San Diego has been the leader in solar energy for a long time. In fact, San Diego is ranked 2nd in the nation for solar energy. Commercial and residential solar energy grew 26% last year. San Diego was also one of the first cities to adopt a commitment and plan to be 100% powered by renewable energy in the future. Therefore, it’s not surprising that San Diego is the first city in California to reach the NEM (Net Energy Metering) Cap, meaning the next phase of net metering, coined “NEM 2.0,” is officially in effect.


The biggest changes with NEM 2.0 are:

One-time interconnection fee – This fee is charged at the time your interconnection is set up, connecting your home or business’s solar system to SDG&E. This fee is estimated to be between $75-150. This fee only applies to people who are planning to install solar now that NEM 2.0 is in effect.

Mandatory TOU rates – NEM 2.0 requires all new customers to switch to the TOU rates starting in 2017. TOU (time-of-use) rates changes the way the value of energy that is generated by a solar system. This means the retail rate customers receive for the solar energy they produce will decrease. The energy is valued depending on the time of day it is generated. To make it simple, the more likely you are to generate energy, or the brighter the sun is, the less your energy is worth. For example, solar energy generated before 2pm is valued less the solar energy generate at 8pm (when the sun is down). Find a way to generate a lot of solar energy at night then you will be making a lot of money!


If you already have a solar system installed at your home or business you’re in the clear, for now. Everyone who already has solar installed, or is in the process of getting their solar system installed, will be grandfathered in under the rules of NEM 1.0 for 20 years.


SDG&E’s chief energy delivery officer, Caroline Winn, points out that the transition to NEM 2.0 is a good thing for the people of San Diego.

“Transitioning new private solar customers to the next phase of the Net Energy Metering program is another sign that our region [San Diego, CA] is a leader in the clean energy movement,” said Caroline Winn, chief energy delivery officer, SDG&E.

Recently NEM 1.0 and NEM 2.0 have been all over the news and media, but what exactly does the transition to NEM 2.0 mean for the renewable energy users and producers of San Diego? Let us explain.


Let’s start with the basics. NEM stands for Net Energy Metering, which is a two-way connection, which allows you to generate your own electricity to power your home or business. NEM connects you to your energy provider, SDG&E, who can provide you with energy if there isn’t enough generated by the sun. It is a two-way connection because you can also send energy back to SDG&E when your solar system generates an excess amount of energy, this energy can turn in credit towards your next energy bill.


The NEM Cap is set by California Law, limiting the amount of renewable energy that is generated by customers who are connected to an electric system. The NEM cap is current set at 5%. This summer San Diego because the first city in California to reach this cap.

You can follow the progress of San Diego’s NEM cap here.


Now that we have reached the 5% NEM cap many San Diegans with Solar Systems, or those who have been interested in solar energy wonder, “What is going to happen now?” Now, NEM 2.0 is officially in effect in the San Diego Area. NEM 2.0 does not change the fact that you will save a large amount of money over the lifetime of your solar PV system. However, NEM 2.0 adds on a handful of fees that go along with installing solar.

If you do not already have solar don’t let these new fees scare you. Solar power is still an incredible investment that will save you a lot of money and help save mother earth. Solar energy still has a high ROI (return on investment) and you will still make money off of your excess solar power (just not as much). Utility rates continue to rise every year, therefore solar energy will still save you a lot of money on your energy bill.


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Net Energy Metering 3.0 (NEM 3.0) is the incoming law created by the California Public Utilities Commission (CPUC). The new tariffs and fees will impact both residential and commercial solar systems built in California. 

As this notice is posted in November of 2022, the Proposed Decision from the CPUC outlining the proposed NEM 3.0 terms is expected soon. This comes after a year’s delay. Once the new agreement is finalized and passed into law, there will exist a designation of the deadline under which new systems will continue to qualify for NEM 2.0 rates. 

The new NEM 3.0 rates will be designed to lower the value of electricity during the daytime hours, when solar is producing, and increase the value of electricity during the evening hours, when solar homes and businesses purchase electricity. In short, NEM 3.0 will create a “sell low, buy high” proposition to new solar system owners. 

To Californians looking to install a solar system on their home or commercial building, the NEM 2.0 rates will be preferred. As of this post, the solar industry does not know the details of how different the NEM 3.0 rates will be from the NEM 2.0 rates. 

Please use the HES Solar website as a resource to learn more, and please take our offer to speak with an HES Solar Energy Consultant at no obligation.

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Robert Laverty

Senior Energy Consultant, Residential

Robert Laverty joined the HES team in the summer of 2018, bringing his ten years of solar design experience and his Bachelor’s degree from the University of Puget Sound with him. Robert is dedicated to finding solutions to help families produce and store electricity in order to reduce their reliance on grid power as well as help reduce their household’s carbon footprint. Robert’s experience as a newspaper editor as well as his involvement with the sustainability-focused Rocky Mountain Institute drives him to constantly seek out innovative ways to meet energy needs through renewable resources as well as helps him share those ideas with Southern California homeowners. When not at work or volunteering time with his church or community, Robert spends time with his wife and two sons or pursues his passion of fly fishing.
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