As California continues to evolve its Net Energy Metering (NEM) policies, homeowners and businesses alike are looking for strategies to make the most out of their solar investments. With the recent transition to NEM 3—also known as the Net Billing Tariff (NBT)—many are worried about potential reductions in solar returns. However, there is an incredible opportunity that many overlook: the so-called NEM Loophole. By utilizing specific strategies, homeowners can achieve remarkable savings and returns even under NEM 3.
In this comprehensive guide, we’ll provide you with three actionable tips to help you unlock the full potential of the NEM Loophole using a solar + storage system. These tips will show you how to maximize your savings, reduce your payback period, and navigate the complexities of NBT effectively.
What is the NEM Loophole and How Does NEM 3 Work?
Before diving into the strategies, it’s essential to understand the fundamentals of NEM 3 for residential property. Under this new system, homeowners with solar power no longer sell excess electricity back to the grid at the same rates they pay for electricity. Instead, NEM 3 compensates solar users based on the market price of energy at the time of the export, meaning prices fluctuate throughout the day. While many fear that NEM 3 could reduce the economic value of solar, the NEM Loophole offers a workaround that can significantly boost your solar return, especially when combined with battery storage. Let’s explore how you can make the most of it.
1. Install a Solar + Storage System to Maximize Savings
The first step to exploiting the NEM Loophole effectively is by investing in a solar + storage system. A simple solar system might help lower your daytime electricity bills, but a battery system is key to achieving substantial savings. By storing excess energy during peak sunlight hours, you can then use or sell this power during times when grid electricity prices are at their highest.
Why Storage Matters in NEM 3
Under the new NEM 3 rules, the utility buys energy from you when rates are lower (often during the middle of the day when solar power is plentiful). Without a storage system, you’d be exporting energy during these low-rate periods, reducing your overall savings. With a battery storage system, you can avoid this issue by storing that energy and selling it back to the grid during peak hours when rates are much higher.
Boost Property Value with Solar + Storage
Installing a solar + storage system doesn’t just help with energy bills. It also increases your property value. Homes with solar power, especially those with integrated storage solutions, are highly sought after in markets like California, where energy costs are a significant concern. By taking advantage of the NEM Loophole, you’re not just lowering your utility costs—you’re making a long-term investment in your property.
2. Optimize Your Battery Settings for Maximum Grid Discharge
Merely installing a solar + storage system isn’t enough. To fully benefit from the NEM Loophole, you must program your battery to optimize its discharge based on time-of-use (TOU) pricing. The key is to leverage peak pricing windows, when utility rates are at their highest.
Programming Your Battery for Success
Under NEM 3, you should set your battery to discharge during peak demand hours when the grid is stressed, and electricity prices surge. By doing this, you can sell electricity back to the grid for a much higher price than during non-peak hours. Many homeowners mistakenly leave their batteries set to “self-consumption mode” only, but this limits your ability to capitalize on the price fluctuations in the grid. For maximum savings, you need a battery system that is intelligent enough to prioritize grid discharge during these peak pricing periods. This strategy ensures that you’re selling your stored energy at times when electricity prices are much higher than they are during midday when solar production peaks.
3. Leverage Energy Arbitrage to Reduce Your Payback Period
Perhaps the most powerful tool for exploiting the NEM Loophole is energy arbitrage. This strategy involves buying and storing cheap energy when demand is low and selling it back to the grid when demand—and thus prices—are high. With proper battery programming and a sharp focus on TOU rates, you can take full advantage of this method to reduce your payback period substantially.
How Energy Arbitrage Works
Energy arbitrage capitalizes on the difference between peak and off-peak rates. In the August to September window, for instance, electricity prices tend to skyrocket due to increased demand on the grid. By selling stored solar energy back to the utility during these months, you can earn far more than during the rest of the year. Our clients have seen payback periods as short as 4 to 6 years, a timeline that is much closer to the returns under NEM 2, thanks to this strategy. If you combine energy arbitrage with proper battery management, you can expect even faster returns on your solar + storage investment.
Why the NEM Loophole is a Game-Changer for Solar Users
The NEM Loophole provides a golden opportunity to bypass some of the limitations introduced by NEM 3. While the newer system might seem less lucrative on the surface, homeowners with solar + storage systems can still achieve significant financial gains by employing the right strategies. In addition to reducing energy costs and shortening payback periods, these strategies also shield homeowners from California’s rising utility rates and its increasing grid instability. With utilities continually raising rates and the grid struggling to keep up with demand, solar energy remains one of the best investments you can make.
Simplifying the NEM Loophole: What You Need to Know
Taking full advantage of the NEM Loophole doesn’t have to be complicated. By installing a solar + storage system, optimizing your battery discharge settings, and leveraging energy arbitrage, you can protect yourself from high utility costs and boost the return on your solar investment. If you’re ready to harness the power of the NEM Loophole and enjoy faster returns on your solar investment, contact us today to schedule a free consultation. Our team of experts will help you get started on the path to energy independence and financial savings.
