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How California’s new net metering policies have made solar energy storage more valuable

Payback credits have changed under NEM 3.0, meaning batteries are now key to extracting more value from solar.

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Design by Mia Coleman

California has some of the most expensive residential electricity prices in the country. One way for consumers to insulate themselves against high, and rising, energy costs is by harnessing the power of the sun and switching to solar. But recent updates to the state’s net metering policy (NEM), that went into effect in April, left people wondering if solar is still worth it.

The short answer is a resounding yes.

“There may be a misconception that it’s no longer the right thing and that is absolutely not true,” said Suzanne Leta, head of policy and strategy for SunPower, a leading solar technology and energy services provider. “It’s still very much the right thing to do for your pocketbook, for our environment, and for the resiliency of our grid.”

Changes to net energy metering

There are two basic tenants of NEM: being able to have clean energy in your home to serve your electricity needs while staying connected to your local utility, and getting value in your utility bill in the form of a credit for any excess energy that you provide back to the grid.

The biggest change in California’s transition from NEM 2.0 to NEM 3.0 is the amount of credit you’re able to get back from your utility when you provide that extra energy back to the grid. With the new changes, consumers now receive about 75% less for the electricity that they send back to the grid, though the amount will vary based on what time of day and what season you export the power.

Under NEM 3.0, the payback period for installing solar panels (the time it takes to pay for your solar energy system through energy bill savings) has increased to 9-10 years, which is actually more in line with the payback period for the rest of the country. Even with these changes, solar in California can still be a cheaper alternative than paying for electricity from the grid.

The value of solar

While NEM 3.0 affects the export value of extra energy, it doesn’t change the fact that if you put solar panels on your roof, you can save money because you’re generating your own electricity. What some consumers might not know is that they can get the most value from solar if they combine it with solar storage through a battery like the SunPower SunVault™.

Solar battery storage can do a handful of things: store energy during the day to be used at night, power a household through a blackout, help increase overall grid resiliency, and contribute to increased cost savings when you sell power back to the grid.

Courtesy of SunPower

In California, energy prices vary based on the time of day, and grid power is more expensive in the evening when demand is high. Meanwhile, solar energy is free during the day when the sun is shining. So if solar-only consumers can schedule their energy usage — like doing laundry or running their AC — during the daytime, then they can take advantage of a plentiful energy source. Apps like the mySunPower app can even alert customers to let them know when they’re producing a lot of solar electricity and encourage them to use it.

Better yet, if consumers have solar battery storage, they can store that energy generated during daylight hours and either use it whenever they want, or export it to the grid during peak usage times, like between 4-9pm when energy is at its most expensive because the grid is most strained.

“The battery is an inoculation against rates that change over the course of a day because it doesn’t really matter what the rates are doing,” said Alex Sherman, senior director of product management for SunPower’s Grid Services. “You’re able to take that solar energy and redirect it to the hours of the day when the sun isn’t shining and offset the need to purchase expensive utility power.”

This not only protects you from moments when energy rates get higher, or when a rolling blackout throws off the grid and prices spike, but it also lets you take advantage of the swings and pricing in a way that you can’t do without these devices. Sherman encourages consumers to focus on the fact that they can get paid simply for how they use energy, and solar and batteries are what can make that a reality. “You can take something you’re already doing and create value beyond just savings,” he said. “You can save money and you can earn money — and it’s your energy.”

By flipping SunPower’s SunVault battery into “cost savings mode” the system will automatically adjust the times that your battery discharges energy back to the grid, meaning that your home will pull energy from the grid when it’s less expensive and export stored solar energy during peak times based on your utility’s rates. That’s just one example of a way to craft a smarter home energy system and save more money in the long term.

Renewables and climate change

Design by Mia Coleman

While saving money is compelling enough, solar also has the potential to provide major benefits to society at large.

Electricity accounts for 25 percent of planet-warming greenhouse gas emissions in the U.S., and right now a staggering 79 percent of our electricity comes from burning fossil fuels. One way for an American consumer to support a secure energy economy is by going solar, and widespread adoption is a key element in the transition toward a renewable energy future.

There’s more potential for emissions reductions when combining residential solar with large, utility-scale clean energy resources, like solar and wind farms. “You have to max out both of them,” SunPower’s Leta said. “That’s not only the best thing to do from an emission standpoint, it’s the best thing to do from a cost effectiveness standpoint in order to get those emissions targets in the most cost effective way.”

Right now, a majority of the clean energy installation workforce in the U.S. is concentrated in the residential market. SunPower has over 500,000 customers in 49 states, and most of its teams that install systems are doing so within a one to two-hour radius from where the install warehouse is, reducing emissions from driving long distances to customers.

Who is solar right for?

Another misconception about solar is that its high upfront cost means it only makes sense for wealthy people. In fact, it’s actually low and middle-class Americans who stand to benefit most, as solar can help reduce their overly high energy burden. What many people don’t know is that solar is available to both homeowners and renters. Renters can approach their landlord about installing solar for a building or single-family home’s electricity needs or look into community solar (a large-scale system that provides electricity to many properties). Through incentives, like virtual net metering, tenants can save money by purchasing a share of the community project and earning credits on their utility bill.

“The whole goal is to make solar affordable for everyone,” said Nate Coleman, chief products officer at SunPower. “If customers can’t do the upfront payment, there are multiple other ways in which you can start making a monthly payment that’s going to be less than your current utility bill.”

In fact, about 85 percent of residential solar today is financed and customers can choose a loan or a lease. And as part of the Inflation Reduction Act, there is a 30 percent tax credit available for installing solar as well as battery storage.

Each system is tailored to a customer’s needs and depending on your home, can be scaled with more panels or additional batteries based on factors like how much you want to offset your utility bill, and if you’re going to get an electric vehicle in the next year or two.

Ultimately, home solar combined with battery storage still makes sense for California and the rest of the country. According to Local Solar for All, sustainable growth in local solar stands to save state ratepayers more than $100 billion by 2050 and U.S. ratepayers $473 billion while creating 2 million jobs. Creating a clean, low-cost grid is considerably cheaper than doing nothing, and with the ability to combine solar with battery storage, solar is only getting more valuable.