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PG&E NEM 3.0

On December 15, 2022, the California Public Utilities Commission (CPUC) voted on and passed the Net Billing tariff (NBT, also commonly referred to as NEM 3.0). April 14, 2023, is the last day to submit an interconnection application to enroll in NEM 2.0.

It is a reduction of 55%-80% on the credits customers receive for the extra solar energy they produce and send to the grid. It also still includes a $14-$16 monthly charge from the mandatory switch to a time-of-use rate for solar customers, uses the Avoided Cost Calculator (ACC) to determine and calculate 576 different NEM credit values in a year, and makes no retroactive changes for NEM 1.0 and NEM 2.0 customers.\\

Final version of NBT includes:

  • A nominal increase in PG&E’s residential and low-income export adder, from 1.8 to 2.2 cents and 8.7 to 9.0 cents respectively to correct for a data error in the Proposed Decision. Adders will still step down 20% each year until they reach zero.

  • Commercial customers enrolling into NBT / NEM 3.0 during the first five years will now get a nine-year lock-in period, instead of five, i.e., their hourly export values for the first nine years are locked-in, using the first nine years of forecasts in the ACC. Commercial customers still do not receive any ACC adders.

  • An expansion of the definition of “low-income” customers; single-family residential customers in disadvantaged communities and tribal land will now be eligible to receive the higher export rate adder.

  • All solar customers submitting applications to get onto NEM 2.0 must “submit final building permit sign off and electrical clearing by the authority having jurisdiction (AHJs)” within three years, i.e., their residential or commercial PV systems must be built within three years of the application date to keep NEM 2.0 eligibility. Residential customers are required to enroll in Electrification Rates.

The currently allowed rates are:

  • PG&E: E-ELEC

Behind-the-meter operation is the same as normal, but exported energy is no longer compensated at retail rate (less non-bypassable charges;) Instead, the compensation rate is based on the most recent Avoided Cost Calculator (ACC) and has a different rate for each hour.

  • Customers who sign up in the first 5 years receive an adder on top of their ACC-based export rate, starting at 2.2 cents for PG&E. The adders are applied for the first 9 years after interconnection. The adder is smaller for customers interconnecting in later years

  • The export rate is only fixed for 9 years, however, there's no strong indication that future iterations of the ACC will be better or worse for solar

Comparing NEM 2.0 and the Net Billing Tariff

A typical residential solar installation in PG&E, to help provide context on the effects of the Net Billing tariff.

We modeled two systems:

An ideally-oriented, unshaded system to show the best possible payback periods

A larger system with a lower Total Solar Resource Fraction (TSRF) at 80% represents more common installations that, for example, don’t have a south-facing roof or have shade losses

Under NBT, the payback period for ideal systems is close to 7 years, while the payback period for typical systems is roughly 8.5 years — 1.5 years longer. In both cases, for a near 100% energy offset design, the payback period increases by 1.8 to 2.7 years.

Notes: Pre-solar customer and the post-solar NEM 2.0 uses schedules E-TOU-C, TOU-D-4-9PM, and TOU-DR1 for PG&E, SCE, and SDG&E, respectively. Post-solar NBT uses E-ELEC, TOU-D-PRIME, and EV-TOU-5 as specified by the final decision. The payback here is the “time to payback” — the time it takes to break even given all cash flows, rate escalation, panel degradation, etc. — and it differs slightly from the CPUC’s “simple payback” which only uses year-1 bill savings.

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