Net Metering Policy Overview
California’s Net Energy Metering 3.0 (NEM 3.0) program began in April 2023, replacing NEM 2.0 for the major utilities. Many municipal utilities are still running NEM 2.0 programs or a program similar to it. NEM 3.0 introduces significant changes to solar compensation:
- Avoided Cost Rates (ACRs): Compensation for exported solar energy is based on ACRs, which reflect the utility’s cost savings from not having to generate or procure electricity elsewhere.
- Time-of-Use (TOU) Rates: Exported energy is credited based on when it is delivered, with higher rates during peak demand times (e.g., evenings) and lower rates during off-peak hours (e.g., midday).
- Emphasis on Energy Storage: Lower ACRs encourage solar customers to pair systems with batteries to store energy for use during peak TOU periods, maximizing cost savings.
Key Utilities and Avoided Cost Rates
Below is a summary of the major and minor utilities in California, including their average avoided cost rates under NEM 3.0:
- Pacific Gas & Electric (PG&E)
- Average ACR: $0.08 per kWh
- Details: Solar customers receive compensation based on TOU schedules, incentivizing battery adoption to shift energy use.
- Link
- Southern California Edison (SCE)
- San Diego Gas & Electric (SDG&E)
- Los Angeles Department of Water and Power (LADWP)
- Sacramento Municipal Utility District (SMUD)
- Average ACR: $0.075 per kWh
- Details: Net metering compensation depends on TOU schedules.
- Link
- Burbank Water and Power
- Average ACR: $0.085 per kWh
- Details: Compensation reflects grid conditions and TOU periods.
- Link
- Glendale Water and Power
- Average ACR: $0.08 per kWh
- Details: Credits vary by TOU schedule and grid demand.
- Link
- Imperial Irrigation District
- Average ACR: $0.065 per kWh
- Details: Compensation rates reflect TOU schedules and grid conditions.
- Link
- Riverside Public Utilities
- Average ACR: $0.07 per kWh
- Details: Offers TOU-based credits for net metering customers.
- Link
- Anaheim Public Utilities
- Modesto Irrigation District
- Turlock Irrigation District
- Pasadena Water and Power
- Average ACR: $0.08 per kWh
- Details: TOU pricing determines the compensation for exported energy.
- Link
- Silicon Valley Power
- Average ACR: $0.075 per kWh
- Details: Credits vary based on TOU schedules and grid demand.
- Link
State Incentives
- California Solar Initiative (CSI)
- Performance-based incentives for solar installations, targeting low-income and multi-family housing projects.
- Link
- CSI Subprograms
- The Single-family Solar Affordable Solar Housing (SASH) Program, provided solar incentives to single-family lowincome housing; the SASH program was administered through the SASH Program Manager, GRID Alternatives, and had a budget of $54 million.
- The Multifamily Affordable Solar Housing (MASH) Program, provided solar incentives to multifamily low-income housing; the MASH program was administered through the same Program Administrators as the general market program: Pacific Gas and Electric (PG&E), Southern California Edison (SCE), and the Center for Sustainable Energy CSE (for San Diego Gas & Electric), and it had a budget of $54 million.
- The CSI-Thermal Program, provided incentives for solar water heating and other solar thermal technologies to residential and commercial customers of PG&E, SCE, Southern California Gas Company (SoCalGas), and San Diego Gas & Electric (SDG&E) .
- The CSI-Thermal Low-Income Program provided higher incentives for solar thermal technologies to multifamily and single-family residential customer in PG&E, SoCalGas, and SDG&E service territories.
- Self-Generation Incentive Program (SGIP)
- Rebates for battery storage systems paired with solar installations.
- Eligibility: Residential customers installing qualifying storage systems.
- Link
- Property Tax Exclusion
- Solar energy systems are exempt from property tax reassessments.
- Eligibility: Owners of newly constructed or existing buildings with solar installations.
- Link
Permitting/Interconnection Processes
The permitting and interconnection process in California involves several steps:
- Permitting
- Process: Obtain necessary building and electrical permits from the local jurisdiction.
- Average Timeline: Varies by municipality; typically 2-4 weeks.
- Challenges: Some jurisdictions have complex requirements, leading to longer approval times.
- Interconnection
- Process: Submit an interconnection application to the utility, including system specifications and necessary documentation.
- Average Timeline:
- PG&E: Approximately 2-4 weeks for systems under 10 kW.
- SCE: Similar timelines to PG&E.
- SDG&E: Typically 2-3 weeks.
- Challenges: High application volumes can lead to delays; ensuring all documentation is accurate can mitigate issues.
Streamlining Efforts: California has implemented the Solar Automated Permit Processing (SolarAPP+) tool in some jurisdictions to expedite the permitting process, reducing approval times significantly.
What Are Avoided Cost Rates (ACRs)?
Definition:
Avoided Cost Rates (ACRs) represent the costs a utility avoids by purchasing electricity from a distributed generation source, such as a solar customer, instead of generating the electricity itself or purchasing it from another supplier.
- Factors in Calculation:
- Fuel Costs: The cost of fuel the utility would have used to generate the electricity.
- Operation & Maintenance (O&M) Costs: The expenses saved by not operating power plants.
- Transmission & Distribution Costs: Some utilities also factor in the reduced need to transport electricity over long distances.
- Lower Than Retail Rates:
ACRs are typically lower than retail electricity rates because they exclude fixed costs like grid maintenance, customer service, and other overheads.
How Are ACRs Calculated?
Utilities use various methods to calculate ACRs, often based on:
- Avoided Generation Costs: The utility’s cost of generating electricity.
- Avoided Purchased Power Costs: The price the utility would pay to purchase electricity on the open market.
- Avoided Capacity Costs: The cost of building new power plants to meet future demand.
Some utilities in California use tools like the Avoided Cost Calculator (ACC) to incorporate real-time grid demand and supply into the rates.
Example Calculation of Avoided Cost Rate
Scenario:
A utility calculates the avoided cost for energy exported by a solar customer during a peak demand hour in California.
- Avoided Generation Cost:
- The utility’s cost of generating electricity using natural gas is $0.05 per kWh.
- Avoided Fuel Cost:
- Fuel savings (e.g., natural gas for a power plant) contribute $0.02 per kWh.
- Avoided Purchased Power Costs:
- Instead of buying power from the wholesale market during peak hours at $0.08 per kWh, the utility saves this expense.
- Avoided Capacity Cost:
- The utility avoids building additional capacity to handle peak demand, saving $0.01 per kWh.
- Transmission and Distribution Savings:
- Energy is generated locally by the solar customer, reducing the need for long-distance power transmission, saving $0.005 per kWh.
Total Avoided Cost Rate:
Adding these factors together:
- $0.05 (generation cost)
- $0.02 (fuel savings)
- $0.08 (avoided wholesale purchase)
- $0.01 (capacity savings)
- $0.005 (transmission savings)
Avoided Cost Rate = $0.155 per kWh (for this example, during peak hours).
Why Avoided Cost Rates Fluctuate
Avoided cost rates vary based on:
- Time of Day:
- Rates are higher during peak demand hours (e.g., evenings) when electricity is more expensive to generate or procure.
- Rates are lower during off-peak hours (e.g., midday) when solar generation is abundant, and grid demand is low.
- Utility-Specific Factors:
- Different utilities have different generation costs, infrastructure needs, and access to renewable or wholesale markets.
- Location on the Grid:
- Energy exported in congested grid areas may have higher avoided costs due to local demand relief.
