How California installers can prepare for NEM 3.0

On December 15, 2022, the California Public Utilities Commission (CPUC) voted on and passed the net billing tariff, also known as NEM 3.0. As the April 15, 2023, start date approaches, project design and sales software provider Aurora Solar weighs in on how this new incentive structure will impact the solar + storage market.

Could you explain how this will impact the design of solar installations and the wider solar market in California?

Chris Hopper, CEO and co-founder at Aurora Solar: First, we expect to see a spike in solar interest and installs throughout California as homeowners act quickly to get grandfathered into NEM 2 pricing — April 14, 2023, is the final day to submit an interconnection application to enroll into NEM 2.0. However, as a result of the conversations homeowners have with solar installers and contractors, we’ll see our second impact: homeowners will realize that solar is still a great investment under NEM 3.0 pricing.

This is especially true for those living in areas that are increasingly impacted by wildfires and power shut offs every year. The potential for solar to provide energy independence and resilience is becoming an increasingly important selling point.

Now, to achieve that resilience, solar design requires storage. This brings us to our third impact, and gets us back to the question on how NEM 3.0 will affect the design of solar installations: Our industry needs an increase in solar + battery storage installations. Under NEM 3.0, battery storage makes more financial sense than ever because it requires homeowners to implement time-of-use utility pricing and reduces the price at which energy can be sold back to the grid. Homeowners who can generate and store energy can sell that stored energy back to the grid at peak times, when time-of-use prices are at their highest. This will help generate a higher return on their solar investments.

How is NEM 3.0 going to impact solar installers in California?

In the short-term, stock up on coffee, because the next couple months are going to be busy as homeowners rush to get systems grandfathered into NEM 2.0.

In the longer-term, though, there are some real opportunities for installers, starting with solar + storage. Battery storage provides that peace of mind — that homeowners will be able to keep the lights on no matter what happens with the grid. And now, this solar plus storage combination has the added benefit of helping homeowners generate the best return on their solar investment under the new NEM 3.0 rules.

To take advantage of this opportunity, installers need to be educated on all the energy storage options available — and new technologies coming. Not only do they need to be able to discuss them with, and explain them to, homeowners, but installers must be able to include storage in their sales pitch and proposal. This means modeling storage as part of a solar installation, model different storage options, and clearly show the costs and savings. And to truly realize this opportunity, all of this has to be a natural, integrated part of what installers present to homeowners.

What advice would you give to contractors to prepare for this new future?

We call our industry the “solar coaster” for a reason — change is the only constant. Homeowners, though, likely aren’t aware of this. The best advice we can give you is to understand customers expect a seamless, flexible and easy purchasing process — no matter what they’re buying. You can research and order almost anything online, right? Then you also have the option to speak with someone in-person, via chat or on a video call if you need more information or support. When you’re making home improvements, for example, you can even see, online, how certain patterns of wallpaper will look on your walls, or how a couch will look in your living room.

Solar is no different. Homeowners want to feel engaged throughout the sales, design and installation process. They want to be presented with multiple options, based on their input and preferences. They want to see how the panels will look on their roof.

When it comes to solar + storage, specifically, they expect to see how a proposed system will create the greatest return on their investment, as well as how many hours of backup energy they have if a power outage occurs. And they want input into the final product. When installers are able to provide this level of service — and many already are — buyers feel well-informed and empowered and have more confidence in their decision to go solar.

We also have to address a couple potential stumbling blocks. First, solar + storage is generally more expensive than standalone solar. This doesn’t have to be a dealbreaker, though. For example, seamlessly providing different financing options gives homeowners back some control and can help overcome their initial cost concerns.

Likewise, installers may see soft costs start to creep up as everything from system design, to procurement, to installation potentially becomes more complex. Having the best, most accurate, most streamlined platform for selling, designing and financing solar projects will continue to be a great way to keep these costs as low as possible. The advances we’ve seen just over the last couple years — including using AI to help improve accuracy, eliminate errors and take out rote tasks — have been mind-boggling in how much they’ve helped improve installers’ efficiency and cut costs, while providing a much better customer experience.

Just as an example, we’ve found that Aurora’s software helped solar companies reduce overall installation soft costs by as much as 35%. But, installers have to do their homework. Research the software options out there and see which ones fit best with what your company needs.