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PG&E NEM 2 vs NEM 1

PG&E’s NEM 2 took effect for new solar interconnection applications completed on or after December 16, 2016. For PG&E to consider an application complete, it requires the solar system to pass the City’s final inspection. A copy of the signed Permit must be included with the application.

NEM 2 activated when 5% of electricity being generated during peak hours was coming from customers with net metering agreements, including solar. Because NEM 2 activates based on a threshold, PG&E never set a date for it to begin. Instead, they provided only a 12 hour notice.

PG&E states that the changes with NEM 2 are “modest”. While there are some restrictions and the return of investment gets pushed back a bit, NEM 2 continues to allow customers to save on their electricity costs by switching to solar.

NEM 2 vs NEM 1

Interconnection Fee

Cost to connect a new solar system to the grid.

NEM 2: One-time fee of $145 for most residential systems.

NEM 1: No fee.

California-Mandated Non-Bypassable Charges

NEM 2: No fees for solar production that is immediately used. ~2-3¢ for each kilowatt taken from the grid, even if that electricity comes as an offset to extra solar production.

NEM 1: No fees for solar production that is immediately used or as a result of extra solar production during daylight hours. ~2-3¢ for each kilowatt taken from the grid that was not offset by solar.


NEM 2: Mandatory time-of-use rate.

NEM 1: All rate plans are available.

How does a time-of-use plan work with solar?

Let’s say you are on PG&E’s EV-A plan, a time of use plan available to electric vehicle (EV) owners only. The benefits of this plan are low rates to charge your EV overnight (11 PM – 7 AM). Here are sample summer rates for the plan:

7 AM – 2 PM: 22.282¢ per kWh (partial-peak)
2 PM – 9 PM: 42.464¢ per kWh (peak)
9 PM – 11 PM: 22.282¢ per kWh (partial-peak)
11 PM – 7 AM: 9.746¢ per kWh (off-peak)

On a time-of-use plan, you are afforded the opportunity to “buy low” and “sell high”. If you produce more electricity than you use during the peak hours, you are “selling” it at a rate of 42.464¢ per kWh. At night when there is no solar production and you are charging your EV, you are “buying” electricity at 9.746¢ per kWh. Essentially, for every kWh you are giving PG&E, you are getting back ~4.36 kWh. However, note that peak hours extend into the night, at 9 PM. 

How long will NEM 2 be offered?

The California Public Utilities Commission plans to revisit NEM in 2019. It is possible the NEM program might be further restricted for new solar systems interconnected after 2019 (NEM 3), depending on the provisions made by the commission.

How long is NEM 2 guaranteed for?

NEM 2 is guaranteed for 20 years. If you sell your home, the agreement passes to the new homeowner. However, if you move and build a new solar system and a potentially more more restrictive NEM 3 takes effect, you cannot “take” your NEM 2 agreement with you. NEM 2 is tied to the house, not to a person.

I signed a contract / got my solar panels installed prior to December 16, 2016. Can I get onto NEM 1?

No. To qualify for NEM 1, PG&E requires the the following completed on or before December 15, 2016.

  • Completed interconnection application.
  • Copy of Signed Permit. A Permit is signed once the solar system passes final inspection by the City.

Having a signed contract for solar with your contractor or having panels already installed but without a passed final inspection before December 16 does not make the system eligible for NEM 1. PG&E never provided a way to “hold” a guarantee for NEM 1 unless all its requirements were completed prior.

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