What California’s NEM 2.0 Decision Means

by Deedee Chao

On January 28, the California Public Utilities Commission (CPUC) voted to pass NEM 2.0, a net energy metering decision for solar that updated how rates would be monitored for solar customers (those who own solar energy systems to generate energy for their own use). Net energy metering (NEM) is a method through which solar system owners are credited for their surplus energy that they feed to the grid, which subtracts from the costs incurred when they use energy from other sources (for example, on cloudy days or at nighttime), so they are only billed for their “net” energy consumption.

The updated policy keeps retail-rate payments intact, which means that solar customers are given higher credits for their surplus energy than if the rate were changed to be closer to wholesale value. This encourages solar customers to maintain their systems and for new investors to choose solar, which is a win for the industry- but other traditional utilities protest the decision, citing reasons that the rates used for solar are unfair to other energy sources and will prove to be unsustainable in the long run.

However, NEM 2.0 is also implementing time-of-use (TOU) rates for pricing, which means that different rates will be used for different times of the day. These rates are meant to be a better match for the actual costs of generating and sending energy through the grid, and partially address the concerns of utility companies such as Southern California Edison (SCE) and Pacific Gas and Electric (PG&E).

Although concerns in regards to artificial pricing of solar energy are not unfounded, we should keep in mind that NEM 2.0 is also meant to be an interim decision, to tide us over until 2019, when the policy will once again be revisited and updated. At that point, CPUC expects to use updated data to re-determine solar rates and figure out how to integrate NEM policy into the distribution resources plan (DRP) and integration of distributed energy resources (IDER), which are meant to connect energy sources into a single system and place values on each in accordance to real-world rates and incentives. In the meantime, continued support for solar and structures to encourage its use, especially within California, a nationwide solar energy leader, should be made a priority.


St. John, Jeff. 2016. Breaking: California’s NEM 2.0 Decision Keeps Retail Rate for Rooftop Solar, Adds Time-of-Use. Greentech Media. January 28, 2016. (http://www.greentechmedia.com/articles/read/Californias-Net-Metering-2.0-Decision-Rooftop-Solar-to-Keep-Retail-Payme)


Net Metering. Solar Energy Industries Association (SEIA). (http://www.seia.org/policy/distributed-solar/net-metering)


Trabish, Herman K. 2016. Inside the decision: California regulators preserve retail rate net metering until 2019. Utility Dive. February 1, 2016. (http://www.utilitydive.com/news/inside-the-decision-california-regulators-preserve-retail-rate-net-meterin/413019/)




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