NEM Changes and the Impact on Your Solar Benefits

You are likely familiar with solar Net Energy Metering (NEM), the California Public Utilities Commission's (CPUC) mandate that provides a "sustainable and growing renewable energy market" in our state. The NEM program (i.e., Rule 21 tariff) that governs solar has gone through multiple versions, and it will change again by the end of the year. Over the coming months, the five CPUC Commissioners, utility representatives, solar advocates, and lawmakers will decide your future solar opportunities.

Utility companies are pursuing changes that impact you in four key ways:

1. Grid-benefits charge: additional fees to connect solar to the grid (think of this like a "solar tax" charged monthly).

2. Time-variant export compensation: reducing the amount your energy gets credited.

3. True-up period: monthly true-up periods instead of annual true-up periods (no rolling over energy credits).

4. NEM-A Changes: allowing meter aggregation, but
with significant caveats.

What does this mean for your bottom line? We break it down further below:

Grid-Benefits Charge:

This charge would effectively tax solar customers to access the grid. The fee would be assessed on the solar system's size and apply a substantial fixed cost per kW installed to be paid per month. For example, the current proposed prices range between $8.13 - $13.57 per kW installed per month for agriculture rates.

Time-Variant Export Compensation:

The value of credits for energy exported back into the electric grid will substantially decrease. When solar energy exports to the grid, utilities will calculate the crediting rate based on their avoided cost calculator, determining the minimum amount they are required to pay an independent power producer. This current average avoided cost is projected at 6 cents per kilowatt-hour (kWh) and will be updated every year.

Compare that with the average savings per kWh solar currently provides on agriculture rates of about 14 – 16 cents, and you can see the economics quickly decline. The only way to receive "dollar-for-dollar" credit is to physically use/consume the energy generated by an onsite electric load.

Monthly True-Ups:

Utilities request annual true-ups be changed to monthly, meaning excess energy produced during the billing period (excess is over and above your gross monthly consumption) pays at the marginal value of energy (i.e., about 3 cents per kWh ). No energy credits will be banked and carried forward from prior billing cycles.

This element, combined with the above issue of export compensation, begins to compound the adverse effects on achieving a reasonable solar payback.

Can I Still Aggregate My Meters?

Yes, but with some serious strings attached. There are provisions to aggregate meters under the NEM3 proposal; however, all energy produced at the point-of-interconnection is considered "exported" and receives the 6-cent credit, trued-up monthly. Energy generated beyond monthly onsite use receives the marginal value or Net Surplus Compensation rate, 3 cents.

Additionally, only meters located on owned parcels will be suitable to be aggregated. Meters located on leased parcels will no longer be deemed eligible.

Deadlines & Decisions

The transition from today's solar program (NEM2) to NEM3 will occur in Q1, 2022. Solar systems that get completed and interconnected by the end of 2021, or very early in 2022, are expected to be safe and "grandfathered" into the NEM2 program – which currently has the most favorable economics the solar industry has experienced. Payback terms are typically 2 – 3 years for solar investments of any size.

JKB Energy is active in advocating alongside CALSSA (California Solar + Storage Association) to articulate the benefits that solar opportunities provide the agricultural industry. We will continue to argue for a reasonable and equitable ruling for NEM3.

However, if you are considering a new project, we strongly urge you to plan on completing it by the end of 2021.

The utilities’ proposed changes will impact all solar customers, but they would have an outsized impact on the ag industry.