Florida might be the Sunshine State but California is the Solar State. With 33,260-gigawatt hours generated from solar in 2021 and 15,206 kilowatts of installed capacity in solar plants and over 1.5 million solar systems installed on homes, schools and small businesses, California is the leader in solar energy in the US.
In 2023, California is shifting from a Net Energy Metering Model to a Net Billing model. The current model is called NEM 2.0 but the new one is called NEM 3.0.
- California’s Net Energy Metering 3.0 will have a radical effect on how prosumers get reimbursed when the electricity generated from their rooftops flows onto the grid.
- NEM 3.0 does not take effect for applications that are filed before April 13th, 2023. That means that before that date, new solar systems will be net-metered.
The changes are meant to help balance the grid - instead of energy flowing onto the grid when conditions are best for solar generation (during the day) - the grid will receive energy when it’s most needed (during the evening).
How Net Energy Metering works now, before the change, is that solar owners generate a certain amount of excess energy that is fed onto the grid. When their solar installation is not generating enough for the home, they pull energy off the grid. The number of kilowatt hours put in and taken out is netted without looking at the market value of the kilowatt hours at the time they were fed to the grid or fed from the grid.
- NEM 3.0 vs NEM 2.0: The difference between net metering to net-billing
- How NEM 3.0 will affect sales of solar panels
- How solar salespeople can prepare for NEM 3.0
NEM 3.0 vs NEM 2.0: The difference between net metering to net-billing
This is a change from net metering to net billing. In very general terms, this means that instead of looking at an extended period for netting usage from the grid versus generation to the grid, the utility calculates the wholesale value of the power when it goes to the grid and calculates the retail value of the power that the homeowner buys off the grid.
In more simplistic terms, the rooftop is viewed as a power plant when generating electricity to the grid. When the home needs electricity off the grid, it is viewed as a retail buyer. Kind of like the separation of the rooftop and the house beneath it.
Net Energy Metering (NEM) explained:
A house with rooftop solar generates different amounts of electricity, depending on the time of day or month of the year. This means that a cloudy January results in the home needing extra electricity off the grid. But in July, the homeowner might be away while the PV system is generating electricity almost at full capacity. The surplus and deficit kilowatt hours are simply netted out as kilowatt hours, not on the value of the electricity when it was loaded on or off the grid.
Net billing explained:
The sun shines the most during the day when electricity is used the least in the home. When electricity is used the most, the is going down or has gone down. When there is surplus supply, the price goes down and when there is surplus demand, the price goes up. With net billing, homeowners get paid wholesale when the electricity goes to the grid but pay retail prices for the electricity they need from the grid during the evening.
How NEM 3.0 will affect sales of solar panels
The change is fair in the eyes of the utilities that have to stabilize the supply and demand of electricity and for customers that don’t have solar installed on their rooftops. But those who have criticized the change, point out that NEM 3 will slow down the adaptation of solar panels in California since it will make the payback time of solar panels longer.
The change will most likely have an impact on solar systems that are installed without storage capabilities.
One of the goals of NEM 3.0 is to increase the adaption of solar + storage. The price fluctuation of the feed-in tariff means that it will become beneficial to store energy when its generation is most abundant (during the day) and sell it back to the grid when demand and price are higher (during the evening).
The payback period of solar + battery in NEM 3.0 is expected to be the same as for a solar system under NEM 2.0.
NEM 3.0 also opens up vehicle-to-grid becoming more feasible. The homeowner can charge the car while at work, when electricity is cheaper and then drive back home and sell the electricity to the grid or use it to fill up the home battery when electricity off the grid is more expensive.
Tips on how sales agents can prepare their solar sales for NEM 3.0
NEM 3.0 is the end of solar sales in California as we know it today. That is the point. But it is not The End of solar sales. It just means that there has to be a change in how you approach new customers since this has no effect on customers who installed a solar system under NEM 2.0.
- Prioritize new customers that are less likely to get battery storage for their solar systems. Think about your conversions with previous customers. Why they didn’t get a battery? Was it because it didn’t make economic sense? Yes, most likely. But think of the other reasons people gave you. Try to find people that fit that profile and give them the sense of urgency to get solar before it’s too late.
- Get up to date on batteries and storage, if you haven’t already. Start learning all the important stuff and how to communicate it.
- If you know a lot about battery storage, forget the jargon. You might call a solar+storage buff but most people don’t understand the difference between watt and voltage. Start unlearning and learn how to explain it to a five-year-old.
- Update your solar calculation tools.
- Sell the idea of solar + battery. Show the prospect a calculation of how much they would be earning with just solar under NEM 3.0 and the payback period of the system. Then show them how much they will earn with a solar system that charges a battery that can sell energy to the grid during peak hours.
- Show the calculations with visuals. Show how energy generation and prices fluctuate and how not having a battery makes no sense. Remember: A picture is worth a thousand words. In sales terms: A picture is worth thousands of dollars.
- Make your sales calls visible. Use simple screen sharing software to complement your sales calls. CrankWheel allows you to share your screen to any device without setup for the viewer. Pull up satellite images and calculations during the call and you can even hand the control over to your prospect.
The change from NEM 2 to NEM 3 is an end of an era. NEM 2 has sped up solar installations in homes in California but NEM 3 is meant to stabilize the grid by helping supply meet demand. It is more likely that new solar projects will be considered more uneconomical without installing a battery system to store excess generation that is fed to the grid when the price is right.
NEM 3 means that selling solar panels to homes that for some reason can’t install a battery system much harder, if not impossible. But it will speed up the adoption of battery storage in California and make microgrids a more feasible option.