Everything You Need to Know About NEM

*This post applies specifically to SCE's transition from NEM 1.0 to NEM 2.0. Other utility companies may have differing NEM requirements and clauses.

An overview

A Grid-Tied residential or commercial solar system connects directly to your utility power grid through the net energy metering (NEM) program. Your NEM agreement provides the basis for you to generate your own power at home. During the day, your solar power system is generating electricity that feeds into the main grid, sort of like a small power station.  

The electricity created by your solar system during the day is used to run your refrigerator, computer, TV, etc. If you are not using electricity during the day equal to that which are producing with your system, that electricity goes back onto the grid, and you get credit for that electricity. 

At night when your system is not creating electricity, you simply draw whatever power you need right back from your utility service. At the end of your 12 month period, the utility will issue a 12-month “true-up” statement and you pay whatever the balance of your bill may be. 

NEM 1.0 to NEM 2.0

There are several changes to be aware of as the NEM program currently in place (NEM 1.0) terminates on July 1, 2017 to make way for NEM 2.0.  Be aware, however, that customers already participating in the NEM 1.0 program will be allowed a transition period of up to 20 years before they will be switched to a new NEM program. Is this good or bad news? Well, as always, it depends.

Under NEM 2.0, customers will be required to select a time-of-use (TOU) rate plan from their utility provider. If you're a residential customer, this could be beneficial depending on how much energy you use and when you use it. To see for yourself, visit SCE's TOU plan webpage and determine which category you fall under. If you're a "low energy user," transitioning to NEM 2.0 may be a wise move. You may in fact find that a TOU rate under NEM 2.0 affects your energy bill very little, or even rewards you for your energy use habits better than NEM 1.0 did. 

NEM 2.0, though, will mandate an interconnection fee for new solar systems (previously waved under NEM 1.0). At $75 for residential systems producing less than 1 MW (and $800 for systems > 1MW), it's a small price to pay for the energy bill savings you'll gain with an energy generating source on your property. Nonetheless, keep in mind that all new solar projects will require an interconnection fee under NEM 2.0.

The last major change to be aware of regards "non-bypassable charges" (NBCs), small fees (2-3 cents per kWh) that are used to fund programs for energy efficiency and low income customer support. These NBCs (automatically included in your utility bill) did not previously apply to energy-generating customers on a month-to-month basis. With NEM 2.0, however, solar customers will have to pay NBCs on each kWh pulled from the utility grid  (i.e. night time electricity use, additional non-generated electricity, etc.) on a month-by-month basis.  They will still be exempt from energy used that was generated from their own system. 

The good news, regardless of whether the transition from NEM 1.0 to NEM 2.0 will help or harm your energy bill, is that solar will continue to be an economically intelligent investment in California. The NEM program is unprecedented in the way it rewards customers for smart energy decisions, starting with the integration of a renewable energy source into their home. As TOU tariffs continue to capitalize on consumers' peak electricity use, energy storage (batteries) may be the next major move for the energy-savvy customer. For now, though, think of NEM as your very own form of energy storage if you're a solar owner.