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How to Maximize Savings with NEM 3.0

California’s NEM 3.0 solar billing policy has taken effect, altering the landscape of energy consumption throughout the state. This new net metering plan has caused a stir, raising questions about the future of solar energy and leaving people wondering if going solar is still worth it.

NEM 3.0 has drastically changed the economics of solar power, reducing compensation rates and making it more difficult for people to save money. Rather than fight the system, the best we can do now is make the most of it. And while it doesn’t offer the same benefits as NEM 2.0 did, there are still ways of taking full advantage of the system to maximize your overall savings.

So the question now becomes: what strategies can be used to maximize savings under the new NEM 3.0?

Understanding NEM 3.0

Before discussing the best ways to save, let’s first take a closer look at NEM 3.0, and how it differs from its predecessor, NEM 2.0.

Net Energy Metering, or simply NEM, is a billing policy designed to promote the adoption of renewable energy, thus incentivizing people to make the switch to solar power. It is based on the relationship between your home and the electric grid, accounting for the flow of energy in each direction. With solar panels, your home can produce electricity which can be sold back to the grid, thus saving you money on your electric bills.

In April of 2023, the California Public Utilities Commission (CPUC) put NEM 3.0 into effect, changing the way we interact with the grid. Compared to NEM 2.0, the new system drastically reduced the financial benefits of going solar. Key differences between NEM 2.0 and NEM 3.0 include:

Reduction in Credit. The substantially lower compensation rate means homeowners earn approximately 75% less in credits than they did under NEM 2.0
Avoided Cost Rates. Compensation is based on specific avoided energy costs during different hours, days, and months, resulting in varied credit values.
Time-of-Use (TOU) Rates. The cost of electricity varies based on peak and off-peak consumption periods, meaning that electricity will cost significantly more during peak hours.

As a result of these changes, going solar has become less appealing to many. However, just because you can’t save as much as you could have before doesn’t mean going solar isn’t worth the effort.

Is Solar Still Worth it?

Despite all of its shortcomings, NEM 3.0 still offers many reasons to go solar. While you won’t save as much as you would have under NEM 2.0, you’ll still earn substantial savings on your monthly electric bill that you wouldn’t get by simply relying on grid power. In addition to potential financial savings, other benefits of going solar include reducing dependence on utility companies, lowering carbon emissions, and, when paired with a battery, having backup power during a blackout. Don’t let the details of NEM 3.0 distract you from the fact that going solar is still very much a wise investment.

How to Maximize Your Savings with NEM 3.0

Now that we’ve established that you can still make going solar financially beneficial under NEM 3.0, the next step is looking at how to maximize the amount of money you can save. What can be done to ensure that you’re getting the most bang for your buck with your solar system?

Add Battery Storage

Out of all of the ways you can maximize your solar power, the best thing you can do is pair it with an energy storage system, known more simply as a battery. Integrating a battery with your solar system means that not only can you generate your own power, but you can choose when to use it. This is particularly helpful given the fact that the energy production and costs fluctuate so much throughout the day. Solar power is dependent on the sun, and the rates of buying and selling from the grid vary over the course of a day, month, and year. A battery allows you the flexibility to choose when you’re consuming your power, when you’re saving it, and when you’re selling it back to the grid.

The best thing you can do with energy storage is maximize self-consumption. In other words, use as much power from your solar and battery system as possible without having to buy from the grid at all. Because export rates are generally very low, you won’t get very much in return by selling excess power back to the grid. The power you generate is therefore more valuable if consumed than it is if it’s exported.

You should also maximize time-of-use (TOU) rates. This means using more energy during times when costs are lower. If needed, you can use excess power stored in your battery during these peak hours to avoid high costs. As a bonus, your battery will also provide you with reliable backup power when outages occur.

Utilize Load Shifting

Load shifting refers to the practice of using up as much power as possible during the hours when your solar system is producing the most energy, and using as little power as possible during the hours where buying power from the grid is most expensive. Solar production varies throughout the day, but generally speaking, it will be the greatest around noon when the sun is highest in the sky. Additionally, buying power from the grid in the evenings is much more expensive. Load shifting means you’re getting the most out of your solar power and paying less for energy in the evenings. Strategies include running heavy appliances, such as laundry machines, and charging electric vehicles during the day.

Understand Avoided Cost Rates

Avoided cost rates refer to the rates at which your power is sold back to the grid. The rates vary by hour, day, week, and year, so knowing when to consume power and when to export will play an important role in getting the most out of your system. For example, on a weekday evening in September, you can earn nearly $3 per kWh exported. On the other hand, you would earn nothing for power exported on a weekday afternoon in April. Having a thorough understanding of these rates will dictate how and when you utilize your power, especially if you have a battery and use load shifting to get the most out of the energy you produce.

Program Your Battery

With the differences in time-of-use (TOU) rates throughout the day, as well as the avoided cost rates, the value of the power you generate will fluctuate throughout the day. Programming your battery to operate in different modes throughout the day can maximize the value of your power. For example, you can program it to discharge in the evening when grid rates are at their highest, to charge during the day when there is excess solar power available, and to export power back to the grid when buyback rates are at their highest.

Maximize Production, Minimize Size

Simply installing panels doesn’t guarantee maximum performance and efficiency. The specifics of a system – the type of panels used, their location – can impact their production. Ensure that your panels are getting the most sunlight by installing them in places with the least shading, and if possible, have them facing southwest to maximize their sun exposure.

The same way simply installing panels doesn’t maximize production, installing more panels doesn’t mean you’re maximizing your savings. Since exporting power back to the grid is less valuable, it doesn’t make sense to produce that much excess power. In fact, systems that offset only 80% of a household’s consumption are shown to actually save more money than a larger system that offsets 100% of consumption.

Take Advantage of Tax Incentives & Financing

Taking advantage of tax incentives and financing options can significantly reduce the cost of your system and increase your solar savings. The Self-Generation Incentive Program (SGIP) is an incentive program run by CPUC that provides rebates for installing energy storage systems. Additionally, federal tax credits like the Investment Tax Credit (ITC) can cover over 25% of the cost of installing a solar system. Financing options such as solar leases or loans can also help to lower the initial cost of installation. When considering all of these options, you can significantly reduce the overall cost of your system and start saving money on your energy bills sooner.

Go Solar with Solar Discovery

While NEM 3.0 isn’t quite as attractive as its predecessor, there’s no doubt that going solar is still the smartest decision going forward, especially when you take the steps to maximize your savings. Solar Discovery is an all-in-one solar, battery, and roofing solution that is dedicated to providing Southern California with accessible clean energy, and offer additional services to help with tax rebates, grant assistance, and anything else to ensure your system is set up as efficiently as possible. Get in touch with our team of solar experts to get started today.

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