Big Changes for San Diego Solar Customers: Net Metering
If you’re a San Diego residential solar panel user, or you’re thinking of becoming one, take note: the rules of net metering have changed.
On June 29, San Diego Gas Electric became the first of three large investor-owned utilities in California to hit a state-mandated cap on net-metered solar power systems. Net-metered systems track the amount of excess electricity generated by residential solar panels that the utility buys from its customers.
Under the new rules, called Net Energy Metering 2.0 or NEM 2.0, SDGE will continue to credit its residential rooftop solar customers for extra energy they deliver to the electrical grid, but new fees imposed by the utility will raise some electricity bills.
Nobody likes new fees, although industry analysts say the news isn’t all bad. Current San Diego residential solar customers won’t see changes for 20 years, thanks to a grandfathering arrangement that keeps their participation in the original version of the net-metering program intact. New residential solar customers, will pay a one-time connection fee plus contribute to public solar energy participation programs.
Experts predict the new fees are small enough to avoid a slowdown in residential solar panel installations in San Diego.
Bernadette Del Chiaro, executive director of the California Solar Energy Industries Association, says the differences between the first iteration of the net metering program and NEM 2.0 will have little overall impact on residential solar sales. Del Chiaro says, The California Public Utilities Commission, which approved the changes of NEM 2.0, successfully struck a balance between charging new fees and disrupting a growing market for residential solar power.
“The California solar industry is primed and ready to step up to the plate and do its part to lower costs so that consumers feel no difference between the two different programs,” Del Chiaro told PV Tech, a solar industry news outlet, in late June. “If anything, we anticipate a return to growth as more consumers realize that NEM 2.0 isn’t a threat to the economics of solar and that now is just as good to go solar as ever.”
Net Metering 101
Net metering is basically a billing mechanism. It represents a give-and-take agreement between homeowners who use rooftop solar systems and utility companies like SDGE. When a residential solar panel system generates more energy than is used by the home, the surplus electricity is delivered to the grid. The utility credits homeowners for the extra energy produced.
For utility customers who use rooftop solar systems, the two-way process of net metering accounts for time of day and power use. Taking full advantage of available sunlight, residential solar panel systems tend to generate extra energy during daytime hours. A net meter allows the “sale” at retail rates of the unused energy. At night or during rainy or cloudy days when solar production drops, residential solar users rely on the grid for some of their electricity needs; they then “buy” electricity from their utility company, also at retail rates.
Net-metered billing occurs seamlessly. When surplus electricity is generated, a homeowner’s net meter runs backward as credits are issued by the utility company. When electricity is used from the grid, the meter runs forward, recording the amount of grid-based electricity consumed.
Each year, a reconciliation process occurs between the homeowner and the utility company. This process determines whether a home has used electricity from the grid that isn’t offset by any extra energy it has generated, in which case the homeowner will owe money to the utility company (in addition to meter service and other set monthly charges). When a home generates more power than it uses over the course of a year, the utility will pay the homeowner the wholesale value of the unused kilowatt-hours.
Cap and Change
SDGE reached the mandatory cap on net metering a year earlier than expected. That’s welcome news to solar advocates, who believe hitting the cap confirms San Diego’s rise as an up-and-coming solar powerhouse. SDGE says 90,000 of its current residential solar customers have installed solar panel systems.
Industry experts say NEM 2.0’s minimal changes won’t stall new solar projects in San Diego. Solar panel installation companies will probably absorb some of the new expenses, such as the new interconnection fee.
The NEM 2.0 rules leave the basic structure of net metering in place but change fees for net metering in three ways. SDGE groups these changes under what it calls the “NEM Successor Tariff,” or NEM-ST. New solar panel users under the NEM-ST rules will:
- Pay a one-time, nonrefundable interconnection fee. New residential solar panel customers must also confirm their equipment includes a minimum 10-year warranty.
- Pay recurring non-bypassable charges (NBCs) of about two to three cents per kilowatt-hour on grid-generated electricity. NBCs will help fund low-income and other programs to maintain the power grid. They do not apply to energy generated from solar panels.
- Transition to a rate structure based on energy consumption during peak hours. Like TV’s prime time rate, the so-called “Time of Use,” or TOU, rates charge more for power used during high-consumption hours of the day. SDGE has yet to announce the times of its on- and off-peak hours, but all of its solar customers will move to TOU rates by 2019. SDGE homeowners who install new rooftop solar panel systems before the TOU rates are finalized (possibly by Spring 2017) can opt to remain on their initial NEM-ST rate for up to five years.
Still a Good Time to Go Solar
California’s Public Utility Commission views NEM 2.0 as a temporary change. As the state moves to TOU rates by the end of the decade and explores emerging models of solar energy delivery, such as distributed energy resources, NEM 3.0 will take shape.
In the meantime, a switch to solar continues to make good financial sense for San Diego homeowners. Even with NEM’s minimal fees, residential solar power installations reduce homeowners’ electricity costs — by up to thousands of dollars each year. Plus, federal incentives that offer a one-time, dollar-for-dollar reduction in federal income tax of 30% of the total cost of a new solar panel installation remain in effect until the end of 2019.
At Baker Solar Electric, we’ll continue to monitor and report policy and other developments that affect San Diego residential solar customers. We’re also happy to help you with questions you may have about net metering and the NEM 2.0 changes. Contact us for more information on commercial or residential solar in San Diego.
California solar and battery incentives
For many California homeowners, going solar is already a slam dunk. However, there are federal, state, and local incentives that can maximize your solar savings.
The incentives fall into two broad categories: tax incentives and rebates. Let’s start by digging into the tax incentives.
Pro Tip: If you plan on moving out of California anytime soon, check out our list of other states incentives and rebates!
California solar and battery tax incentives
The following California solar incentives come in the form of tax credits, exemptions, and exclusions. Consult a licensed tax professional for advice regarding tax incentives.
Federal solar and battery tax credit
The first tax incentive to mention is the 30% solar investment tax credit – also known as the ITC or Residential Clean Energy Credit.
This federal tax credit is worth 30% of the cost of installing solar and battery storage systems. Thanks to the Inflation Reduction Act, the ITC will remain at 30% until 2032 and beginning on January 1, 2023 applies to battery storage that isn’t hooked up to solar.
Property tax exclusion
Studies by Zillow and Berkeley Lab found that solar panels increase home values by up to 4,000 per kW. And Californians know better than anyone else that higher property value means higher property taxes.
But thanks to California’s Active Solar Energy System Exclusion, rooftop solar systems installed before January 1, 2025 won’t be assessed in property valuations, and therefore won’t increase your property tax.
According to the California State Board of Equalization, this tax exclusion applies to solar systems “where the energy is used to provide for the collection, storage, or distribution of solar energy.”
It does not apply to solar swimming pool heaters or hot tub heaters.
Property-Assessed Clean Energy (PACE)
Upfront cost is often the biggest hurdle to going solar, but the PACE program – known as the Home Energy Renovation Opportunity (Hero) program in California – is one way to go solar with zero money down.
Through the Hero program, your state or local government teams up with a local lender to fund the upfront cost of your solar project. Then you pay the project off through an increase to your property tax bill over an agreed upon term, typically 5 to 20 years.
The savings come when the increase to your property taxes is lower than the energy savings provided by your solar system.
California solar and battery rebates
California also has solar incentives in the form of rebates, which can help reduce the upfront cost of solar and battery storage projects. We’ve listed a few below, but we strongly encourage you to check for local rebates through your utility, city, or municipality.
Self-Generation Incentive Program (SGIP)
With frequent power outages and Time-of-Use rates, home battery storage is an opportunity for both energy independence and savings.
Through SGIP, eligible Californians can be reimbursed for 150 to 450,000 per kWh of battery storage installed – which, in some cases, covers the entire cost of the project.
The incentive amount depends on your utility, your wildfire risk, and special circumstances like having a life threatening illness, medical equipment, and an electric pump for well water.
Disadvantaged Communities – Single-Family Solar Homes (DAC-SASH)
DAC-SASH is an upfront rebate to reduce the cost of going solar for qualifying low-income households.
To be eligible, you must meet all of the following criteria.
- Receive electrical service from
- Pacific Gas Electric (PGE)
- Southern California Edison (SCE)
- San Diego Gas Electric (SDGE)
DAC-SASH is scheduled to run through 2030. Visit GRID Alternatives to check your eligibility.
In addition to state rebate incentives, California also has several local rebates that can further maximize your solar savings.
For example, Rancho Mirage Energy Authority has a Residential Solar Rebate Program that offers a one-time 500 incentive for installing or expanding a residential solar system.
Similarly, Sacramento Municipal Utility District (SMUD) offers a 150 stipend for residential solar system installations.
Cost of going solar in California
While there are a variety of solar incentives in California, most homeowners will only qualify for the federal solar tax credit – and that’s okay. Even without incentives, the cost of going solar in California is already much cheaper than grid energy.
But, for many homeowners, the goal of going solar is to maximize your energy savings, so let’s see how the cost of going solar in California compares tobuying electricity from a utility provider.
Cost of solar vs grid electricity in the Los Angeles metro area
The figures below are from a real quote presented to a solar.com customer in Buena Park, Cali. for a 6.4 kW solar system under NEM 3.0 solar billing.
With California’s abundant sunshine, a 6.4 kW solar system can be expected to produce:
- An average of 9,770 kWh of electricity per year
- A total of 244,250 kWh of electricity over 25 years
If you divide the net cost of the project by the lifetime production, the cost per kilowatt-hour of home solar for this Los Angeles-area customer comes to:
- 7.8 cents per kWh with the 30% solar tax credit
- 11.2 cents per kWh without the solar tax credit
Now, let’s compare the cost per year electricity from home solar to the cost of grid electricity:
Even without the 30% federal tax credit, grid electricity is 118% more expensive per year than home solar – and that’s before factoring in the constantly rising cost of grid electricity
According to the Bureau of Labor Statistics, the average cost of grid electricity has increased by over 6% per year since 2017 in the Los Angeles metro area – but let’s use a 4% annual increase to be conservative.
Here’s how the cost of solar versus grid energy in Los Angeles compares over the 25-year warrantied life of a solar system:
Even NEM 3.0 solar billing, this solar.com customer near Los Angeles is looking at a payback period around 9 years and over 60,000 in energy cost savings over 25 years.
Is going solar worth it in California?
Whether your goal is energy cost savings, contributing to the clean energy transition, or providing backup power for grid outages, going solar is absolutely worth it in California – even under NEM 3.0 solar billing.
California is notorious for having some of the nation’s highest utility electricity rates and there is plenty of reason to belive they will continue increasing. Home solar is an affordable alternative to buying electricity from a utility provider and a hedge against rising energy costs.
California Solar Incentives FAQ’s
How much do solar panels cost in California?
Based on real binding quotes generated by solar.com, a 6.4 kW solar system (slightly larger than average for California) has a net cost around 19,000 after claiming the 30% federal tax credit.
That breaks down to around 3 per Watt for the system, and around 7.8 cents per kWh for the electricity it produces. For comparison, grid electricity rates ranged between 25.1 cents/kWh in Los Angeles to 40.9 cents/kWh in San Diego in 2022.
How does the California solar tax credit work?
California no longer has a state solar tax credit. However, the federal solar tax credit is worth 30% of the installed cost of a solar and/or battery system. This credit can be used to decrease your federal tax liability and increase your tax refund.
On a 15,000 solar system, the federal solar tax credit can be used to lower your tax liability by 4,500. If you don’t have enough tax liability to use at all it once, the tax credit can be rolled over into future years.
Consult a licensed tax professional for advice regarding applying the solar tax credit.
Can you get free solar panels in California?
There are a few programs in California that can drastically reduce or completely cover the cost of going solar. These niche programs are reserved for low-income and disadvantaged communities that meet strict eligibility criteria.
The Disadvantaged Communities/Single-Family Solar Homes (DAC-SASH) offers an upfront rebate for low-income homeowners in disadvantaged communities identified here.
California’s Low-Income Weatherization Program provides no-cost solar systems and energy efficiency upgrades for eligible farmworker households and other low-income housing types.
Local Solar Incentives
There are several local solar incentives in California that residents can take advantage of, which we’ve outlined in the chart below.
Local California Solar Incentive
SMUD provides customers with a stipend for the purchase and installation of a solar system meter cabinet and equipment.
RMEA offers its customers a 500 rebate for installing new solar panels or expanding an existing system.
GreenFinanceSF (San Francisco PACE financing)
Varies depending on your solar loan term and interest rate
This program allows you to finance your solar panels through your property taxes, making payments more convenient and decreasing what you pay in interest rates.
Ongoing through the end of your solar loan
Up to 7.5% of permit fees for home renovations
Allows you to reduce your permit fees by up to 7.5% if you’re renovating or building a home and adding solar panels or other energy efficiency or renewable upgrades.
How To Claim Local Incentives
Your solar installer will help you apply for federal, statewide and local renewable energy incentives you are eligible for. To see if there are additional solar incentives in your city or county, check your local utility and government websites.
California Net Metering Explained
Generally, net energy metering (NEM) allows you to earn energy bill credits for any excess energy your panels produce and send to the electricity grid. California transitioned from the NEM 2.0 program, which issued energy credits at the full retail rate, to the NEM 3.0 program on April 15, 2023. This new structure is technically “net billing,” in which the utility credits customers the avoided-cost rate for excess energy rather than the full retail rate. An avoided-cost rate is what the utility would pay to produce the energy, which is significantly lower than the full retail rate.
Customers who submitted a request for net metering to their utility company by midnight on April 14, 2023, are grandfathered into the full-rate, NEM 2.0 net metering program. All other customers are only eligible for the NEM 3.0 program.
This new policy significantly extends the payback period of solar panels for most homeowners in the Golden State, as they will be saving far less on their energy bills.
Under the new NEM 3.0 solar program, you may save more money on your electric bill by installing a solar battery. Solar batteries store excess solar energy your panels generate during the day for you to use at night, on cloudy days or during power outages. Solar energy storage can help you avoid more expensive electricity rates during peak hours and serve as a replacement for net metering.
How To Enroll in Net Metering
To enroll in net metering, your solar installer will submit an interconnection application to your utility company. Once approved for interconnection, your installer will connect your solar system to the grid, and you can start earning from the net billing tariff (NEM 3.0).
To learn more about the new net billing structure, visit the California Public Utilities Commission website.
Estimated Solar Savings in California
All California residents are eligible for the solar tax credit from the federal government, worth 30% of your entire system cost. Several solar power rebate programs are also available in the state to help you save even more. For example, the state has a program that will cover the cost of a solar system for qualifying low-income or at-risk households.
Recent changes to California’s net energy metering system have decreased the value of net metering bill credits for new solar customers. However, going solar in California will still typically pay for itself in about 10 years under new regulations. And considering solar power systems have a lifespan of 25 years or more, it’s still worth it to go solar in California.
The Bottom Line
The solar industry in California has been booming for years — the state ranks first in the nation for installed solar capacity. Plus, statewide solar incentives, utility company credits and the federal solar tax credit can reduce the cost of going solar. Unfortunately, the change in California’s net metering program, effective April 15, 2023, will mean a decrease in solar energy savings for many homeowners installing solar panels.
Despite this change, most Californians with solar panels will still save thousands of dollars in utility bills over the lifespan of their system. Your solar installer can help you find and apply for any solar incentives you are eligible for to help you pay off your panels even quicker.
If you’re interested in installing solar panels and saving more through energy independence, we recommend using our tool below to get matched to reputable and reliable local solar providers.
Energy Star-certified products Comprehensive active monitoring 25-year warranties on products and labor
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THE ENERGY TRANSITION
California officials approved the state’s latest long-term climate plan, which envisions a massive build-out of solar and wind power but which critics say includes too much reliance on carbon capture. Details here from Sophie Austin at the Associated Press. State officials also approved 5000.9 billion to build 90,000 electric vehicle chargers. These moves are a big deal — in part because whatever California does on climate change, it’s likely others will follow suit. Just this week, Oregon adopted the Golden State’s ban on the sale of most new gasoline cars by 2035, as the Oregonian’s Gosia Wozniacka reports.
Nevada’s major electric company wants to spend 827 million building batteries, geothermal plants and gas turbines to meet energy demand on the hottest summer days. Warren Buffett-owned NV Energy says California’s electric-grid troubles are among the factors driving its plans, because the Golden State’s huge demand for power has led to fewer supplies available on the western market at peak times, Sean Hemmersmeier writes for the Las Vegas Review-Journal. wind turbines in gusty New Mexico could help solve the problem. But some conservationists are fighting a planned electric line that would bring wind energy from the Land of Enchantment to California, saying the project would irreparably damage the Lower San Pedro River Valley, a wild refuge for birds and other animals. Here’s the story from Henry Brean at the Arizona Daily Star.
Billion-year-old rock in the Idaho Cobalt Belt could help fuel electric cars and solve the climate crisis. But environmental concerns abound in and around the Salmon River, a wild waterway known as the River of No Return, as Ian Max Stevenson and Kevin Fixler report in a fabulous deep dive for the Idaho Statesman. They dig into the global companies looking to mine huge amounts of cobalt, the political support they’ve secured and the delicate balance being sought by conservation activists.
AND EVERYTHING ELSE
A celebrity-studded enclave in western Los Angeles County is investing in wastewater recycling. The area served by Las Virgenes Municipal Water District — home to Kim Kardashian — is almost entirely dependent on water imported from Northern California, but it should eventually be able to source 20% of its supplies locally, The Times’ Hayley Smith reports. Out in the Mojave Desert, thirsty bighorn sheep are getting their own water lifeline. California officials have given a nonprofit permission to install dozens of watering stations for the at-risk species, Brooke Staggs reports for the Orange County Register.
“If you thought the industry would slink away and accept its loss in Sacramento, you don’t know our oil drillers.” L.A. Times columnist Michael Hiltzik wrote about the fossil fuel industry’s campaign to overturn a newly enacted ban on drilling near homes and schools — and how it’s only the latest of example of deep-ed businesses bankrolling ballot measures to get rid of regulations they don’t like. Some drilling is still on the way out, though. A conservation nonprofit finalized the purchase of a coastal oil field in Orange County, with plans to preserve the property as open space, Hannah Fry reports.
“Delayed breaths and pauses for long, healthy growing years. Tighter sequences in years strained by drought or cut short by a passing wildfire scarring the bark, pausing progress.” I loved this story by the Arizona Republic’s Joan Meiners about scientists bringing tree rings to life with music, and trying to find harmony in the otherwise discordant work of studying climate chaos. I also enjoyed this profile by my colleague Jeanette Marantos of a photographer-turned-researcher documenting California’s endangered native bees. I had no idea there are bees as small as the size of a letter on a quarter!
ONE MORE THING
I wrote earlier this year about Southern California Gas Co.’s plan to spend billions of dollars building a huge hydrogen pipeline known as Angeles Link. The company told me the project could help L.A. transition away from fossil gas, and possibly allow for closure of the controversial Aliso Canyon gas storage field, which sprung a record-breaking methane leak in 2015.
In an early victory for SoCalGas, the California Public Utilities Commission voted last week to let the utility begin tracking the costs of planning the green hydrogen pipeline — not a guarantee that SoCalGas will be allowed to charge customers for those costs and eventually build the pipeline, but a necessary first step.
In a press release lauding the commission’s vote, the utility company said Angeles Link would “support significantly reducing greenhouse gas emissions from electric generation, industrial processes, heavy-duty trucks, and other hard-to-electrify sectors of the Southern California economy.”
Some climate activists are cautiously optimistic. But others are highly skeptical about green hydrogen. For a rundown of why, see this story by the Orange County Register’s Brooke Staggs, about students at UC Irvine protesting a SoCalGas plan to test hydrogen blending in pipelines on campus, citing safety concerns. SoCalGas canceled an interview for the story.
It’s also worth keeping in mind that the utility is a subsidiary of San Diego-based Sempra Energy, a Fortune 500 company heavily invested in natural gas. Just this week, the Biden administration agreed to let Sempra send gas to Mexico for export to Asia in exchange for Sen. Ted Cruz (R-Texas) lifting holds on four Energy Department nominees, Reuters’ Timothy Gardner reports.
I wrote last year about Sempra’s request to ship gas to Mexico, saying the Biden administration’s decision “could offer an early preview of how aggressively it will confront the climate crisis.” A lot has happened on climate since then — most notably passage of the Inflation Reduction Act — but when it comes to greenhouse gas emissions, all the pieces matter.
ACTUALLY, JUST ONE MORE
Tony Barboza, a member of The Times’ editorial board, wrote a heartbreaking, heartfelt commentary on the difficulty of talking with his kids about the climate crisis. It’s not easy reading. But it’s worthwhile, heading into the Christmas holiday.
“As an environmental reporter, I have written over and over about how the pollution we keep dumping into the air is hurting people, threatening ecosystems and endangering our future. But at home, I’ve struggled to explain this to my own daughters,” Tony writes. “Because being a father helped me grasp that humanity’s failure to address climate change is transgenerational violence against our own children and their future children and grandchildren.”
If you’ve got kids, or other young people in your life, Tony’s lessons and suggestions are worthwhile. Take a gander.
We’ll be back in your inbox next week. If you enjoyed this newsletter, or previous ones, please consider forwarding it to your friends and colleagues. For more climate and environment news, follow me on @Sammy_Roth.