Net Metering 1.0 (1996 – 2016)
The original version of Net Metering, Net Metering 1.0, established the system by which homeowners could sell their excess solar energy back to the utility for credit. During the day, when the Sun is high and hitting a home’s solar panels, the solar panels create more power than the home is using. With Net Metering, that excess energy goes through the home’s electric meter to the energy grid, which runs the meter backwards, crediting that excess energy to the homeowner’s account at retail price. Later, when the Sun goes down and the solar is no longer producing, those credits accrued earlier in the day are used to purchase power back from the utility.
So this balance of creating extra energy and earning credits during the day, and then utilizing those to buy energy back later at night is what creates the “offset” which allows homeowners with solar to zero out their electric bills. Homeowners cannot make money from oversizing their system and receiving extra credits, it only allows for zeroing out charges.
Under California’s State Net Metering policy, Net Metering 1.0 in SDG&E territory had a cap of 5% of total peak electricity demand. That cap was hit in 2016, after which the California Public Utilities Commission created Net Metering 2.0 to ensure that the solar industry would be able to maintain its momentum. So at the time, all homeowners who went solar in SDG&E territory went on Net Metering 2.0, of which, at the time, there was no cap.
Net Metering 2.0 (2016 – Present)
Net Metering 2.0 was essentially the same as Net Metering 1.0 except for a few changes. The core of it, receiving retail rate bill credits, as in, per kWh bill credits, from the excess solar power equal to the rate of a kWh of electricity, remained the same. What was changed were three things: Time-of-Use rates, interconnection fees, and non-bypassable charges. While these changes were not estimated to make a significant impact on bills, (approximately $10 a month increase) it did have a temporary impact on the local demand for solar.
Under Net Metering 2.0, every customer who goes solar has to have a representative from the city come out to do an inspection on the installation and sign off on its activation. The fee for this is $132 in SDG&E territory, and is required for all residential and commercial installations. While a small fee, it is one of the main differences between Net Metering 1.0 and 2.0
Also included under Net Metering 2.0 are what are known as non-bypassable charges, which are per kWh charges that are built into rates. These are mostly insignificant, 2 – 3 cents per kWh, and they go to low-income, customer assistance, and energy efficiency programs. These don’t add a huge amount to the bill, but are still there and should therefore be considered.
With Time-of-Use, electricity costs different amounts depending on the time of day it is being used. This is due to the demand for power being different at different times of the day, and therefore SDG&E has to charge more for when there is a higher demand. These prices also apply to excess solar energy being sold back to SDG&E for credit, as in, when the excess energy is being created affects the amount per kWh SDG&E will pay for it.
You can compare Time-of-Use Rate structures to buying a ticket from an airline — the ticket prices are variable. When they have a lot of inventory, they cut the price. When there’s a Super Bowl in Atlanta and everyone wants to fly there, ticket prices go up. At least with SDG&E, they tell you ahead of time when the prices are highest: from 4pm to 9pm in the summer months, M-F. And also when they are the cheapest: from midnight to 6am.
And this is true whether you go solar or not. You always have the opportunity to use less power from 4pm – 9pm and use more power overnight, if you can adjust your habits accordingly.
If you have solar, you will almost always be making more power from 9am – 4pm on most days; which means you’ll be buying less from SDGE and maybe be selling more back.
In order to offset the power you use from 4pm-9m, you have to make (sell) twice as much during the middle of the day, because the value (price) of the electricity doubles after 4pm (or, conversely, is worth half as much from 6am-4pm, M-F.
There are multiple Time-of-Use rate structures to choose from, but the common thread amongst all of them is that there are three price periods in a day:
- On-peak, when the demand for electricity is highest and prices are highest – typically in the late afternoon / evening.
- Off-peak, which is when the demand is less high and prices are in the mid range – typically during the day.
- Super Off-peak, when demand is low and prices are low – typically at night.
Prices for all these categories also differ between Summer and Winter months. So every TOU structure has different prices based on time of day and what time of year it is. They also have different terms that go along with them. Which structure you choose is based on a number of factors, including whether you have an electric vehicle or not.