to switch to time-of-use (TOU) tariffs that are currently only available to customers with electric vehicles or batteries (see list above). In addition, new solar customers will be required to pay a grid access fee of $8/month per kW of solar installed. For PG&E and SCE, the grid access charge will initially be offset by a market transition credit that also varies according to the size of the customer’s solar system.

But the most disruptive feature of NEM 3.0 for solar developers is the change in how power exported to the grid is valued. With NEM 3.0, new solar customers will be required to install a dual-register meter that measures imports and exports in real time. This means that at any given time, the meter is measuring either the power imported from the grid or the power exported to the grid.

  • Imports will be priced at the TOU prices defined in EV-2A-TOU, TOU-D-PRIME and EV-TOU-5.
  • Exports will be credited to the customer according to the avoided cost calculator (ACC) values.

From the NEM 3.0 ruling:

"Export Compensation Rates based on hourly Avoided Cost Calculator values averaged across days in a month, differentiated by weekdays and weekends. For the first five years after system interconnection ("R.20-08-020 ALJ/KHY/jnf PROPOSED DECISION - 181"), export compensation rates will be based on a five-year schedule fo values for each hour from the most recent Avoided Cost Calculator, adopted as of January 1 of the calendar year of the customer's interconnection date. Following the five-year lock-in rate, export compensation rates will be based on averaged hourly avoided cost values from the most recent Avoided Cost Calculator, adopted as of January 1."

In practice, this means that there will be 48 export prices per month, 24 each for weekdays and weekends.

How does this impact Switch implementations?

Most Genability Switch customers will not need to make any changes in order to use the proposed NEM 3.0 tariffs.

Genability has long supported real-time netting. We employ a proprietary algorithm that models real-time imports and exports from the annual-hourly (8760) solar profile provided by Switch customers and the annual-hourly (8760) usage profile, whether it’s provided by the Switch customer or extrapolated by our Intelligent Baselining algorithm. These capabilities allow Genability to assign an import kWh and export kWh to every hour in the year, which is then used to calculate costs and credits.

In addition, Switch already supports rate structures like the market transition credit. If a Switch customer sets the system size on the solar production profile, Genability will use that value to calculate the market transition credit. If you do not, Genability will solve for a system size based on the customer’s location and the annual solar production, assuming typical solar settings.

Finally, note that with our recent release of performance and experience upgrades to Switch when using interval rather than billing data, we are ready to provide you with the best solar + storage analysis in the industry.

How does NEM 3.0 impact the economics of solar in California?

Genability is performing a detailed analysis of NEM 3.0 utility avoided cost economics, and will update this blog post soon. However, as a preview, and not unexpectedly, NEM 3.0 does have a sizable negative impact on many rooftop solar scenarios when compared with NEM 2.0. To understand why, look at the export credits available to solar customers under NEM 3.0. The ACC values exports to the grid lowest during the hours when the sun is shining and values them highest just as the sun sets. This means that the economics of rooftop solar without storage will be very difficult.

However, with storage, the economics improve dramatically. By banking the excess solar production during the daylight hours to release in the evening, the solar + storage customer can not only offset high-priced evening power but also potentially export power to the grid during those hours to receive hefty export credits.

For Genability Switch customers, this means that you should review how you are modeling solar and storage using Switch. How you’ve included solar in your calculations may not be optimal for the new ACC hourly prices, which provide a significant opportunity to increase customer savings.

Final thoughts

It is not yet clear when the NEM 3.0 tariffs will go into effect, and there will likely be changes to the NEM 3.0 tariffs before they are official. We recommend that Switch customers who are active in California review their Switch API implementation with an eye first to how they model storage and solar. This will have the most impact on solar economics under NEM 3.0.

Less critical is to review whether you send Genability the system size when creating a solar profile. Be assured that if you do not, we will estimate that value and the calculation will reflect a representative but not precise system size.