SunWork Renewable Energy Projects

PG&E Net Metering 2.0:
Fees reduce value of electricity up to 10% verses NEM 1 

Net Metering 2.0 kicked in, in late 2016 in PG&E territory. Now that PG&E has transitioned from the original Net Metering to the successor set of policies, the original is now often called NEM 1.0 or NEM1 and the current version is called NEM 2.0 or just NEM2. The transition occurred on Dec 15, 2016, when the total rooftop solar in PG&E's service area reached 5% of “aggregate customer peak demand.” The good news bottom line about NEM2 is that going solar is nearly as positive economically as it was under NEM1.

NEM1 customers will stay on NEM1 (for 20 years from their original interconnection date), but all new solar customers will now be on NEM2

Almost everything in NEM2 is the same as for NEM1: Rate plans and tiers and territories and TOU hours and the minimum bill. Many customers chose to shift to a TOU rate plan under NEM1. Now they must under NEM2.

There are two other ​changes, an interconnection fee, and Non-Bypassable Charges (NBCs). 

The first new NEM2 charge is simple, a $145 onetime interconnection fee, payable to PG&E.  Interconnection had been free under NEM1.

Non-Bypassable Charges (NBCs) – 2.3/kWh for PG&E Customers

The second NEM2 impact reduces the value of the energy that you send back to the grid.  Specifically, solar customers no longer get full retail credit for the electricity returned to the grid.  Under NEM2 you are no longer credited with 2.3 cents per kilowatt for the energy that you send back to the grid as measured hourly. These fees are called Non-Bypassable Charges and all PG&E customers pay them. However, because NBCs are based on the amount of electricity used, under NEM1 solar customers could bypass most of them by shrinking their net consumption (total energy consumed from the grid minus total solar energy generated, over the course of 12 months) down to almost zero.

​NBCs are somewhat ​complicated to calculate​ in practice because PG&E must track more than just net energy usage from or to​ the grid over the month. For example, where you take 400 kWh from the grid and send 350 kWh to the grid, at the end of the month your meter only shows the 50 kWh difference. You could also have used 600 kWh from the grid and sent 550 kWh back, or 150 kWh and 100 kWh, and the meter would show the same 50 kWh net consumption. PG&E will manage this by segmenting each day into 24 hours and tracking net energy on a per-hour basis. ​At the end of the month, PG&E adds up all the hours where you've consumed more than you've generated and for this total you will be charged the additional 2.3/kWh. If you consume 400 kWh from the grid in the month, NBCs will be about 400 times $.023 or $9.20, regardless of how much solar energy you send back. NBCs are in addition to your minimum bill and like the minimum bill, they cannot be offset with solar. 

NEM2 solar economics – Minor Impact

​Under NEM1, solar owners with TOU rate plans were paid the maximum for sending energy to the grid during peak hours, and so they were rewarded for not consuming energy during that time (because your solar energy will power your household consumption before going to the grid), and instead consuming energy as much as possible during off peak hours. Under NEM2 this incentive is still in place (especially because all NEM2 solar customers are required to have TOU rate plans).

However, under NEM2 solar owners also have an opposite incentive. They are now rewarded for consuming their own solar energy (known, ghoulishly, as self-consumption), because all energy they use from the grid will be "taxed" at 2.3/kWh. Generally, the reward for sending solar energy to the grid, which may be exceed 40/kWh, will greatly exceed the reward for consuming your own solar energy (2.3/kWh). Therefore, for example, it usually won’t make sense to run your electric clothes dryer during the afternoon. Of course, there’s always a good reward for any energy reductions or efficiency improvements you make, because these enable you to consume less electricity overall.

Solar finance specialists and installers are working on understanding and modeling the impacts of NEM2 on solar economics. This is important for sizing your solar system accurately. You may want to offset 100% of your consumption for environmental reasons, but solar installers should present alternatives to you, including specifying the amount of solar to install to maximize your economic investment. Also, if you’re considering a significant change in your electricity usage or usage patterns (such as purchasing an electric car), changes in when you use power as well as how much you use are more important for sizing your solar under NEM2 than before.

SunWork’s modeling shows that the effects of NEM2 will be negative for going solar, but not bad—solar remains an excellent investment in PG&E territory.

The charts below model NBC data for one of our customers prior to his going solar, and his net grid usage (based on hourly calculations) given a modeled amount of solar energy generated by a solar system. They’re a bit more complicated than they may appear. Under NEM1, charts like this would not be as relevant to sizing solar. Under NEM1, a chart showing Solar Generation simply subtracted from Pre-Solar Grid Usage could be used to arrive at monthly net consumption (or generation).

Here, for NEM2, the Pre-Solar Grid Usage and Solar Generation lines are the same, but Net Grid Usage with Solar includes the hourly calculations needed for NEM2 NBCs. In other words, the Net Grid Usage with Solar line shows the amount of grid energy drawn after “self-consumption” of solar energy.

          Effects of Solar on the Grid - Hourly

          Effects of Solar on the Grid - Monthly

NEM2 modeling is complex, and appropriate solar size and corresponding financial returns depend more on individual or family daily electricity consumption patterns than was the case under NEM1. SunWork analytical models show that the NEM2 changes will impact going solar by 5% to 10%. Note that the charts above are specific to one customer’s electricity usage. They are not “one size fits all.”

On the bright side, solar equipment prices continue to drop, including a 20% drop in the prices of our most commonly used solar panels in just the first few months of 2017. On a 5 kW (DC) solar system, this panel cost reduction would add up to about $700 savings.  SunWork passes all of our cost savings on to our customers which would cover the first 6 or more years of the NEM2 NBCs. Bottom line, solar remains nearly as strong an investment under PG&E's NEM2 as under NEM1. 

Final points

  • NEM 3.0 is set to arrive in 2019. If you go solar before NEM 3.0, your NEM2 policies will stay in place for 20 years from when you connected to the grid.
  • If you move, the new owner of your home gets to stay with your NEM policy, whether it’s NEM1 or NEM2.

Existing NEM 1 Customers

  • Can expand their solar systems by up to 1 kW (AC) which is about 1.15 kW (DC) before triggering a switch to NEM2.
  • Can stay on existing program for 20 years from the installation date of the system
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