Over the past year, the introduction of NEM 3.0 in California has led to significant shifts in the solar industry. Additionally, Title 24 building energy efficiency standards are set for an update. In this blog, EG4 Electronics will discuss how NEM 3.0 has affected the market since it took effect about one year ago and the changes that Title 24 will soon undergo.
California’s Solar Market Adjusts to New Net Billing Tariff
A year after California introduced a new net billing tariff (NBT) commonly known as NEM 3.0, Berkeley Lab says the market is still adjusting, mainly due to the backlog of NEM 2.0 applications processed last year. Over the past year, solar installations remained stable compared to the previous year, but 80% were NEM 2.0 systems from the pre-NEM 3.0 rush. Today more customers are installing storage with their solar panels, with attachment rates jumping from 10% under NEM 2.0 to 60% under NEM 3.0. This is due to the way that NEM 3.0 values electricity more during high demand hours, making energy stored during low demand (and low cost) hours more valuable. This surge in demand for paired PV+ storage systems has led to a 17% increase in inflation-adjusted installed prices compared to NEM 2.0.
Solar adoption has increased in less affluent zip codes, likely due to California’s solar mandate for new homes and programs supporting solar and storage for low-to-moderate-income households. Third-party ownership (TPO) rates also saw a significant rise, from 24% under NEM 2.0 to 44% under NEM 3.0, driven by factors like high interest rates, federal tax incentives, and increased adoption in new construction and lower-income areas. Additionally, PV systems are now about 9% smaller overall and 17% smaller when paired with storage, influenced by lower compensation for grid exports and trends in new construction and less affluent households.
The installer market has become more concentrated, with the top five installers holding 51% of the market share, up from 40% under NEM 2.0. These trends will become clearer as the NEM 2.0 backlog clears and the market stabilizes under the new NEM 3.0 structure.
Strategic Positioning for Sustainable Growth
With the significant increase in customers opting for storage alongside solar panels, installers can focus on expanding their service offerings to include integrated PV+ storage systems. This allows them to cater to the growing demand and capitalize on higher installation costs.
Given the rise in solar adoption in less affluent zip codes and the influence of California’s solar mandate for new homes, installers can develop targeted marketing strategies. This includes offering financing options tailored to low-to-moderate-income households and positioning themselves as specialists in meeting regulatory requirements for new construction.
With TPO rates increasing significantly under NEM 3.0, installers can collaborate with third-party financing providers or offer their own leasing options. This approach can appeal to customers in lower-income areas or locations with new construction who may prefer leasing over upfront ownership costs.
Recognizing the trend towards smaller PV systems, installers can focus on offering high-efficiency panels and optimizing system designs. This can help mitigate the impact of lower grid export compensation under NEM 3.0 and align installations with the preferences of new construction projects and less affluent households. Furthermore, batteries work well with smaller systems in time of use applications.
In a more concentrated installer market, differentiation becomes crucial. Installers can differentiate themselves through superior customer service, expertise in navigating regulatory changes, and partnerships with technology providers that offer innovative energy solutions.
Title 24 Updates for Solar Installations
Title 24 went into effect in 2022. The building energy efficiency standards are updated on a regular basis, so they are currently being revised. The California Energy Commission’s 2025 Building Energy Efficiency Standards will apply to new buildings, additions, and alterations. Revisions were presented in workshops for public feedback in March and June 2024. The proposed standards will be adopted in August 2024 and take effect on January 1, 2026.
For installers, staying informed about these changes is crucial. The new standards may impact how solar systems are integrated into building designs, and understanding the requirements ahead of time will help ensure compliance and optimize installations. We won’t know for sure what these standards will look like until sometime in August, so installers should be poised for change when those announcements come.
Contact EG4 for Expert Guidance in California’s Regulatory Market
As the market adjusts to NEM 3.0 and the upcoming updates to Title 24 building energy efficiency standards, staying informed and adaptable is essential. By aligning their services with these insights, solar installers can navigate market shifts and position themselves for sustainable growth in a dynamic regulatory environment.
EG4’s batteries,12kPV inverter, and 18kPV inverter have been designed to work well within NEM regulations. Installers and customers can use our Time of Use settings to charge batteries with grid power when electricity prices are low, then use battery power to run loads or export to the grid when electricity prices are high. Our products also have PV priority mode settings which can be used to further tailor power usage. Additionally, EG4’s 12k and 24k Hybrid Solar Mini Splits can be used to help meet current NEM 3.0 requirements. Alternatively, they can be incorporated into previous NEM agreements by offsetting cooling demand directly from solar without needing utility interconnection. Contact EG4 for more information about how to navigate California’s complex regulatory market.
