There will be many changes in the solar industry over PG&E’s new NEM3.0 program or Net Billing Tariff, (NBT) which went into effect for all applications filed after 4/15/2023. NBT reduced the compensation for solar exports by 75% over previous Net Energy Metering (NEM) plans. For NBT to be a financially viable solution for solar, will require a combination of using available technology to minimize solar exports to the utility, switching from natural gas and propane appliances to electrical appliances when possible and using power at different times then with NEM.
I am writing this multi-part series to help cover the many aspects of NBT, starting with this Blog. Future blogs will cover the history of NEM and how we got to where we are, Fuel switching, moving gas appliances and vehicles to electric ones to maximize NBT savings, best practices in power usage by customers and how we design systems for NBT. At First Response Solar (FRS) we write these blogs for you, so please ask questions, or suggest areas you would like us to delve into or ideas on other subjects.
While NBT will virtually eliminate solar-only projects, we will see systems that combine solar with energy storage become the norm. FRS and the solar industry are ramping up to retrain our sales and design teams to adapt to this change. First let’s look at why I believe solar with storage is still a great proposition for most homeowners under NBT. First, let’s compare the Kilo Watt Hour (KWH) cost we pay to PG&E and the KWH cost of installing solar. A KWH is a measure (1,000 watts) PG&E uses as a means to bill their customers.
When FRS prepares a proposal, we do a detailed financial justification, and we are finding an average a 6-8-year payback on most systems with savings batteries under NBT. For purposes of this blog, I will use a simple way to justify solar and storage under NBT. I use 25-years as a timeframe as most components, modules, racking, and inverters come with a 25-year warranty. This concept is to look at the 25-year cost of a solar system, divided by the total power a solar system will produce over 25 years. Another way to say this is it gives us a 25-year cost of pre-paying our electricity. In 2021 we were installing solar only projects for a pre-paid cost of about $0.13 per KWH. In 2024 a solar system with a savings battery, has a 25-year pre-paid cost of $0.16 per KWH., a $0.03 increase over 2021. Now the other side of the equation, utility cost. Below is a chart showing the cost increase in PG&E’s power from 2021 to January 2024,
Average Bundled Change from
Year Residential rate prior year
2021 $0.286 8.7%
2022 $0.338 18.1%
2023 $0.382 13.2%
2024 (YTD) $0.448 17.3%
So solar allows us to pre-pay our electrical bills at about $0.16 per KWH while PG&E is charging $0.448 per KWH. Another way to say this is solar costs are 36% of those from PG&E.
The numbers above don’t lie, justifications for solar with storage are still as good as ever. The one big difference with NBT is we need to minimize our solar exports to the grid since we are receiving about 75% less then under NEM 2, or on average $0.08 per KWH. This change requires us to change the design and power usage to maximize financial returns by installing the largest solar system we can, while minimizing exports to the grid. Let’s look at three areas of design changes that can benefit savings: storage, fuel switching and when we use appliances.
Storage: - Storage is one of the biggest savings opportunities under NBT as it allows us a degree of control over our usage. A storage system allows us to use power from the storage system at night and most importantly during our evening utility peak, when power costs are at the highest (over $0.65 per KWH during summer on some schedules). Another major advantage of storage is it allows us to store our excess solar power in our storage system during the day, rather than exporting it at very low rates to the grid.
Fuel Switching: Fuel switching is moving cars, appliances, and even powered tools away from fossil fuels towards electric alternatives that can be charged by solar. When we fuel switch, primarily to devices that use power during the day, we can design large solar systems, using the power during the day and/or larger storage systems to use the increased power at night. Natural gas and propane continue to increase in price and fuel switching with solar is one of the easiest ways to control these costs.
Appliance usage timing and Electric Vehicle (EV) charging times: By making changes to when we use our appliances, we can increase our savings even more. For example, at my house I run a mini split (electric heater), primarily during the day when my solar is running, minimizing exports to the grid. I also charge my EV during the day whenever possible using my solar rather than exporting it.
In writing this blog, it was my goal to demonstrate that solar with a savings battery is not only viable but just as justifiable as systems in the past under NEM 1 and 2. And with sky rocketing rate increase from PG&E, now is a great time to install solar.
I will be writing other blogs to discuss in more details ways to maximize the benefits of solar and storage under NBT. Please let me know what you think of this Blog and ideas for future ones.
Marketing and training director
First Response Solar