What is NEM-3 and What Does This Mean For California?
First of all, what is NEM-3 and what does it stand for? NEM is an acronym for Net Energy Metering and concerns the tariffs and fees applied when retail and commercial users sell power back to the grid.
NEM-3 will be an update to the current feed-in tariffs under NEM-2, if the Public Utility Commission votes to accept the proposed changes, which will be taken on January 27th, 2022. If you live in California, you can still voice your objections to the PUC in California at 415-703-2782 (good luck trying to reach anyone, though, we have tried many times). Once the PUC decides on this proposal, the changes will take effect 4 months later.
What is the intention? The proposal has this to say about the intention of these changes:
Our review of the current net energy metering tariff, referred to as NEM 2.0, found that the tariff negatively impacts non participating customers; is not cost-effective; and disproportionately harms low-income ratepayers.
How these changes will affect the actual solar market for low-income ratepayers remains to be seen, but NEM-3 does provide incentives for low-income customers. However, another reason is the growing market for home batteries, which can be used effectively to avoid feeding back into the grid.
So, let’s get to it! What changes are we to expect? Generally, we’re referencing changes for residential solar customers only. Also, NEM-3 only affects you, if you have signed – or intend to sign – an Interconnection Agreement (needed when selling back to the grid) in California. Not all systems are affected by the Public Utility Commission, such as off-grid systems, or our very own CraftStrom products, since they do not have to feed power back into the grid.
Solar credits – or the feed-in-tariff applied to power, which is sold by residential customers to utilities – will be greatly reduced. It seems that utilities will only have to pay around 5 $ Cents per Kilo Watt-hour (0.05$/kWh), down from currently around 0.25 – 0.30$/kWh. However, there will be slight variations in this price depending on hour of the day.
For instance, PG&E customers currently receive about 0.224$/kWh, but would only be paid 0.049$/kWh as of May 28th, 2022. There will be no transition period. Once NEM 3.0 goes into effect in May, the tariffs will apply immediately.
Low-income residential and commercial customers are excluded from the following fees. Fees are applied on a monthly basis, for each kW in installed solar capacity and vary depending on whether utilities add so-called “rates” per month, which are then included in the Fees:
PG&E: 8$/kW, so 10kW of solar will come out to $80 per month in feed-.in fees only.
SCE: 8$/kW plus 12$, so 10kW will cost you $92 per month.
SDG&E: 8$/KW PLUS 16$, SO 10kW will cost you 96$ per month.
Let’s use a best case scenario and assume that you are not a low-income customer, with a 10kW solar array under the current NEM-2 scheme with PG&E. A 10kW array will provide about 1,300 kWh of energy per month, on average in California (Oakland area), so let’s use this number to calculate how much you would receive now, versus in 4 months, should the CPUC decided to adopt this policy change. PG&E pays 0.224$/kWh, so 1,300kWh x 0.224$/kWh = 291.20 $. NEM-3 would reduce this to 0.049$/kWh, leading to only $63,70 in solar income, or $227.50 less (that’s a loss of 78%, btw). However, now we still have the solar fee, which comes out to $80, as we calculated above, which you will have to pay, even as winter will see your production drop to as little as 883 kWh in December, or $43.27. Pretty measly, considering you probably paid around $30,000 for your system.
The Market Transition Credit
As you noticed from above calculations, there wouldn’t be much in incentives left to invest in solar, so the proposed NEM-3 describes the credit as “the amount necessary for a customer to achieve a 10-year payback period”. Not all utilities have agreed with this credit, so far, and only PG&E, as well as SCE have proposed such credits:
Low Income: 4.36$/kW per month for 10 years
Others: 1.62$/kW per month for 10 years
SCE Low Income: 5.25$/kW per month for 10 years
Others: 3.59$/kW per month for 10 years.
The Icing On The Cake – Retroactive Changes
The current 20-year eligibility period for NEM-1 and NEM-2 is reduced to 15 years for non-low-income residential customers.
CraftStrom customers will not be affected by this change, as you can avoid interconnection agreements entirely. The change is clearly targeted at battery systems, as they are becoming more affordable and intelligent. All in all, it’s a harsh change, but it is similar to changes seen in other markets, such as Germany. Once the technology has been sufficiently disseminated in the market and investing in solar has become a financial instrument, subsidies and prices are often reduced. Again, you can still voice your opposing views until the 27th.
To evaluate this question, we need to look at who has any say on what you do with or on your house. We also need to look at the size and type of installation you’re considering. Type is crucial for us, here at CraftStrom, because of the types of technology we use. In essence, we call our system Permission-Free. With this we refer to the local government, utility and emergency services levels of this question, not to individual HOA or historic building restrictions. We’ll get to those later.
Local Government: This can be on a municipal, state or national level. They want to ensure that what you put on your house cannot endanger anyone. Imagine solar panels flying around in heave winds, because someone only laid them loosely on their roof, or a house fire starting, because of shoddy electrical works. These requirements can vary greatly, even within neighbourhoods, so do inform yourself with your local government for your specific address. Local government will typically require 3 types of permits for traditional solar installations:
Solar PV System Permit: This permit specifies the type of installation (roof, ground or building), the products involved, as well as their certifications (such as our UL1741), whether it’s for commercial or residential use, the size of the system, maybe even the environmental impact. In addition, you will need to submit construction drawings that show the exact installation method and the materials used – e.g. structural calculations for your roof, a framing plan, a roof-sealing plan, etc. Finally, the electrical plans on how everything is connected and can be easily disconnected.
Electrical Permit: To ensure you connect to your home according to the National Electric Code (NEC). Only a registered and licenses electrician is typically able to purchase this permit.
Structural/Building Permit: Traditional solar installations using glass and frame panels can be very heavy. One such panel can weigh between 40 and 50 pounds (18 – 23 kg) or even more, depending on manufacturer. Panels and mounting structure typically add 2-4 lbs/f2 (10-20 kg/m2). Not every roof can take that much weight, especially, since that increases in snowy regions and times. CraftStrom panels weigh less than half of traditional panels and can even be glued to surfaces. For ground mounted systems, you might actually need special permits and even land-use evaluations.
Utilities: Utilities, whether they are power companies or grid-owners, have the right to ensure that you are not endangering the efficiency of their services. Therefore, they will need to see a full list of all the components you want to install, as well as a wiring diagram. Secondly, you will need to apply for an Interconnection Agreement, which will allow you to back-feed into the grid (often called net-metering, when combined with electricity credits counted against your own electricity usage). To ensure the stability of the local grid, utilities do need to know how much power you will likely be feeding into the grid. They typically require the following information:
The location of your planned PV array, the utility meter, the electrical panel, etc.
The number of solar panels and inverters, including manufacturer and model being installed.
The capacity rating for your planned power inverter and PV panels.
Emergency Services: Firefighters need to be able to take full control of any distributed power system, to ensure their safety. Hence, they have a say in what you put in, on and around your house! They often require you keep a certain radius around your solar installation clear of any other types of installation and accessible, so that they can get close in an emergency. For traditional solar systems, they will require a lockable shut-down switch (a big, red, mean-looking sucker), to ensure no one but them can turn the system back on. CraftStrom products use specialised micro-inverters that plug into any outlet. So, instead of turning a switch, you unplug the entire system and can even take the cable with you. You could also lock the used power outlet, rendering it useless.
HOA: Yes, well, unfortunately these can have quite a bit of influence over what you do with your house. In Texas and California, the HOA cannot legally stop you from installing solar panels on your home. This might be different in your region or state, so do check! Local laws might give you permission under two different types: Solar Access and Solar Easement laws. Check out this site for more detailed information in the USA: https://www.solarunitedneighbors.org/learn-the-issues/homeowners-associations-and-solar-access/
The also have a downloadable HOA Solar Action Guide.
Historical Commissions: Depending on where you live (Europe especially), these might cause a headache. If you live in or near a protected building, such commissions often don’t look kindly on the typically unseemly traditional solar installations. But, talk to them, they might simply have a few extra criteria.
Once you’ve received all permissions and installed the system, using certified specialists, then the last step is to have the system inspected and received the sign-off, in the form of a Permission-To-Operate (PTO) document.
For plug&play systems in Europe: Please be aware that, while there isn’t a permitting process required, there is typically a 2 week waiting period that provides the utility and grid-owner with the time to ensure you are using only certified products.
A solar lease contract is a financial product that allows home-owners to “rent” a complete solar system. We say home-owners, because such leases are typically no-down-payment, 15-20 year long contracts. In this case, the solar company retains ownership of the system and you pay the rent. That rent, combined with utility fees and net metering, should then be cheaper than your current annual power bill.
No or very little down payment for a full system that would cost up to $ 30,000.
Maintenance is usually included.
You need to own the home for this to make sense.
Contracts run for up to 20 years, locking you into that particular home. Selling a home with such a lease is difficult, as the new owners would have to want to take over the contract and, crucially, would have to actually qualify for the same contract.
Since you won’t own the system, you don’t qualify for tax subsidies. The installer does.
For the same reason, such a system doesn’t add value to your home.
Included maintenance is often not very thorough.
Here is an article that describes the main issue when selling the house while in such a lease contract, in the UK.
In summary, if you are trying to power your home 100% from solar, you should compare such options with regular solar loans. Otherwise, consider starting with a modular CraftStrom system.
This is a loaded question, but here is an overview. It really depends on
your power usage profile during the day,
whether you want to feed back into the grid for credits with your utility (net metering) and
If you want backup power in case of power outages.
If you work away from home, or aren’t usually home around lunch time, then your profile might looks something like this…
This has changed for a lot of people during the pandemic, but it’s still very true for most. It’s typical that you use quite a bit of power in the mornings, cooking breakfast, watching TV, etc. That increased usage is called a peak. The next peak typically occurs in the evening, after work. As you might have imagined, that’s exactly wrong for solar, since you’ll be producing most of your solar power in 4 -5 hours around lunch time, not around 6 p.m.
Batteries can be very useful, if you want to “trickle charge” your home for when your panels stop producing. This is called Consumption Optimization.
Net metering can be great – if your utility offers it. With the CraftStrom system, we typically avoid this, as it involves paper work, such as an Interconnection Agreement. You can find a sample application here. Using our system, which can include our Smart Battery, you can avoid net metering completely. Either by charging the batteries for later, or by simply turning off solar inverters, if you produce more than you consume in electricity, which is measured and reported by our Power Meter. Of course, if you do want to apply for an Interconnection Agreement, then there’s nothing standing in your way!
For many, power outages are a common issue (hi from Texas). Every grid-tied solar system is required to shut down, as soon as the utility grid is shut down. In case of battery systems installed by a professional, you can switch to battery power for your house. Such systems, however, are costly. CraftStrom batteries are tied to your home grid using any standard power outlet and do feed into your home when needed most, but they also comply with the regulations for auto-shut-down in case of grid failure. To then use the batteries as backup power, simply use the offgrid inverter and plug appliances directly into it. Simply put, CraftStrom batteries are a hybrid solution, and can be used grid-tied to supply your home directly, or off-grid, either during a power failure or when outdoors.
To evaluate how many panels work for you, you should consider a few points. Note, since we are specialized in plug&play solar solutions, you can start with one panel and buy more later on, without any extra costs. This is especially beneficial for those of us living in cities, apartments and/or renters. If you have a large roof available, then maybe a solar installation company might be best for you, if your utility supports net metering. The steps for evaluating how many panels you can or want to install are very similar, though.
Do you own your home or do you rent? If you rent, check with your landlord or landlady, whether she will allow a fixed installation. Our panels are designed to be mounted in non-fixed locations, so that can make things a lot easier.
Do you need to get permission from the Home Owners Association (non-US residents, feel blessed this doesn’t concern you) or a building owner/management company?
Where would you like to install the solar panels? Do you have South facing surfaces, or some aligned East-West?
Do those surfaces receive any shading? Can you do something about that shading (please don’t cut down any trees for this)?
How much energy does your household use each month and when are your peak usage times? If they are in the mornings and evenings, an East-West alignment might be perfect. No worries, though, because our battery system will calculate your anticipated power production and learn from your data, to ensure you charge optimally and have power available for when you need it.
Net metering might be an option, if you can install a large roof-mounted system with an installer and your utility supports it. The CraftStrom product suite will avoid net metering, by keeping all your power behind the meter, i.e. you don’t feed power back into the utility grid.
How much power do you use on average? Your utility bill will feature that information in “kilo-Watt-hours (kWh) Used”. Usually, you will see a monthly value, though for the calculation we will need hourly use. If your bill doesn’t give you that value, simple take a monthly value and divide it by 30 days to get the monthly value, and then again by 24 hours, if you want the hourly use.
On a side note, kilo-Watt-hours are used, because it is a unit of Energy. Watts or kilo-Watts are the unit for Power. You use Power to perform work in an instance. If you want to know how much energy you have used to keep that power up, simply multiply that value by the hours used. Hence, kilo-Watt-hour.
If you have all the space you want for solar power, you can take this kilo-Watt-hour value you calculated above (by dividing your monthly usage by 30) and use that as an estimate for the amount of panels you need.
Example: if you use 900kWh a month, that gives you around 30 kWh as the average daily usage rate. Divide this number by the sun-hours at your location (5 peak sun-hours is typical in the USA). This provides the amount of energy your panels need to produce every hour. In our case, that would be 6 kilo-Watts, or 6000 Watts. Multiply that by 1.3 to account for losses in the solar system, which is 7800 Watts. Divide this number by the panel size, e.g. 320 Watt for our panels, which means you would need 24 panels to cover 100% of your energy needs. That’s a lot of panels, considering the size of the average solar panel, and shows that you need a lot of roof space, if you want to cover 100% of your usage.
Do you really need to cover 100% of your energy needs? No, not at all, it turns out. If you size your system this way, it’s typically because you have the possibility to install solar on your home’s roof. In this case, you can either install the panels yourself and hire an electrician to connect you with the grid and deal with the utilities for approval yourself. Or you can hire an installer to do all this for you. Make sure to get multiple quotes and check the price per kilo-Watt-hour (kWh). The average price for solar installations currently is around 3$/kWh after subsidies. Also, consider that the number we calculated above will always give you the maximum, so there’ll be plenty of days, where you won’t be using as much energy and sell to the grid.
CraftStrom products are designed to be modular, so you don’t need to decide immediately how many panels you can use. Our system is still grid-tied, in the sense that you will still purchase any power that your solar panel cannot provide, but you won’t be selling back to the grid. You can start with one or two panels and already see a markable change in your electricity bill. Since they are plug&play, adding more solar panels won’t cost you any extra installation fees and you can still apply for subsidies.
With this we mean how much electricity you will, realistically, produce through the year. There are multiple, excellent and free solar calculators out there. Here are our two favorites.
PVWatts, by the National Renewable Energy Lab in the USA. We like this one because of its simple, yet effective user experience.
Step 1: Enter your exact address, the calculator will take not only your location, but also weather data into consideration.
Step 2: After confirming your address, you are directed a simplified list of parameters, as shown here.
Our solar panels produce a max of 320W, so we enter 0.32, because this field is always in kW or kiloWatts, meaning in steps of 1000 Watts. If you buy 5 panels, for instance, you simply multiply that by 5 and insert 1.6kW. Tilt depends on your location, but a general, decent tilt for all-year-round is between 25° and 35°. Use the free Solar Angle Calculator to check the general angle for your home.
This is really all you need, so don’t worry about the advanced parameters. Even changing the tilt angle for our location in Houston by from 20° to 25° only estimates a difference of 3kWh per year. You can play around with this angle a bit and find the optimal angle for your location.
Step 3: After hitting “Go to” again, you will be taken to the results, which are presented visually, but can also be downloaded with a data resolution down to the hour. The annual value calculated depends on your electricity price, which you can set in Step 2, below the Advanced Parameters.
PVGis, which is also a free tool and created by the EU Science Hub.
While it seems a bit more complex, it’s really just the site design. You follow the exact same steps and insert the same variables as in PVWatts. As you can see, we’ve changed the tilt angle, which is called “slope” in this calculator, to 35°, because we used Vienna, Austria as an example.
This also shows nicely the difference your location makes. The same panel will produce less in Austria, as you can see from the Yearly PV energy production value. However, when we compare the June results for Houston and Vienna, we see barely a difference. Both around 42 kWh for that month. The difference in electricity production comes mostly from the sun-hours, of which Houston has more.
There are a multitude of other calculators available online, from governments, as well as private companies. A simple google search will show you those.
What are the things to need to take into consideration when planning to install solar and/or batteries?
Let’s start with a few sub-questions here:
Where can I install solar panels?
Pretty much anywhere that doesn’t receive any shading. The solar cells inside the solar panels are connected to each other in a way that causes not just the shaded cell to lose power, but almost all cells connected to it. Hence, ensure there is no shading where you would like to mount the solar panel!
You can even install solar panels behind glass windows, in houses even, but beware; you will lose efficiency. Any glass in front of the panel will reflect at least some of the sun’s rays, away from the solar cells. You want as many as possible to hit directly. That also means that placing panels in cars or houses means you don’t get any reflected sun rays, for instance from water surrounding your location. Every little bit helps!
Which direction should the panel point to?
Depends on in which hemisphere you live. Optimal direction for most of us living in the Northern hemisphere is due South. If you’re from Downunder, look North. However, East-West facing facades, roofs or balconies can also be very valuable. South facing panels produce, on average, about 16% more power than East-West facing modules.
Still, there are very good use cases for this East-West arrangement. You simply might not have any surface useful for solar facing due South. Or you might not need full power during lunch time, because you’re never home and electricity consumption is particularly low during that time of day. In that case, an East-West alignment would actually provide you with better efficiency, because that alignment optimizes production in the mornings and evenings.
Do I need to consider an angle for the solar panel?
Yup. The angle towards the sun makes a lot of difference. That doesn’t mean you shouldn’t install solar, just because you can’t get the optimal angle. That changes throughout the year, anyway. You can either set a general angle that’ll optimize production without ever changing the angle of the panel to the sun. Or you can adjust that angle at least twice a year. The difference between 0° (i.e. the panel hanging flat of a surface) and optimal angle can be 25% in production. It really depends on your location. (Yes, in actuality, it’s not quite that simple and we need to take atmospheric scattering into account – but we won’t here.)
Good solar potential calculators – we will get to those right after this – actually provide you with the ability of testing your optimal tilt (that’s what we call the angle of the panel facing the sun). Those calculators actually take weather conditions into account and you will find that you can change the angle from optimal quite a bit, before losing any noticeable amounts of electricity.
If you’d like to find just the tilt for your location, we recommend the Solar Electricity Handbook Site. This is their free Solar Angle Calculator, but if you want to get a good start in DIY Solar, buy the book. We wholeheartedly recommend it.
So, you’rethinking of investing in solar, but aren’t sure how to get started?
Here is a simple list of things to take into consideration when investing in solar and/or batteries for your home:
What do I want?
This might a weird question, since you’re already here reading up on solar. Well, in order to find the best solution for you, you should be aware that there are different ways of investing in and using solar energy (we are only referring to Photovoltaics, or electricity from solar, in this blog). In general, there are two ways for you to use solar power: Grid-tied vs. Off-grid
Your solar system is connected via a utility power meter (often a bi-directional smart meter) to the electric grid run by your local government of private companies. This means that you use some of the electricity you produce, but any power that you cannot use is fed into the grid. This gives you the option of exportingthat power back to your utility and gain credits with your local utility. You will then, typically, get a monthly statement, where the utility provides the exact calculation of how much power you’ve used, versus how much you’ve produced. We will talk later about your options in getting such a system. The benefit of such a system is that you can nicely offset any power you use at night with what you produced during the day and you don’t need batteries. The major downside is that your system will shut down as soon as the utility grid shuts down, to ensure the safety of anyone working on the grid and first responders. It also requires at least the help of a certified electrician and a lot of paperwork.
You’ve probably guessed it. In this case you are completely dependent on your solar panels and a large battery system. Solar power cannot be effectively used to power your home without buffer batteries. Simply put, your solar panel never generates exactly the same amount of power for any lengthy period, with often wild fluctuations throughout the day. Your appliances, however, want stable power with enough juice to keep them running. The benefit of such a system is that utilities don’t get to have a say in your installation, if there’s no possibility of you feeding power back into the grid. It is also much easier to install and the electrical work not as daunting. There are loads of DIY videos on YouTube, as well as books (recommendation in Blog post #3) that explain how to size and install an off-grid solar system. Grid-Tied systems typically are the more labor intensive systems.
The CraftStrom product ecosystem allows you to safely take advantage of still being connected to your local grid without having to work with installation companies, electricians or through lengthy permitting processes. Your power stays behind the meter!
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