Go Solar by April 14 to Beat NEM-3 Changes!

Home Solar Before NEM-3

Koralie Hill, a 17-year solar veteran and former Director of System Performance at Sun Light & Power explains why you should go solar now! She was recently asked whether solar still makes sense given the drastic rate and rule changes adopted for Net Energy Metering (NEM) by the California Public Utilities Commission (CPUC). Koralie’s insightful summary makes a very strong case for going solar by April 14, 2023!


If you can afford solar – get it NOW!


Why now?

The CPUC regulates privately owned public utilities in California such as PG&E. On Dec 15, 2022, they voted to greatly decrease the compensation for solar-generated electricity under their third iteration of Net Energy Metering, NEM-3. These new rates apply to any “excess electricity” generated by customers that is not being used in the house or building at the time of generation and is instead pushed into the electrical grid. New solar customers have until April 14, 2023 to be “grandfathered” into the current compensation rate which is about three times as much as the upcoming rate.

How does home solar work with the electrical grid?  In California, solar electricity is generally produced between 10 am and 4 pm. Typically, the amount of electricity produced during this time is more than what is being used in the house or building, so the excess electricity is sent to the grid. If your solar system is registered with a utility company, your electrical meter will record the extra electricity produced and the utility will give you a credit on your bill.

How are solar credits calculated and how will that change? Most homes are already on a Time Of Use (TOU) electrical plan, and peak hours are considered to be 4 pm -10 pm. During these peak hours, utilities charge a higher rate than non-peak hours for electricity. In the Bay area, it’s $0.29/kWh during off-peak hours and $0.42/kWh during peak hours. Currently, most solar is produced during the off-peak hours, and the current compensation rate for electricity pushed to the grid is a one-to-one tradeoff for electricity used during off-peak hours. For example, if a solar system at one house is producing electricity during an off-peak hour, the bill payer will receive a credit of $0.29 per solar kilowatt hour of electricity produced. Likewise, their neighbor who is using electricity without solar will be paying $0.29 per kWh. Under the new NEM 3.0 rules, all homes must be on a TOU rate plan and all solar generated electricity pushed to the grid will receive an average of only $0.08 / kWh. This is roughly 75% less than the current rate!

Why did the CPUC vote to change NEM rules? It costs the utilities to manage the power grid, and with the increase of solar across California, the utilities claim they are making less money than needed to support the grid. The utilities claim that the costs to manage the power grid will shift from wealthy homeowners who can afford solar to customers who cannot afford it as the cost per kWh increases. The utilities also claim that their proposal will encourage customers to pair batteries with their home solar system so that more excess electricity produced during the 10 am – 4 pm hours can be stored, which would offset the burden on the utilities themselves to store that energy.

Should I get solar now if I don’t use enough electricity to justify the cost? YES, especially If you are considering an EV, converting your appliances from nautral gas to electric or adding an addition or ADU to your house. Solar can add value to your home!


Financing options

Best Option: Pay for the whole system upfront. Solar qualifies for a 30% federal investment tax credit (ITC)!

Financing: Loans are often available through solar installation companies as well as banks. Again, you can earn a 30% ITC on solar!

Solar Leasing: This is when customers pay nothing up front and the solar installation company pays for the whole system. This sounds like a great deal, but it’s the third best option because the financial savings made through the electricity created and sent to the grid are being shared with the installation company over the age of the lease, which is often 20 years. There's little to no financial benefit to the homeowner here.


Solar with or without batteries

Without Batteries: For most homes, solar systems cost $25K - $60k.  Advantages: solar alone is much more affordable and the permit and approval by the utility to turn on your system will be much faster. The system is also much simpler to understand and address when issues arise. Disadvantages: when the power goes out on the grid, there will be no power in the house.

With Batteries: Typically, adding battery storage increases the total price about $20 - $25k. Advantages: Resiliency – when grid power goes out, you can still have *some* circuits (but generally not all) still running with power. Power Arbitrage – your battery can be programmed to store the extra electricity your solar system made during the day, and then you can use it in your house during peak hours. Disadvantages: Cost and system complications can increase with batteries. In addition, the savings gained through power arbitrage do not necessarily offset the total cost of energy because some power is lost when electricity is transferred from the batteries to the home during peak hours. 


Alternatives, if you can't afford solar now (or ever)


If you are planning for solar

Get a permit and utility approval now but install later: Some solar companies may offer a system design that can be submitted to the utility now, which can give you up to three years to finish the installation.

Other considerations: People often install solar electric systems on their homes with the intention of saving money on electrical bills and reducing greenhouse gas emissions by using clean solar power they generated instead of electricity produced from the burning of fossil fuels at a power plant. If you want to save money, you will need to act fast because homeowners will be compensated far less for solar systems that are approved and signed off after April 14, 2023. If your concern is lowering your carbon footprint, you could wait a little longer because once you start producing your own electricity, your system will still offset your daytime usage. Therefore, when you are working from home, charging devices, or running washers and dryers, etc., your electricity will be powered in part or in full by clean solar energy as long as your solar system is producing power during these times.

Home Energy Efficiency

There are many ways to modify your home in order to use less electricity and natural gas. For many people, this feels much less exciting than going solar. However, the payback can be significant and measures can be taken piecemeal or all at once, making this option potentially more affordable. There are also enticing rebates (check out BAYREN.org/rebates-financing and techcleanca.com). In order of priority, measures to reduce electricity and gas usage include, air sealing (fix and fill leaks where air is escaping the house), insulating and accurately sizing heating ducts, and adding cellulose insulation to ceilings and walls. Other measures include changing out old natural gas appliances with energy efficient ones.


This term describes the replacement of natural gas powered appliances (air/space heaters, water heaters, stoves) and fossil fuel powered vehicles with electric models. Whether this actually saves homeowners money or not is a tossup depending on the age of the appliances, type of home and their driving habits. Electric heat pumps (available for both water and space heating), electric vehicles, and induction cook top stoves have become popular among those moving toward total electrification. Again, there are a number of rebates available for these (check out BAYREN.org/rebates-financing and techcleanca.com).

Contact an energy expert at Sun Light & Power by filling out the form below. Good luck on your solar journey!



Written by Koralie Hill. Edited by Seamas Brennan, Marketing & IT Coordinator at Sun Light & Power