Modeling Energy and Economics on California's New Net Billing Tariffs (NEM3)

On December 16th, 2022 the California PUC released the final version of NEM 3.0 and in the process renamed the policy Net Billing. The new name was probably the biggest change in the final version but there were a few other tweaks and clarifications:

1. The export adders for PG&E increased slightly, increasing customer savings.
2. Fixed charges cannot be offset by export credits, decreasing customer savings.
3. New construction is ineligible for export adders.
4. NEM status is not transferable when a home is sold, with limited exceptions.

Key Aspects of the New Tariffs

Each of the 3 investor owned utilities (PG&E, SCE, and SDG&E) have one and only one "NEM3" tariff. Note that the official name is now "Net Billing." All solar customers must take service on their utility's new net billing tariff. In SolarNexus, these are the current tariff versions:

• Pacific Gas & Electric: Residential Time-Of-Use - Electric Home, NEM 3.0 (E-ELEC-NEM3)
• Southern California Edison: Residential - Domestic - Time of Use, PRIME, NEM 3.0 (TOU-D-PRIME-NEM3)
• San Diego Gas & Electric: Domestic, Cost-Based, Time of Use, NEM 3.0 (EV-TOU-5-NEM3)

The new tariffs are have time-of-use rates for imports of grid electricity, however, exports are valued at a different rate for every hour.  Export values for kWhs have a much lower value than they did for NEM2 tariffs.

When developing the new tariff structure and rates, the utilities targeted a rough payback of 9 yrs or better for residential systems.

Analyzing Project Economics of NEM3 jobs in SolarNexus

Because SolarNexus has always been built to evaluate project economics on an hourly basis, we've been able to adapt to the new rate structures without any new engineering. We have created three new ESS dispatch strategies, however - one for each utility's NEM3 tariff. The dispatch strategy defines how the ESS is charged and discharged throughout the year.

See these demo videos for how to set your dispatch strategies:

 

Administratively setting default strategy to NEM3

Comparing Project Economics of NEM3 to NEM2

Our rates provider, Arcadia (formerly Genability) has provided us with NEM3 rates.

We have run analyses on some representative project solutions in each of the IOU territories to get comparisons of results. We looked at PV only, and PV + ESS systems under both NEM2 and NEM3 scenarios. The table below shows our test results. Key takeaways:

• PV Only jobs: NEM3 adds 2 - 3 yrs to payback period
• PV + ESS jobs: NEM3 adds 1 - 2 yrs to payback
• Investment returns on NEM3 projects remain fairly attractive

Payback Comparisons:

	NEM2: PV Only	NEM3: PV Only	NEM2: PV + ESS	NEM3: PV + ESS
PG&E	4.5 - 5 yrs	7 - 8 yrs	6 - 6.5 yrs	7.5 - 8.5 yrs
SCE	4.5 - 5 yrs	6.5 - 7 yrs	5.5 - 6 yrs	7.5 - 8 yrs
SDG&E	3.25 - 3.75 yrs	5.25 - 5.75 yrs	4.5 - 5 yrs	6 - 6.5 yrs

Assumptions:

• PV system offsetting approx 100% of customer annual use
• PV system price = $3.60 / W
• Battery sized using SolarNexus' storage system size estimator. Selected size approximates the recommended size battery for each case. For simplicity, we used an AC battery. Note that battery size for NEM2 peak TOU offset is generally smaller than a battery size for NEM3 offset, so system cost is higher.
• Battery price = $0.90 / Wh

NEM3 tariffs provide greater economic drivers for larger battery capacity than NEM2. That is, adding more battery capacity to NEM2 projects tends to lower returns more than adding capacity in NEM3 projects.

 

Net Billing Tariffs for CA IOU's in SolarNexus

Pacific Gas & Electric: Residential Time-Of-Use - Electric Home, NEM 3.0 (E-ELEC-NEM3) (link to Genability Explorer)

No seasonal difference in Time of Use periods

• On-Peak: 4-9pm
• Part-Peak: 3-4pm and 9-midnight daily
• Off-Peak: 12am-3pm

San Diego Gas & Electric: Domestic, Cost-Based, Time of Use, NEM 3.0 (EV-TOU-5-NEM3) (link to Genability Explorer)

Summer Time of Use periods (Jun 1 - Oct 31)

• On-Peak
  • Mon-Sun, 4-9pm
• Off-Peak:
  • Mon-Fri, 6am - 4pm AND 9pm-midnight
  • Sat-Sun, 2pm-4pm, AND 9pm-midnight
• Super Off-Peak
  • Mon-Fri, 12am-6am
  • Sat-Sun, 12am-2pm

Winter (Nov - Feb) Time of Use periods:

• On-Peak
  • Mon-Sun, 4pm-9pm
• Off-Peak:
  • Mon-Fri, 6am-4pm, and 9pm-12am
  • Sat-Sun, 2pm-4pm, AND 9pm-12am
• Super Off-Peak
  • Mon-Fri, 12am-6am
  • Sat-Sun, 12am-2pm

Winter (Mar - Apr) Time of Use periods:

• On-Peak
  • Mon-Sun, 4pm-9pm
• Off-Peak:
  • Mon-Fri, 6am-10am, and 2pm-4pm, and 9pm-12am
  • Sat-Sun, 2pm-4pm, and 9pm-12am
• Super Off-Peak
  • Mon-Fri, 12am-6am, and 10am-2pm
  • Sat-Sun, 12am-2pm

Winter (May) Time of Use periods:

• On-Peak
  • Mon-Sun, 4pm-9pm
• Off-Peak:
  • Mon-Fri, 6am-4pm, and 9pm-12am
  • Sat-Sun, 2pm-4pm, and 9pm-12am
• Super Off-Peak
  • Mon-Fri, 12am-6am
  • Sat-Sun, 12am-2pm

 

Southern California Edison: Residential - Domestic - Time of Use, PRIME, NEM 3.0 (TOU-D-PRIME-NEM3) (link to Genability Explorer)

Summer Time of Use periods (Jun 1 - Oct 31)

• Peak
  • Mon-Fri, 4-9pm
• Mid-Peak:
  • Sat-Sun, 4pm-9pm
• Off-Peak
  • Mon-Sun, 9pm-4pm

Winter (Nov - Feb) Time of Use periods:

• Mid-Peak
  • Mon-Sun, 4pm-9pm
• Off-Peak:
  • Mon-Sun, 9pm-8am
• Super Off-Peak
  • Mon-Sun, 8am-4pm

Winter (Mar - Apr) Time of Use periods:

• Mid-Peak
  • Mon-Sun, 4pm-9pm
• Off-Peak:
  • Mon-Fri, 6am-10am, and 2pm-4pm, and 9pm-12am
  • Sat-Sun, 2pm-4pm, and 9pm-12am
• Super Off-Peak
  • Mon-Fri, 12am-6am, and 10am-2pm
  • Sat-Sun, 12am-2pm

Winter (May) Time of Use periods:

• Mid-Peak
  • Mon-Sun, 4pm-9pm
• Off-Peak:
  • Mon-Fri, 6am-4pm, and 9pm-12am
  • Sat-Sun, 2pm-4pm, and 9pm-12am
• Super Off-Peak
  • Mon-Fri, 12am-6am
  • Sat-Sun, 12am-2pm

 

Arcadia's* blog on CA Net Billing (* - formerly Genability)