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How to save big with California’s Net Metering 2.0

Avatar for Ben Zientara
Published on 03/16/2017 in
Updated 01/17/2019

If you’re a California homeowner considering solar, you need to know about net metering. California is in the middle of a switch from its old net metering system to “Net Energy Metering (NEM) 2.0,” and it’s going to change how you can get solar and how much you can save.

Heck, if you live in California and you’re not considering going solar, you should reconsider, and you should also know why net metering is so important.

Net Metering, California style

If you know all about net metering and just want to see how to save more under NEM 2.0, skip ahead to read more below. Otherwise, read on for the exciting history of Net Energy Metering in California!

The concept is simple: solar panels produce electricity that’s measured in kilowatt-hours (kWh). Some electricity gets used to power your home, replacing electricity you would otherwise buy. The rest of the electricity gets sent to the grid, and under net metering you get a credit for each kWh that offsets electricity you need when the sun doesn’t shine.

Basically, each kWh your panels produce goes to reduce your electric bill by one kWh. Net metering!

The net metering cap

Wait, there’s a catch. California’s net metering program allows a maximum of 5% of peak electricity demand (the net metering “cap”) to come from solar panels. As the state’s big utilities approached that 5% cap a couple years ago, the California Public Utilities Commission (CPUC) had to come up with a net metering program for the future.

There was a lot of concern that a replacement for net metering would be costly, complicated, and unworkable. Big utility companies advocated for schemes that charged customers big monthly fees for feeding solar into the grid.

In a state where more homes have panels than anywhere else, that would’ve been devastating. Thankfully, the CPUC came through with a logical new net metering plan, NEM 2.0, that made some important changes while preserving the best parts about the old law so homeowners could still benefit from solar.

How NEM 2.0 works

First, if you had solar panels installed before NEM 2.0 took effect, you won’t be forced to leave the earlier net metering program. You’ll be “grandfathered” in for the life of your system.

Here’s some more good news: Under NEM 2.0, solar owners still get 1-to-1 credit for the kWh their systems produce. Those credits are

The kinda bad news is there are new fees for getting your system hooked into the grid, but those fees are low ($75-$145, depending on where you live). Also, there are certain portions of the per-kWh retail price that are no longer credited for the kWh you don’t use in your own home. These “non-bypassable” charges are tiny portions of the retail electric price that all customers have to pay, and add up to about 2 cents/kWh.

The big change in NEM 2.0 is that new solar owners are automatically switch to a Time-of-Use billing arrangement, no matter how they had been billed for electricity before.

How to save big with NEM 2.0

Under NEM 2.0, all customers are required to use Time-of-Use (ToU) billing, which charges customers different prices for electricity based on the time of day they use it. That might sound complicated, so let’s break it down:

Here are Pacific Gas and Electric’s (PG&E) ToU explainer images:
PG&E TOU-A billing

As you can see from the images, the cost of electricity is generally lower during the winter than the summer, though both feature higher prices from 3 to 8 p.m. every day.

You may have also noticed that dashed line running below the colored bars. It represents the price for people who use less than their “baseline” amount of energy per month. The good news here is that solar already reduces your usage, keeping you out of the higher-priced tier. That’ll save you a great deal of money automatically!

Point west, young panels

The key to taking advantage of the ToU billing rates is to know that the credits you get for your solar kWh go up and down with the rate. So if you can capture more sun from 3 to 8 p.m., you can save more. That means the best direction for solar panels to face under NEM 2.0 is actually west or southwest, because the panels will be pointed more directly at the sun during the peak time.

That could mean panels go on both your south- and west-facing roof surfaces, or that the shade tree on the south side of your house might not be the impediment to getting solar you thought it was.

The calculations to determine the best way to position panels are actually quite complex, so connect with a local solar installer and have them put their system-design tools to use for you. You’ll be able to see detailed savings estimates that show you how much electricity your panels will generate.

NEM 2.0 isn’t everywhere

The NEM 2.0 rules apply only to customers of the state’s 3 big investor-owned utility companies. San Diego Gas & Electric (SDG&E) and Pacific Gas and Electric (PG&E) have already hit their 5% net metering caps, so any new customers in their service territory will sign up under NEM 2.0.

So homeowners in Bakersfield can install solar panels and fall under PG&E’s NEM 2.0 rules, and Santa Ana residents can install solar panels under SCE’s version of NEM 2.0.

Customers of Southern California Edison (SCE), on the other hand, can still get in on NEM 1.0, at least until July, 2017, at which point the new rules take effect even if the 5% threshold hasn’t been reached. If you are a customer of Southern California Edison, connect with a local solar installer today.

If you’re a customer of an electric cooperative or municipal electric company, you need to check whether your utility’s 5% threshold has been hit. If it has, you may no longer be eligible for net metering, depending on how your company has decided to proceed.

Finally, the NEM 2.0 rules apply to solar installations completed before the end of 2019, after which the CPUC will come up with new rules for how solar owners are compensated for their excess electricity.

Last modified: January 17, 2019

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