Everything you need to know about net metering and battery storage

April 5, 2023

Holly Bowers

If you’ve thought about getting solar panels, you’ve probably come across the term “net metering.” And if you’re in California, you might have heard that net metering is changing. But what is net metering? How does it affect your potential solar benefits? And how does installing a home battery open a loophole to better savings?

Everything you need to know about net metering and battery storage image

What is net metering?

Net metering, or NEM, allows homeowners with solar panels to earn power bill credits for any excess energy they send to the grid. So if your solar panels generate more electricity than you use, you can sell that surplus back to your utility. You can use your credits later, when you need to draw electricity from the grid.

Let's say your solar panels generate 100 kilowatt-hours (kWh) of electricity in an afternoon, but you only use 50 kWh to power your home. With NEM, you can sell the extra 50 kWh to your utility for, say, $0.25 per kWh. So you earn a $12.50 credit. Later that night, when you need power from the grid, you can use that credit.

What is NEM 3.0?

NEM 3.0 is California's latest iteration of its net metering policy. It replaces NEM 2.0 and takes effect in April 2023.

Under NEM 3.0, any homeowner who submits their solar interconnection application after April 14 won't earn as much by exporting their surplus power to the grid. The policy is not retroactive, however, so existing homeowners with solar will be grandfathered into their original net metering policy for 20 years.

NEM 3.0 includes new benefits to incentivize customers to install a home battery in addition to solar. And customers who already have solar under the NEM 1.0 or NEM 2.0 policies can still enjoy the benefits of home battery storage.

Reduced net metering credits

For the past two decades, homeowners in California could sell their solar electricity for between $0.22/kWh and $0.36/kWh. Under NEM 3.0, new solar customers will only receive credits of about $0.08/kWh, varying by month and time of day. This works out to a $30,000 to $40,000 loss over the lifetime of their solar system.

Why is NEM 3.0 happening now?

California has the most residential solar power in the country. It also has a power grid that's becoming increasingly taxed by the state's growing demand. Regulators see an opportunity here.

Solar production helps reduce stress on the grid during the day when the sun is shining. But it doesn't help in the evening, when the sun goes down and electricity demand peaks. Instead, California needs to meet peak demand by drawing power from dirtier sources, like natural gas.

Regulators aim to incentivize home battery storage as a way to reduce demand on the grid at peak times, prevent power outages, and help people save money on their utility bills. And more home battery storage will help all of California decarbonize faster.

Changes to rate plans

With NEM 3.0, residential solar customers must also enroll in new, 'highly differentiated' time-of-use (TOU) rate plans. Under TOU plans, electricity costs more when demand is highest, such as in the evening or on hot summer days when AC use increases. Electricity costs less when demand is lower.

So NEM 3.0 lowers the value of excess solar energy that households generate during the day, but raises the cost of electricity during peak hours. At first glance, that doesn't sound great for residential customers who want to install solar. But there's a strategic loophole: get a battery.

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Home batteries increase the value of solar under NEM 3.0

NEM 3.0 makes solar with battery backup more valuable than standalone storage. Batteries also have a number of benefits for residential customers.

Optimize your solar credits

Residential customers with solar who _don't _have home batteries have to sell their excess power back to the grid right away. But solar owners who install batteries will be able to store that excess energy and export it to the grid later, when demand“ and prices are highest.

Shorten your payback period

Under NEM 2.0, most homeowners in California take roughly five to six years to recover the cost of their solar installation through energy savings. NEM 3.0 will extend that period closer to nine or ten years. Adding battery storage to solar will help you save more over your system's lifetime and shorten your payback period.

Save more money

Most homeowners who install solar panels care about saving money on energy costs. But under NEM 3.0, new solar customers are set to miss out on 75% of the value of their solar installation over its lifetime, compared to customers who install solar panels and battery storage together.

You can potentially save around $300 a year by using your stored solar energy when prices go up and by selling excess solar power to sell back to the grid when you can get the highest price.

Enjoy backup during power outages

One of the most compelling benefits of a home battery is the peace of mind it provides during power outages. This is an increasing concern in California, given more frequent extreme weather events and rolling summer blackouts to balance the grid. Home battery backup may not be able to power your entire house, but you'll be able to keep your essentials going.

Get ready to save

To optimize your savings with solar under NEM 3.0, a battery is your best bet. When you work with Haven Energy, we make it easy to find the right battery system for you. We handle every step along the way, from choosing your battery to system design, permitting, and connecting you with a vetted installer. Get a free quote today.