Do you live in California and own your home? If yes, you need to get solar. Do you want to get (or have) an electric vehicle, an induction stove, or otherwise upgrade your home’s appliances and contribute to cleaner air and a stable climate? Well, you need to get busy getting solar ASAP!
While at the national level, policy is moving in the direction of promoting solar adoption (see the enhanced incentives in the Inflation Reduction Act or this complete guide), California regulations are moving in the opposite direction. The California Public Utilities Commission passed new regulations slashing the financial benefits of installing solar — but there is a narrow window to act to lock in the current benefits. Starting in April, California’s net energy metering (NEM) program will be transitioning to a new version known as NEM 3.0. This means that if you want to lock in the current NEM2 rates and take advantage of the financial benefits of solar energy, you need to act quickly. Need more reason to act? Jump to #7 below.
Here’s what you need to know:
- Understanding Net Energy Metering (NEM)
Net energy metering is a billing mechanism that allows homeowners with solar panels to receive credit for the excess energy their systems generate and send back to the grid. Under the current NEM2 program, homeowners can receive full retail credit for the excess energy they generate, which can significantly reduce their monthly utility bills.
2. What’s changing with NEM3?
Under the new NEM3 regulations, the credit homeowners receive for their excess energy will be reduced up to 75% on average, making it less financially beneficial to install solar in many cases. In addition, there will be a one-time interconnection fee for new solar installations, and new rules regarding how energy is credited back to homeowners.
3. The urgency of going solar now
If you’re considering going solar, now is the time to act to lock in the current NEM2 rates before they’re gone. By setting in motion the installation of solar before April 14, 2023, you can benefit from full retail credit for your excess energy for years to come, helping you save on your energy bills and pay off your solar system more quickly. You do not have to complete the solar installation, just various paperwork that an installer will help you with. Once secured, you will be grandfathered in to the current NEM2 rates for 20 years.
4. What incentives are available to add solar?
While California is moving in the direction do make it less attractive to install solar, there are federal tax incentives available to homeowners who invest in solar energy, which have gotten better with the passage of the Inflation Reduction Act (IRA). The federal government offers a solar investment tax credit (ITC) for homeowners who install solar panels on their properties. The ITC allows homeowners to deduct 30% of the cost of their solar system and related expenses from their federal taxes (or receive a rebate, if they do not have an income tax liability). This credit applies to both residential and commercial solar installations and if you also have to replace your roof, you can claim the tax credit on the corresponding portion of your roof. There are some smaller state and local incentives too, and your solar installer can fill you in on what you qualify for. Talk to your tax professional for details about the ITC.
5. Are there financing options available for solar?
Solar can be a significant upfront investment, but there are several financing options available to help make it more affordable. Many homeowners choose to finance their solar systems through loans, which allow them to pay off the system over time while still enjoying the savings on their energy bills. My recommendation is to contact a local credit union for the best rates. Some solar installers also offer lease and power purchase agreement (PPA) options with their proposal, which can provide immediate savings with little or no upfront cost, however, these often involve added fees bundled into the system cost, making overall financing more expensive.
6. What is the process for getting solar installed?
The process of getting solar installed on your home typically involves several steps:
- Share your information: Solar installations are site specific, so you will need to share your address and energy usage information with an installer to be able to properly design a system.
- Proposal creation: After gathering the necessary information, the installer will provide you with a custom solar system proposal.
- Design and engineering: Once you’ve agreed on a solar system design, the installer will take care of any necessary engineering and design work. This is the step you need to get through before the April 14 deadline so you can secure NEM2 benefits!
- Installation: The solar panels and other equipment will be installed on your home, typically over the course of several days. Installation times are often scheduled months out from the previous steps and involves obtaining the necessary permits for the installation.
- Inspection: A local inspector will come out to verify that the installation was done correctly and up to code.
- Activation: Once your solar system is approved and ready to go, you’ll receive permission to operate from your utility and can start enjoying the benefits of solar energy.
7. Solar is a key way to manage energy costs and accelerate clean energy
Solar is the cheapest way to generate electricity today. Meanwhile, in California, the major utilities continue to raise the rates we pay for electricity (21% increase in 2022 and also raised rates in several previous years, leading to 31% increase in rates between 2009–2019).
And, to combat climate change, we all need to electrify our homes, eliminating the miniature power plants that burn fossil fuels to heat our space and water, dry our clothes and cook our food. That means we will use MORE electricity, which will make the impact of the ongoing rate hikes from the utilities even more expensive.
Installing solar on your home can provide significant long-term savings on your energy bills, as well as help you reduce your carbon footprint. By generating your own electricity with solar, you’re less reliant on the grid and less vulnerable to future electricity rate increases. Plus, if you produce more energy than you use, you can sell that excess energy back to the grid and receive credits on your utility bill.
Overall, if you’re a California homeowner considering going solar, it’s important to act now to take advantage of the current NEM2 rates and lock in savings for years to come. With financing options available and a straightforward installation process, going solar can be a smart investment in your home’s energy future. Keep in mind that every solar installer in the state is swamped right now with people wanting to lock in rates, SO DON’T WAIT — GET OFF YOUR BUM AND GET SOME SOLAR!
I can recommend solar installers in the Bay Area buy not as many outside of that area. Drop a comment if you have questions or need support in other areas of the state.
Still have questions? I recommend the Solar Rights Alliance FAQ here.