California’s Net Billing Tariff (NEM 3.0) – Unraveling and Simulating the Mechanism

California’s Net Billing Tariff (NEM 3.0) – Unraveling and Simulating the Mechanism

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With the implementation of the California’s Net Billing Tariff (NBT), also known as NEM 3.0, approaching in the next few months, there are many questions from installers and customers about how it will affect them. In this article, we will provide an explanation of the Net Billing Tariff, which will apply to all systems submitted after April 14, 2023. We will also walk you through the charging and crediting process. For more information and updates on NEM 3.0, you can visit Aurora’s NEM 3.0 Resource Center.

Under NEM 3.0, customers who want to install solar systems after the NEM 2.0 deadline on April 14, 2023, will be enrolled in NEM 3.0 and will be required to use an electrification rate instead of a regular time-of-use (TOU) rate. The available electric rates as of January 2023 are: E-ELEC for PG&E customers, TOU-D-PRIME for SCE customers, and EV-TOU-5 for SDG&E customers. Compared to regular TOU rates, these electrification rates have higher on-peak charges and lower off-peak charges. They also have a fixed monthly charge of $15 instead of a minimum fee of $10. The peak rate period remains the same from 4pm to 9pm.

Additionally, NBT customers will be billed monthly instead of annually as it was under NEM 2.0.

Export compensation in NEM 3.0 is determined using California’s Avoided Cost Calculator (ACC), which provides a specific export rate for each combination of Month, Hour, and Weekday or Weekend. The export rate is lowest during the middle of the day when there is abundant solar energy and highest during peak summer demand periods. The rates for SDG&E weekdays throughout the year are shown in the heatmap.

When comparing the TOU rates with the ACC export rates, we can see that the export rates are significantly lower than the retail rates during the hours when PV systems are most productive (10am-3pm). To make solar PV systems financially viable for homeowners, customers in PG&E and SCE service territories receive an adder on top of the ACC rate, ranging from 2.2 to 9 cents depending on location and customer class.

Calculating utility bills under NEM 3.0 is a bit more complicated. It involves examining the customer’s hourly energy usage and PV production estimation. Aurora provides methods to estimate or upload a customer’s hourly load profile and use their design tool and PV simulator to obtain this information.

The calculation process includes determining the energy usage from the grid and energy sent to the grid for each hour. The cost of electricity for energy taken from the grid is determined based on the hourly rate, while the ACC export rate is used to calculate the credit for energy sent to the grid. These calculations are done for each hour in a month, and any credits are applied against the charges. Any remaining credits are rolled over to the next month if applicable.

To better understand the billing process, an example of one day in August for an SDG&E customer is provided. Charts are used to illustrate the consumption and production load profiles, energy purchased from the grid, self-consumption of PV energy, and energy sold to the grid. The timing of exported electricity is compared to the high ACC export hours.

In summary, under NEM 3.0, grid usage during peak hours is more expensive, and export rates for PV energy are lower than retail rates. Self-consumption of PV energy offers savings, but the value of exported energy is limited. The billing process is complex, and understanding its calculations is important in designing a PV system.

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