Net metering 2.0 in California: Complete overview

Net metering in California is part of what makes the Golden State the undisputed leader for solar in the country. In fact, California saw 26,232 megawatts (MW) of solar installed as of the end of Q3 2019, about five times as much as the #2 state North Carolina.

NOTE: The California Public Utility Commission has implemented the third iteration of net metering, NEM 3.0. Learn more about NEM 3.0 here. New solar projects in California will no longer fall under NEM 2.0. The article below was originally published in 2020 and reflects the old policy.

Homeowners and businesses can use California's net metering to receive bill credits for the excess electricity that their solar panels produce, as long as the system is less than 1,000 kilowatts (1 MW). With the help of net metering in CA, electric utility customers who install solar typically save tens of thousands of dollars on their electricity costs over the lifetime of their solar panels.

California's first net metering policy set a "cap" for the three investor-owned utilities in the state: Pacific Gas & Electric (PG&E), San Diego Gas & Electric (SDG&E), and Southern California Edison (SCE). Total solar installations in each utility's territory were capped at five percent of total peak electricity demand. As a result of explosive solar growth in the Golden State, all three utilities were approaching their caps by the end of 2015. To ensure that solar would continue to succeed, the California Public Utilities Commission (CPUC) created a next-generation program known as "Net Metering 2.0" (NEM 2.0) that extends California net metering benefits for years to come.

The original policy for net metering in California is very simple: for every kilowatt-hour (kWh) of solar electricity you feed into the grid, you get a bill credit for one kWh of utility-generated electricity. When your solar panels produce more than you need, you "bank" the excess to use when your panels don't produce enough to meet your monthly use. If your system is the right size, net metering makes it possible for you to cover your electricity use for the entire year with solar.

Net Metering 2.0 makes a few minor changes to California's original net metering policy, but it preserves the key element that makes solar economical for California residents: retail rate bill credits. Homeowners and businesses that enroll in NEM 2.0 will still receive per-kWh credits for their solar electricity that are equal to the value of a kWh of utility electricity. This means that the economics of solar are still very favorable under NEM 2.0.

In addition to preserving retail rate bill credits, the new California net metering program also prohibits many fixed charges for residential customers, including demand charges, grid access charges, installed capacity fees, and standby fees. NEM 2.0 will run until 2019, at which point the CPUC will look at establishing a new program that is designed to account for the benefits of solar in different locations and at different times.

There are three main differences between the original California net metering policy and Net Metering 2.0: time-of-use rates, interconnection fees, and non-bypassable charges. The California Solar Energy Industries Association (CalSEIA) estimates that the combined impact of these changes will be approximately $10/month compared to the original policy.

Time-of-use (TOU) rates

TOU rates are designed to align your electricity costs with demand across the electric grid. Electricity is most expensive at times of high demand, like late afternoon and early evening, which means that your utility will charge you more per kWh during those "peak hours." It also means that net metering credits will be worth more for electricity you send back to the grid during peak hours.

Under NEM 2.0, every property owner who installs a solar energy system will automatically be switched to TOU rates for their electric bills. What you pay per kWh will depend on your utility. Solar panel systems operating under NEM 2.0 can be just as economical as traditional net metering with the right system design. In general, TOU rates are highest in the afternoon and evening during the summer and lowest during nights and weekends in the winter. Property owners with solar systems on NEM 2.0 can maximize net metering credits by locating panels on the west side of the roof so that they capture the late afternoon sun. (Learn more about how roof orientation can impact your solar savings.)

Interconnection fee

Before your solar PV system can send electricity back to the grid, a representative from your city or town will come to your property to inspect the system and sign off on the installation. Under NEM 2.0, residential and small commercial system owners pay a small one-time "interconnection fee” to connect their solar panels to the electric grid. For SDG&E customers, the fee is $132, PG&E customers will pay $145, and SCE customers pay $75.

Non-bypassable charges

Non-bypassable charges (NBCs) are per-kilowatt-hour charges that are built into utility electric rates. They add up to approximately 2-3 cents per kWh and go towards funding energy efficiency, low-income customer assistance, and other related programs.

In the original net metering policy, system owners did not have to pay NBCs on the electricity that they bought from the utility on a month-to-month basis. "Under NEM 2.0, new system owners will have to pay NBCs, but only for the kWh of electricity delivered by the utility. None of the solar electricity generated and used at home will be subject to NBCs.

NEM 2.0 enrollment for PG&E, SCE, and SDG&E customers starts after each utility reaches its original net metering cap or by July 1, 2017 – whichever happens first. The status for each utility is as follows:

• SDG&E: Net metering reached its cap in the summer of 2016, which means that new San Diego solar system owners are currently enrolling in net metering 2.0.

• PG&E: PG&E reached its net metering cap on December 15, 2016. All new PG&E solar customers are being enrolled in NEM 2.0.

• SCE: The original SCE net metering program reached its cap in the summer of 2017, and all new solar customers will enroll in NEM 2.0.

Utility customers who installed solar under the original net metering policy will be "grandfathered" in for 20 years from their original enrollment date. After that point, they will also move to NEM 2.0.

About net metering in California

• Net Energy Meeting (NEM) Successor Tariff (California Public Utilities Commission)

• Net Energy Metering in California (Go Solar California)

• San Diego about to hit net metering caps (San Diego Union-Tribune, June 17, 2016)

Net metering policies: PG&E, SDG&E, and SCE

• Understanding Net Energy Metering and Your Bill (Pacific Gas & Electric)

• Net Energy Metering Program (San Diego Gas & Electric)

• Net Energy Metering FAQ (Southern California Edison)

Three Tips for Solar Shoppers

1. Homeowners who get multiple quotes save 10% or more

As with any big-ticket purchase, shopping for a solar panel installation takes a lot of research and consideration, including a thorough review of the companies in your area. A recent report by the U.S. Department of Energy's National Renewable Energy Laboratory (NREL) recommended that consumers compare as many solar options as possible to avoid paying inflated prices offered by the large installers in the solar industry.

To find the smaller contractors that typically offer lower prices, you'll need to use an installer network like EnergySage. You can receive free quotes from vetted installers local to you when you register your property on our Solar Marketplace – homeowners who get three or more quotes can expect to save $5,000 to $10,000 on their solar panel installation.

2. The biggest installers typically don't offer the best price

The bigger isn't always better mantra is one of the main reasons we strongly encourage homeowners to consider all of their solar options, not just the brands large enough to pay for the most advertising. A recent report by the U.S. government found that large installers are $2,000 to $5,000 more expensive than small solar companies. If you have offers from some of the big installers in solar, make sure you compare those bids with quotes from local installers to ensure you don't overpay for solar.

3. Comparing all your equipment options is just as important

National-scale installers don't just offer higher prices – they also tend to have fewer solar equipment options, which can have a significant impact on your system's electricity production. By collecting a diverse array of solar bids, you can compare costs and savings based on the different equipment packages available to you.

There are multiple variables to consider when seeking out the best solar panels on the market. While certain panels will have higher efficiency ratings than others, investing in top-of-the-line solar equipment doesn't always result in higher savings. The only way to find the "sweet spot" for your property is to evaluate quotes with varying equipment and financing offers.

For any homeowner in the early stage of shopping for solar that would just like a ballpark estimate for an installation, try our Solar Calculator, which offers upfront cost and long-term savings estimates based on your location and roof type. For those looking to get quotes from local contractors today, check out our quote comparison platform.