The article was reposted with permission from Run on Sun. Subscribe to the California installer’s monthly newsletter.
Run on Sun has written at some length about how Net Energy Metering (NEM) works and about the upcoming changes–NEM 2.0. While both PG&E and SDG&E have already switched to the 2.0 version, SCE customers are still able to go solar under the existing, more favorable rules, but not for much longer. It’s important to note that PWP and LADWP customers are unaffected by this change, so the following is only relevant to SCE customers.
Here’s an update as we dive headlong into the brave new world of NEM 2.0.
Timing of the change
Under the rules adopted by the California Public Utilities Commission (CPUC), SCE must continue to allow new customers to operate under the current NEM 1.0 rules, until either of the following events occur:
- SCE reaches its NEM 1.0 cap of 5% of net aggregate demand, or
- We reach the deadline date of July 1, 2017.
As of this writing, SCE is still a full percentage point below its cap, with 480 MW worth of solar to install before the cap is reached. That’s not likely to happen before the end of June, so the deadline to get in on the current rules is 11:59 p.m. on June 30, 2017.
But here is the rub—to qualify, not only must the project have been completed, but a final, signed-off inspection card must also be submitted to SCE prior to the deadline. This is going to make June a difficult month as installers struggle to get projects completed and approved in time. Since approvals are at the whim of individual inspectors, it is difficult to guarantee that a project will be approved on first inspection.
Prudent consumers will want to make sure that first inspection occurs on or before June 15.
Although NEM 2.0 is not the crushing blow to solar that some feared it might become, it still has a number of aspects that make it less appealing to the solar system owner. Here are the major differences:
- New Interconnection Fee—Presently, it doesn’t cost anything to connect to SCE’s grid. NEM 2.0 changes that and imposes a one-time charge of $ 75.
- Imposition of Nonbypassable Charges (NBCs)—Under existing rules, if the credits generated by exporting power to the grid equal or exceed the charges incurred for energy imported, the energy charges are zeroed out (or even a credit is carried forward, if exports exceeded imports). Under NEM 2.0, for every kWh imported from the grid, whether it can be netted out, there are NBCs charged for that energy. The good news is that this is just about 2.2¢/kWh, and it does not apply to solar energy consumed locally, but it does still decrease the savings from solar.
- Mandatory Time-of-Use (TOU) Rates—Presently, residential customers on an SCE tiered rate before adding solar remain on that rate after interconnection. NEM 2.0 changes and forces new solar customers to shift to a TOU rate. SCE’s TOU rate charges the most for energy consumed from 2 to 8 p.m., meaning that energy exported to the grid before 2 p.m. (as many solar systems do) is less valuable to the consumer than the energy they have to import from the grid in the evening after the solar system is no longer producing.
(Unintended?) Consequences of NEM 2.0
The coming of NEM 2.0 has some obvious consequences—there will be a crush this spring to get projects approved before the new rules take effect (so don’t wait!), and the overall savings from going solar will be reduced, although not dramatically so.
But there are some unintended consequences as well. For one, these new rules will be a boon for intelligent storage systems, both to help reduce NBCs and to shift that otherwise exported energy to peak TOU periods. Storage systems with the “smarts” to do all that will suddenly make economic sense–think AC batteries.
Another unintended consequence is the significantly increased difficulty in properly modeling the savings derived from adding solar. While some installation companies use sophisticated software like EnergyToolbase (as Run on Sun does) or build out sufficiently detailed spreadsheet models (as Run on Sun also does), for many, that level of complexity is simply overwhelming. So what will they do? More than likely, they’ll create a number that is little more than a wild guess.
Therefore, potential solar clients should push companies providing them with solar quotes to justify their savings numbers. Be wary of numbers, especially outliers that claim greater savings without sufficient documentation.