Net Energy Metering

Welcome to the Net Energy Metering Hub - A resource for understanding California's Net Energy Metering (NEM) policies. Learn about the history, evolution, and implications of NEM programs like NEM 1.0, NEM 2.0, and the Net Billing Tariff (NBT), and how these policies affect ratepayers, the energy grid, and California's clean energy goals.

Our Work on Net Energy Metering Reform

At the Public Advocates Office, we advocate for equitable energy policies that benefit California ratepayers. Our work on NEM includes:

Analyzing cost impacts: Studying how NEM policies affect ratepayers, particularly those who do not have solar.
Promoting fairness: Supporting rate design reforms and providing policy recommendations to address cost-shift concerns while maintaining incentives for clean energy adoption.
Ensuring transparency: Engaging with stakeholders to provide data-driven insights and advocate for long-term solutions that support grid reliability and affordability.

Net Energy Metering (NEM) is a policy framework originally designed to incentivize the adoption of rooftop solar by allowing customers to offset their energy usage with the electricity they generate. Under NEM, customers can send excess energy back to the grid in exchange for bill credits. While this approach has encouraged solar adoption, it has also created challenges for cost allocation and grid reliability, raising concerns about fairness for all ratepayers. and customers who signed up remain eligible for its benefits for 20 years.

NEM 1.0, the first iteration of the policy, was introduced to jumpstart rooftop solar adoption. Customers who installed systems before July 2017 earned a 1:1 retail rate credit for every kilowatt-hour of energy they generated. These credits allowed solar customers to reduce their bills significantly, but this structure shifted costs for grid maintenance and public programs onto non-solar customers. Participation in NEM 1.0 was capped at a percentage of the utility’s peak demand, and customers who signed up remain eligible for its benefits for 20 years.

NEM 2.0 was implemented for customers who installed solar systems between July 2017 and April 2023, following the NEM 1.0 program cap. While it introduced non-bypassable charges (NBCs)—fees that solar customers must pay to support grid maintenance and public programs—to address the cost shift, these charges were modest and did little to fully resolve the underlying fairness issues. NEM 2.0 continued to provide credits close to the retail rate, leaving the imbalance between solar and non-solar customers largely intact. As a result, the program perpetuated challenges in equitably sharing the costs of grid maintenance and public benefit programs.

In April 2023, the Net Billing Tariff (NBT) replaced NEM 2.0, representing a step toward addressing the cost shift and modernizing solar compensation. Under the NBT framework, customers are credited for excess energy based on hourly rates that reflect market demand and grid needs. This approach aims to provide fair compensation while encouraging solar systems designed for self-consumption and energy storage. While the NBT seeks to better align customer incentives with California’s clean energy goals, its success depends on ongoing evaluation and implementation.