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On December 15, 2022, the California Public Utilities Commission passed an overhaul of the net-metering program for the state’s investor-owned utilities. The changes replaced the long-standing net energy metering (NEM) tariffs with a net billing tariff (NBT) structure — colloquially known as “NEM 3.0” — which significantly reduces the compensation for behind-the-meter solar PV systems. The NEM tariffs remained open for new interconnection applications until April 15, 2023, but after that date, all new interconnection applications were submitted under NBT. Now, one year later, we have an opportunity to evaluate how the California solar market has evolved under this new compensation regime.

As a precursor to its annual Tracking the Sun report, Berkeley Lab has released a short technical brief describing key trends in the California residential solar market since the roll-out of the new NBT structure. The purpose of this analysis is to provide empirical insights into how the market has evolved over the past year, confirming some expectations while also revealing several striking surprises.

Key trends include the following:

• PV installs in the year since NBT implementation (starting April 15, 2023) were roughly equal to the year prior, but 80% were NEM systems associated with the rush of interconnection applications submitted during the several months before (and installed after) the NEM tariffs closed.
• As expected, more customers are installing storage along with PV, but the pivot has been quite pronounced, with storage attachment rates jumping from roughly 10% under NEM to 60% under NBT.
• Perhaps as a result of that sudden increase in demand, inflation-adjusted installed prices for paired PV+storage systems rose by about 17% under NBT, relative to their level under NEM (this is for host-owned systems, inclusive of any loan-financing “dealer fees”).
• Most surprising has been the dramatic shift in solar adoption toward less affluent zip-codes. Though the reasons for this development require further exploration, it likely reflects a larger share of NBT systems associated with California’s solar mandate for new homes, as well as the growing effects of programs and policies to support solar and storage adoption by LMI households.
• Another remarkable shift has been the sharp increase in third-party ownership (TPO) rates, from 24% under NEM in the preceding year, to 44% under NBT, reversing what had previously been a steady movement away from TPO. This may partly reflect exogenous factors related to high interest rates and federal tax incentives, but is also consistent with any underlying shift toward new construction and less affluent households, both of which have historically had higher TPO rates.
• As expected, PV systems are smaller under NBT — by about 9% overall and by 17% for systems co-installed with storage. This shift is likely driven in large part by the lower compensation for grid exports provided under NBT, though systems installed in new construction and by less affluent households tend to be smaller as well.
• The installer market has become more concentrated under NBT, with the Top 5 installers accounting for 51% of the market, compared to 40% under NEM (though most of that difference is associated with the state’s largest installer).

To be sure, not all of the trends described above can be attributed entirely to NBT, as other important factors have also been at play, and this brief data summary does not attempt to parse out the effects of the many drivers. But at least on first glance, NBT does appear to have already had significant impacts on the California residential PV market. These impacts and others will no doubt come into sharper focus over the next year, once the NEM backlog is fully cleared and a “new normal” under NBT sets in.

News item from Berkeley Labs

Headline updated 05/16 to reflect attachment jump