What Is NEM 2 and NEM 3?

NEM stands for Net Metering, the process where solar homeowners use the grid to not only buy power from their utility, but also receive credits and spin their meter backwards when exporting to the grid. The NEM rules are set by the California Public Utility Commission (CPUC).

Current NEM 2 rules favor solar homeowners, allowing them to buy energy from the utility, and receive credits back, at roughly the same rate. Your system overproduces in the middle of the day, and you buy back at night. So, although average self-consumption (without a battery) is only 34%, you can zero out your utility bill if the system is sized properly.

The utilities argue that solar homes make heavy use of the grid without paying for it, and are being subsidized by less affluent homeowners who don’t have solar.The CPUC proposed on 1/28/22 NEM 3 rules limiting the credit received by homeowners selling back to the grid to 5-6ยข per kWh, plus monthly fees of $8 per kW installed just to have solar.

Protest from the solar industry caused the CPUC to withdraw this proposal, and request public input. The decision is now delayed until the middle of 2023. And there should be a four month period, after the final decision, before NEM 3 rules are implemented.

So…NEM 3 is on hold for now. Some complacency has set in among homeowners. But NEM 3 has not gone away. SaveCaliforniaSolar.org held a large Everyone Under The Sun rally in Sacramento on October 11th to remind everyone, lawmakers in particular, that California is supposed to be a renewable energy leader.

What the new rules will be are unknown. The payback period of a solar installation, currently averaging 5 1/2 years on a system that will produce for 30 years or more, will surely increase. Those who install before NEM 3 is implemented should be grandfathered into NEM 2 rules for 20 years. Now is a great time to pick an installer and move forward with solar!