The Benefits of Home Batteries as Electricity Prices Rise and California NEM 3.0 Takes Effect

Home energy storage · Mar 6, 2023

Electricity Prices Keep Going Up

Mark Wolfe, the director of the National Energy Assistance Directors Association, predicted that the electricity prices in the U.S. could rise at a 10% clip again this year and possibly next, even though economists have forecast overall inflation to ease to between 3% and 4% by year-end.

There are three main reasons for this prediction.

First, liquified natural gas, which fuels over one-third of America's electricity, has increased in price. Due to the global political situation, the U.S. has exported a greater amount of natural gas to Europe, making domestic supply more limited.

Second, labor shortages and tighter supplies have pushed up wages and other costs for utility companies. Skilled technicians such as grid operators are hard to hire and require higher wages than before. Higher labor contributes to higher electricity bills.

Third, the increased operational costs of utility companies to provide a more stable grid and grid upgrades also influence electricity prices. Higher demand combined with more frequent emergencies means that grid operators face increased challenges.

"More than 75% of Americans were concerned about their ability to pay their utility or electric bills, with 51% shopping less to budget for the cost and one-quarter getting a second job to cover the expense," said Payless Power, a Texas electric power company.

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NEM 3.0

As electricity prices continue to rise, NEM 3.0 will take effect in California this April 15. This program was approved unanimously by the California Public Utilities Commission (CPUC). It has caused many disagreements within the industry, since the new net metering program will decrease the savings that rooftop solar users can get by 60%, compared to the current NEM 2.0 program.

The decreased savings make going solar a more expensive choice. The payback period was estimated to be 5 - 6 years under NEM 2.0 while it is estimated to be 9 - 10 years under NEM 3.0, according to EnergySage.

Home Battery Incentives

In the newly effective Inflation Reduction Act (IRA), battery storage technology was added as an eligible expenditure, with the tax credit increased from 26% to 30% of the battery cost. By increasing the tax credit ratio, the government is encouraging wider residential battery usage.

In California, there is a Self-Generation Incentive Program (SGIP) that offers approximately $250/kWh for a home battery purchase, which covers approximately 25% of the cost of an average energy storage system.

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Home Battery Savings

The combination of NEM 3.0 lowering the benefit of pure solar and the IRA creating a battery incentive, combining a home battery and rooftop solar can save homeowners money. They can offset the peak utility rate, which is usually in the afternoon and evening, by using solar power stored in the battery to save money. The higher the electricity price goes, the more money can be saved by using a home battery.

Take California as an example. There is a Time of Use (TOU) rate plan in California which leads to different electricity prices based on different use times. The figure below shows the price difference.

time of use rate plan

With a home battery, assuming the homeowner charges the battery during off-peak hours or solar power surplus to home needs, and discharges it during peak hours to supply the whole home. In this scenario, here are a single day’s savings:

(45-25) * 4+(56-25) * 5=235¢=$2.35

And this is how much it can save for the whole year:

$2.35 * 365 = $857.75

For 10 years, the savings could be $8577.50.

With the extra electricity selling back to the grid, even with the large drop in the NEM 3.0 selling price, homeowners can still earn additional money.

Assume selling 10 kWh per day to the grid, homeowners could earn $0.50-$1.00 per day, adding $182.50 to $365 per year. If selling more than 10 kWh per day, the earnings could be more.

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FranklinWH Energy Management and Storage

FranklinWH is a San Jose-based technology company that designs and manufactures intelligent home energy management systems.

The FranklinWH energy management system integrates solar, grid, battery storage, and generator to manage multiple home energy sources to maximize solar ROI, improve home energy efficiency, and provide a non-stop power supply to the home.

Not only can homeowners monitor and control energy generation and consumption of different energy sources through the FranklinWH App in real-time, they can also integrate local grid packages smoothly with the system, as the app supports three modes: self-consumption, time of use (TOU), and emergency backup.

Want to learn more about the FranklinWH system? Book a free consultant with our energy expert today!

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The energy supply shortage and the quality of the grid will continue to increase electricity prices, pushing more people to gain energy freedom through solar energy and battery storage. It has a heavy upfront investment, but in the long run, it will be more savings alongside the other benefits of the green solution.

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