Net Energy Metering (NEM) is the utility program which enables on-site (or behind the meter) energy installations (like solar) to earn credits for exporting electricity to the grid. Under the terms of the NEM program, electricity that is generated by customers and delivered to the grid earns financial credits that are banked over the course of the year, and used to offset the costs of using electricity from the grid over the course of that same year. Under the initial NEM program, the credits from export of electricity to the utility were set to be equal to the cost of electricity purchased from the utility.

In 2016-2017, California transitioned from the initial NEM program (NEM 1.0) to a successor program (NEM 2.0) which:

  • Added an interconnection fee to customers
  • Added non-bypassable charges to customers
  • Required projects to transition to Time-of-Use rates
  • Lifted the 1 megawatt installation size limit (now limited to the customer’s annual load)

As a result of these changes in NEM 2.0, new solar projects generated less cost savings value than those that were deployed under NEM 1.0. Customers that deployed their projects under NEM 1.0 were grandfathered on that program for 20 years.

Proceedings are currently underway (NEM Rulemaking 20-08-020) for the development and implementation of another new NEM Tariff (NEM 3.0). Stakeholders from the utilities, the solar industry, climate advocates, and various customer groups are currently in the process of submitting their proposals and comments to the California Public Utilities Commission. A final decision regarding the new NEM program is excepted later this year and expected to take effect in early 2022.

While it is too early in the process to know the outcomes of these proceedings, the current proposals by the utilities will substantially reduce the cost savings from solar projects deployed under NEM 3.0. Thus, if your organization is considering solar projects, now is the time to move while NEM 2.0 is still available. To get your projects deployed under NEM 2.0, you’ll need to evaluate the technical and financial feasibility of your projects, and then submit your interconnection application to your utility.

TerraVerde Energy is here to help. As independent energy advisors, TerraVerde supports public agencies and commercial enterprises in developing and deploying solar + battery projects that can reduce energy costs and provide backup power. To learn about how TerraVerde can help your organization get your projects deployed under NEM 2.0, reach out to us at

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