While California multifamily owners and developers are widely embracing solar power systems, recent changes to the state’s solar Net Energy Metering (NEM) rules are threatening to upend the many financial benefits solar provides for multifamily properties.
Thankfully for multifamily stakeholders looking to use solar systems to increase NOI, meet sustainability targets, provide their properties with a renewable source of energy and lower resident utility bills, battery storage can be the solution to staying ahead of the state’s shifting energy regulations.
Battery storage is quickly becoming an essential part of multifamily solar systems, helping to keep the costs of solar energy low and giving multifamily owners more control over the power generated on their properties. Here is a closer look at how the metering rules have changed, new innovations in battery technology and what multifamily players can do to ensure they are still gaining the financial benefits of solar power.
The end of the free solar storage era
In the early days of solar, multifamily owners who installed systems on their properties were able to generate energy during the day when the sun produces the most energy, sell it to the utility company at a one-to-one ratio, then buy it back when the sun was down in the evening. This original NEM system, regulated by the California Public Utility Commission, essentially made utility companies provide free storage for private solar power on the grid.
This system was highly beneficial system for property owners, as it enabled them to generate power during peak times (hot sunny afternoons), when the cost of electricity is lower, and then use it during off-peak times (nighttime and rainy days), when the cost is higher, ultimately lowering the overall cost of solar energy.
Unfortunately, the days of free solar storage have come to an end. Under the third iteration of NEM policy (NEM 3.0) enacted in 2023, the compensation for solar power sent back to the grid was lowered by 75%, meaning that property owners now have to either use the power generated by their systems in real time or sell it to a utility company for pennies on the dollar and buy it back at full price during off-peak periods.
By using battery storage in tandem with solar systems, multifamily property owners can keep energy onsite, preserving the NOI financial benefit for the property. While NEM 3.0 has significantly changed the financial benefits of renewable energy, that doesn’t mean solar is no longer a viable option for multifamily properties. In fact, by using battery storage, the solar energy generated during the day can be stored and utilized without the need for property owners to buy it back from the utilities at any upcharge.
Considerations for multifamily battery integration
NEM 3.0 has made battery storage systems an essential component of a solar infrastructure for multifamily properties, but there are some important nuances for owners and developers to keep in mind when it comes to implementation.
The most challenging part of battery installation is often finding the right space to house it. Typically, by the time solar enters the conversation, developers have already maximized every inch of a property, and these massive battery systems need to be stored outdoors, be easily accessible for maintenance and meet strict regulatory requirements to protect the thermal runway.
Housing for battery storage systems also needs to be specially constructed with fire-safe materials and must feature fire suppression and sprinkler systems to protect both residents and the surrounding area from catastrophic fire situations, which is relevant in any solar market, but especially in California. While many property owners opt to store their battery units in an existing garage, this can present additional challenges, as it is critical that batteries do not come in contact with other combustible objects like cars and gas meters.
Property types such as garden-style apartment complexes and wrap-style construction with ample ground space are well-suited for battery and solar installation. In contrast, taller multifamily buildings are not optimal locations for solar or battery installation, as they often do not have the outdoor space necessary to support these systems.
New innovations in battery tech
To ensure that solar remains a viable option for renewable energy on multifamily properties, innovators are stepping up to provide new battery solutions by developing smaller and more compact systems.
Canadian Solar, for example, is currently developing modular, stackable battery solutions that take up less space and include an arbitrage mode that makes multifamily integration much easier by eliminating the need to rewire a property’s electrical panels during installation. Another forward-thinking manufacturer is creating a distributed battery system. Rather than putting the entire battery system into one centralized place, a distributed system puts one small battery underneath each solar panel, creating a network of small batteries to support solar generation and storage in place of one large container. Both design approaches will make battery integration much easier for multifamily property owners, and they both help solve the storage location equation.
The solar power industry is evolving rapidly. Although some of the programs that once empowered property owners to adopt solar power are phasing out as the market matures, the technology and infrastructure is adapting alongside the regulation. With deep experience in the multifamily solar space, PearlX helps property owners and developers maximize NOI, boost property value, and stay ahead of evolving energy regulations without needing to pay a dime out of pocket.
From upfront installation to long-term system maintenance, PearlX handles all aspects of solar and battery integration, empowering multifamily property developers, owners and operators to capture the full financial and practical benefits of clean energy. Contact us today to learn how PearlX can futureproof your property with smart, hassle-free solar solutions.
