California Supports Solar (NEM 2.0 update)

CA Has Got Solar’s Back

As the leading solar market in the United States, California continues to ensure that homeowners get a good deal and save by going solar.

First a quick reminder of federal incentives for solar, the 30% Solar Investment Tax Credit (ITC) is the federal government’s solar incentive and it was set to expire in 2017. In a surprising turn of events, both Republicans and Democrats decided together to keep the current 30% ITC through 2019. In 2020, the ITC will decrease to 26%, 22% in 2021. By 2023, the residential ITC will drop down to 0%.

Many speculated California would reduce solar support in 2017 since the Feds extended the tax credit for a few more years. California however, boldly chose to continue its support of residential solar. The California Public Utilities Commission decided last January to keep ‘retail credit at the meter’ as part of the Net Energy Metering (NEM) rules for NEM 2.0. This is great news for homeowners because retail credit means solar is still a great investment!

As of January 1st, 2017 California has officially hit the NEM 2.0 switchover point which means all new installation will operate under the new NEM 2.0 rules. I’ll explain the most important changes later in this article.

Our Governor Supports Solar Too!

Jerry Brown, the Governor of California, recently gave a speech at the 2016 Fall gathering of the American Geophysical Union. During the speech, he made a statement highlighting California’s the job growth resulting from the renewable energy sector, “We’ve got more sun than [Texas’] got oil, and we are gonna use it!”

Brown’s support for renewables, like solar, is nothing new. In his inaugural address in 2015, Jerry Brown pronounced a new goal for California: 50% renewables by 2030. The 50% expansion is an ambitious expansion from the previous milestone of 1/3rd by 2020 – which California is on track to hit. As of 2016, California is producing 27% of its energy from renewables sources; a fourth of which is generated by solar.

In July 2014, Brown signed a bill that extends the Solar Property Tax exclusion until 2025. The exclusion means that installing solar doesn’t trigger a reassessment of your property tax liability, saving you more money. The Solar Property Tax Exclusion is another way that California supports homeowners going solar through laws many are unaware of.

NEM 2.0 Changes

If you are unclear what Net Energy Metering is, this article explains it.

NEM 1.0 was a great solar incentive for homeowners. It was one of the ways that California incentivized the adoption of solar, in addition to the ITC. The plan was that once NEM-eligible solar installations powered 5% of PG&E’s service area, the rules would transition to NEM 2.0.

We are now under NEM 2.0. The California Public Utilities Council voted to leave key fundamentals of the original NEM 1.0 regulation as-is. While the NEM 2.0 rules are slightly better for PG&E, many of the bill-saving features of NEM will continue under the new rules. The two key points are:

  • Retail Rates at Meter: You still get paid at retail rates for electricity you push back to the grid. This rule is what turns solar from a good deal into a great deal. That rule is unchanged in NEM 2.0!
  • Grandfathering: You are guaranteed that your NEM agreement will remain unchanged for 20 years. Even if policymakers decide to launch NEM 3.0, you will be safe from any negative changes under the NEM grandfathering agreement!

This is great news! These fundamentals, retail rates at the meter and a 20-year guarantee that California will honor your NEM agreement, prove that solar will remain a great deal no matter what policymakers decide in the future.

Now that NEM 2.0 is in place, what’s it mean for the homeowner that is going solar?

Solar is still a great deal. The new NEM 2.0 rules alter two basic numbers:

  • Your Internal Rate of Return (IRR) will decrease by a percentage point or two. (i.e. 17% to 15%).
  • Your payback period will increase by a year or two. (i.e. from 5 years to 7 years.)

With the new rules, you will still save a ton of money by powering your home with solar electricity rather than PG&E electricity with regularly increasing costs.

You can lock in a low monthly electricity bill by producing your own power. Call Allterra Solar today at (831) 425–2608 to set up a consultation with one of our solar experts.  It is time to look at solar and learn how federal and state solar incentives can work for you and your family.