The original Net Energy Metering (NEM) 1.0, established in the late 1990s, was a pioneering policy designed to incentivize the adoption of solar energy by homeowners and businesses. NEM 2.0, introduced in California in 2016, emerged as a response to the growing demand for solar energy and the need to update the state's energy policies to reflect the changing energy landscape.

The California Public Utilities Commission (CPUC) plays a crucial role in regulating utilities, setting rates, ensuring customer protection, and overseeing infrastructure and safety under NEM 2.0.

As Investor-Owned Utilities (IOUs) in California reach the Net Energy Metering (NEM 1.0) cap and begin to operate under NEM 2.0, it’s understandable that some homeowners may be confused as to whether or not installing a home solar system is still financially beneficial. 

Sunrun is here to help. We’ll run through some facts to guide you through your decision-making process as you evaluate your energy options under California’s new rates and NEM 2.0.

1. NEM 2.0 removes cap on solar adoption, expanding on NEM 1.0's framework

Under the original Net Energy Metering (NEM) 1.0 policy, solar customers in California had the ability to sell excess solar energy back to the grid, receiving credits from their local utility. The key aspect of this arrangement was that customers only paid for the net amount of electricity they consumed, minus the energy they contributed back. 

However, NEM 1.0 had a limitation: once solar power constituted 5% or more of a utility’s grid capacity, the program reached its cap, restricting further solar adoption.

NEM 2.0, a significant policy update, removed this cap, thereby opening the door for unlimited solar installation across California. This change not only provides certainty for the state's solar energy future but also democratizes access to solar energy. Under NEM 2.0, solar customers can continue to sell surplus solar energy back to the grid, but with some updated terms.

These include a one-time interconnection charge and monthly non-bypassable charges (NBCs), typically ranging from $5 to $7. Additionally, NEM 2.0 introduces a shift to time-of-use (TOU) energy rates, which vary based on the time of day, encouraging energy usage during off-peak hours. This transition to NEM 2.0 reflects California's commitment to expanding solar energy adoption and moving towards a more sustainable energy model.

Definition: Non-bypassable charges (NBCs) are small, mandatory fees included in your electricity bill, used to fund public programs like energy efficiency and low-income assistance. Under NEM 2.0, these charges apply to the electricity you consume from the grid and are not offset by the solar energy you generate.

Evolution from NEM 1.0 to NEM 2.0

The table below highlights the evolution from NEM 1.0 to NEM 2.0, showing how California’s policies have adapted to encourage and sustain solar energy adoption while introducing new billing mechanisms and charges under NEM 2.0.

2. NEM 2.0 contributes to California’s sustainable energy goals

The removal of the cap under NEM 2.0 has been instrumental in driving California toward its ambitious renewable energy targets. By allowing unrestricted participation, NEM 2.0 has accelerated the adoption of solar energy across the state, contributing significantly to California's goal of sourcing 50% of its electricity from renewable sources by 2030. This policy shift has supported the growth of the solar industry and played a crucial role in reducing greenhouse gas emissions and promoting sustainable energy practices.

NEM 2.0 has been a key factor in democratizing access to solar energy. By eliminating the participation cap, a diverse range of consumers, including low-income households and small businesses, have been able to invest in solar technology, benefit from reduced energy costs, and contribute to a cleaner environment.

The policy also reflects California's commitment to leading the nation in renewable energy innovation and climate change mitigation, setting a precedent for other states and regions to follow.

Fact: California is the top state in the U.S. for solar power, with the highest number of solar installations.

3. Going solar is still cost-effective

Under NEM 2.0, residential customers and businesses who install solar panels can benefit from financial incentives, including federal income tax credits and other state-specific incentives. These financial benefits make solar installations more affordable and offer substantial savings over the lifetime of the solar energy system.

Solar panels remain an incredible investment, and NEM 2.0 does not change the fact that you will still save over the lifetime of your solar system. Sunshine is and always will be predictable, unlike utility rates, which continue to rise every year. With quality and technology improving, solar continues to be a great option for homeowners and new solar customers who want to save money and reduce their community’s reliance on dirty fossil fuels!

4. Time-of-Use (TOU) rates are set to become the new normal

In 2019, a significant shift occurred in California's energy billing system, particularly for customers of major utilities like PG&E, SDG&E, and SCE. These customers transitioned to a Time-of-Use (TOU) rate plan, aligning with a trend that's becoming increasingly common across the United States and set to become the new normal in California. 

TOU rates represent a more dynamic approach to energy pricing, reflecting the actual cost of electricity at different times of the day and week. 

TOU rates are structured based on the principle of supply and demand. During periods of high energy demand, typically in the late afternoon and early evening, electricity rates are higher. This is known as the peak demand period. 

Conversely, during times when demand is lower, such as late night, early morning, or weekends, the rates drop. This pricing structure encourages consumers to adjust their energy usage to times when it's less expensive and eases the strain on the electrical grid during peak hours.

For instance, for PG&E customers, peak time is generally weekdays from 3-8 PM. These are the hours when energy demand is at its highest, often due to increased activity in homes and businesses. Off-peak hours, which include weekends, holidays, mornings, and overnight, offer lower rates, making it more economical to run high-energy appliances during these times.

Bonus: Did you know that as an electric vehicle owner in California, you can benefit significantly from Time-of-Use (TOU) rate plans? These plans offer even lower rates during off-peak hours, making overnight EV charging highly cost-effective.

5. TOU allows you to maximize your savings

For solar energy users, TOU rates present an opportunity for increased savings. Solar panels typically generate the most power during the middle of the day when the sun is at its peak. This energy can either be used immediately or stored in solar batteries for use during peak hours, allowing solar customers to avoid higher rates.

While you don’t have to change when and how you use electricity to save money when you go solar, you can maximize your savings with some small changes. Here are some helpful tips to optimize your energy usage:

• Schedule High-Energy Appliances: Run appliances like dishwashers, washing machines, thermostats, and electric dryers during off-peak hours. This simple shift can significantly reduce your electricity costs.

• Utilize Smart Home Technologies: Use appliances with smart capabilities that can be programmed to run at the most cost-effective times.

• Monitor Energy Consumption: Keep track of your energy usage patterns and adjust your habits accordingly. Many utility companies provide tools and apps for this purpose.

• Use Solar Batteries Efficiently: Store excess solar energy generated during the day in solar batteries, and use this stored energy during peak rate periods.

• Optimize Solar Panel Performance: Regularly maintain and clean your solar panels to ensure they are operating at maximum efficiency.

• Educate Household Members: Make sure everyone in your home understands the best times to use energy-intensive devices.

• Invest in Energy-Efficient Appliances: When it's time to replace or upgrade, choose appliances with high energy efficiency ratings.

6. Sunrun BrightBox™ optimizes emergency power and management  

Another alternative is to go solar with Sunrun BrightBox™, Sunrun’s solar energy plus storage solution. BrightBox helps you optimize your energy under a TOU rate structure. When TOU rates are highest, BrightBox automatically begins powering your home from your solar panels or battery, saving you money on energy costs. 

By intelligently shifting between your solar PV system and battery during peak and off-peak times, BrightBox effortlessly optimizes your energy savings while still providing you the benefits of being connected to the grid — giving you maximum control over your energy bills. Plus, you get additional peace of mind knowing that should there be an energy blackout, you’ll have stored excess energy to power the critical parts of your home.

Embrace the future of solar with Sunrun

NEM 2.0 transforms California's solar energy scene by lifting limits on solar adoption, introducing time-based rates, and providing financial incentives, making solar power more accessible and beneficial for everyone.

The future is bright for existing solar customers and those considering the switch to solar. Sunrun stands at the forefront of this solar revolution, offering state-of-the-art solar PV systems that promise significant solar savings and ensure you make the most of your net metering credits.

With Sunrun's expertise, transitioning to solar electricity under NEM 2.0 becomes a seamless and rewarding journey. Whether you're new to solar systems or looking to upgrade your existing setup, Sunrun's solutions are designed to maximize efficiency and savings. Contact Sunrun and make the switch to solar today!