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My NEM 1 Is Expiring. What Should I Do?
If you installed your solar around 20 years ago, then your NEM (net energy metering) protection will end soon. This article explains what happens next, and what your options are.
What is NEM?
NEM stands for “net energy metering.” Under NEM, when your solar panels make more electricity than your home needs, the extra electricity flows to your neighbors. The utility then sells that electricity to your neighbor and passes most of that to you as a credit.
It makes sense: you pay to generate and transport that energy to your neighbor. In doing so, you help reduce how much electricity the utility has to deliver to both you and your neighbor. For the utility, it’s electrons in, electrons out: they don’t make or lose money, and you get credited fairly for sharing your extra energy.
How do I know if I am on NEM?
Customers of PG&E, Edison, or SDG&E who got solar before or around 2016 are on what is called NEM 1 or NEM 1.0. Those who got solar after that time, and before April 2023, are on what is called NEM 2 or NEM 2.0. There are variations on this for customers of public utilities such as SMUD or LADWP.
Does NEM expire?
Yes. The State of California guarantees that all NEM customers can stay on NEM for 20 years from the date their original solar system was turned on. So for example, if your solar system was turned on in March 2007, then you are on NEM 1, and your NEM protection will expire in March 2027.
This guarantee is sometimes called “grandfathering” or the “NEM lock-in period”.
What happens when NEM 1 expires?
When your NEM 1 expires, your utility will automatically move you to the Solar Billing Plan (SBP). This has a bunch of names: NEM 3, NEM 3.0, or the Net Billing Tariff (NBT).
When you’re moved to the Solar Billing Plan, any extra solar energy that you send to your neighbor will get credited to you at a much lower rate.
For example, under NEM 1, if the daytime electricity rate was 35 cents per kilowatt hour (kWh), and you sent 100 kWh of extra electricity to your neighbors, your credit would be around $35. However, under the Solar Billing Plan, your credit for the same 100 kWh will be more like 5 cents per kWh, or $5.
More reading: Frequently Asked Questions about the Solar Billing Plan
How do I know when my NEM 1 lock-in period ends?
Some utilities will send you a notice a few months before your NEM expiration date. However, you can also calculate this yourself since NEM ends 20 years from the date that the utility turned on your solar system. That date is called Permission to Operate, or PTO.
You can find this date on your utility interconnection agreement, or by calling your utility.
What will happen to my electric bill after NEM 1 expires?
Your electric bill will likely increase when your NEM 1 expires. That is because you will receive a much lower credit for the extra solar energy you share with your neighbors.
Should I keep my existing solar system?
You can definitely keep your solar panels after your NEM 1 expires. Whether that makes sense depends on how well your old panels are working, your goals, and how much longer you plan to be in your home.
Solar panel warranties are usually for twenty years, but the panels can often last longer. And if they are still working, they are still helping to reduce how much electricity you have to buy from the utility. That may be good enough for your purposes, especially since you paid for those old panels a long time ago. How to make sure your solar panels are working properly.
But what you do next may depend on your situation.
For example, if you don’t plan to be in your home much longer, investing in new solar panels and a battery may not make financial sense. Granted, you might pay a higher electricity bill for a while. However, that still might be less than the cost of installing a new system and not being around long enough to recover the savings.
If you do plan to be in your home for at least eight to ten more years, then putting in a new system may make sense. But if you do get a new solar system, consider getting batteries with your new panels.
Should I add a battery when NEM 1 expires?
If you plan to be in your home for the foreseeable future, then it may make sense to get a battery. That’s because when your NEM 1 expires, you will get almost nothing for the extra solar energy you send to your neighbors. A battery will allow you to store the extra solar energy you make when the sun is shining. That will allow you to use that energy yourself when the sun is not shining, rather than buying the utility’s expensive electricity.
It’s possible you can simply add batteries to your old solar panels. But often that’s not technically possible or advisable. If that’s the case, you may need to install new panels. A good solar installer should be able to advise you on your options.
What should I keep in mind if I want to replace my solar system?
Whether you are planning to install new solar panels, add solar panels to your existing system, or get a battery, we recommend you read our tips for going solar and contact us if you have questions specific to your situation.
What if the company that installed my solar panels is no longer in business?
Our Solar Company Finder can help you locate reputable solar companies in your area.
What should I do before my NEM 1 expiration date?
We suggest that you start thinking about what you want to do a year or two before your NEM 1 expiration date. Use the tips in this article to help you make a plan.
And please contact the California Solar Help Desk using the form below with any questions you have.
Solar Rights Alliance Consumer Guide and articles
