A proposal by the California Public Utilities Commission (CPUC) would make owning and operating residential solar in the state much more expensive for customers of Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric. Together, these companies serve nearly 25 million people, over half the state’s population.
The proposition, backed by two investor-owned utilities in California, is causing a stir in the state. Opponents say it would end California’s leadership status when it comes to clean energy. Recent rallies in Los Angeles and San Francisco attracted around 3,000 people in total, and in December, nearly 200 members of a nonprofit association of California solar users gathered at the California State Capitol to present the governor with boxes containing 120,000 printed public comments denouncing the proposal.
With commissioners set to vote on the issue as early as January 27, 2022, let’s take a closer look at what’s being proposed.
Net metering credits would be reduced by at least 75%
When solar panels generate more energy than needed to power a home or building, the excess electricity gets pooled back into the grid, and in California and other states, the owner is compensated for effectively selling energy to their utility.
The Proposed Decision, which has been nicknamed Net Energy Metering (NEM) 3.0, will reduce compensation for this excess energy. Traditionally, utilities in California buy excess solar energy at the “retail rate” of 20 to 30 cents per kilowatt-hour. The new rules would see solar owners net a much lower “avoided cost” rate of around five cents per kilowatt-hour.
A monthly surcharge would be introduced
Homeowners with solar panels would need to pay a monthly grid participation charge calculated based on the size of their system. The proposed tariff is $8 per kilowatt. Therefore, someone with a seven-kilowatt system would need to pay $56 per month, or $672 per year, in surcharges. Low-income and tribal households are excluded from this new fee.
Those who purchase solar panels for their home between now and 2026 will benefit from a ten-year credit on this monthly charge, lessening its impact by at least 20%, with greater savings available for lower-income customers.
Meanwhile, those who already have residential solar can continue with traditional NEM for 15 years from the day their systems were installed.
The NEM 3.0 scheme also allows customers to oversize their solar power system by 150% of their historical load to adequately prepare for future electricity demands like home electric vehicle charging.
Special time-of-use rates for solar customers
NEM 3.0 customers will see “high differentials” in electricity rates charged between 6:00 p.m. and 9:00 p.m. CPUC encourages those with solar panels to rely on stored energy or otherwise curtail electricity usage during this time.
Stationary battery systems would be incentivized
Existing solar customers could receive rebates of $200 per kWh on the cost of energy storage systems. For instance, purchasing an LG Chem RESU 10H storage system, with its total energy capacity of 9.8 kWh, would entitle the owner to a $1,900 discount on the product.
Note that this rebate is conditional on solar customers transitioning to NEM 3.0 within four years, after which point the battery incentives would be lessened.
Money would be funneled towards communities in need
A fund focused on bringing clean energy to low-income and polluted neighborhoods would be created, and could provide as much as $600 million of assistance over the next four years.
Perceived issues with net metering
A survey conducted by PV Magazine found that the new net metering rates deterred nearly 70% of solar shoppers, while the prospect of NEM 3.0 combined with the proposed grid participation charge made 95% of respondents want to say no to a new solar project. Comments on the CPUC forum are also largely negative.
The CPUC proposition makes rooftop solar more expensive and less valuable moving forward, and creates a scenario in which onsite energy storage becomes essential to achieve financial viability.
Utilities tend to point out that traditional net metering has made electricity more expensive for everyone in the state who does not own solar panels, as the cost of maintaining transmission wires is passed onto disadvantaged communities.
Meanwhile, the Solar Rights Alliance, a California non-profit, seeks to debunk that idea. They point out that rooftop solar can unlock significant cost savings when compared to further expanding the traditional centralized model of energy transmission and distribution. The proliferation of rooftop solar arrays led to $2.6 billion in savings for all ratepayers in 2018 alone as proposed transmission infrastructure was made redundant and went unbuilt.
It also cites figures from the Protect Our Communities Foundation which estimate that each solar system installed in PG&E territory during the 2015-2017 period avoided approximately $620 per year in new transmission costs, savings the alliance says outweigh the cost shift that utilities point towards.
This seems to corroborate a long-term benefits study conducted by energy modeler Dr. Christopher Clack, which dcbel also covered in a previous blog post. The study reveals that $10 billion worth of distributed energy resources can enable $300 billion in savings by 2050.
The Solar Rights Alliance indicates the value of rooftop solar and home energy storage increases over time as land for large-scale energy projects becomes scarce. It suggests that utilities purposely omitted these long-term benefits from their projections, opting for a ten-year evaluation instead.
Solar farms can harm wildlife
While utilities could generate power more cheaply through large-scale solar farms, such structures can have unintended consequences on biodiversity. When installed on otherwise undisturbed desert land, solar farms can affect native plant growth and harm animals like insects and birds that may venture nearby due to the intense heat. Location is therefore key, and experts suggest that solar farms be installed in less ecologically-sensitive spots.
Meanwhile, long-distance power lines that are required to transport energy from a solar farm to the populace are expensive to build and maintain, and the reoccurrence of public safety power shutoffs further reduces their effectiveness, says the alliance.
Rooftop solar is compelling in this regard. The tops of homes and other buildings are prime spots with great potential to convert solar energy into electricity. The National Renewable Energy Laboratory estimates that the total potential rooftop solar capacity in America is over one terawatt, and even a small fraction of solar installations on new roofs being built would make a significant impact.
Vocal dissenting cast
Figures like actor Mark Ruffalo, Tesla CEO Elon Musk and former state governor Arnold Schwarzenegger joined groups like the Sierra Club, the Climate Center and the Environmental Working Group in expressing their displeasure with the CPUC proposal.
Musk called the move “bizarre” while Schwarzenegger said the proposition, part of which he labeled a “solar tax,” would threaten the climate progress made in the state. Like many, he appreciated some of the proposed elements of the plan that foster equity, but ultimately called on Governor Gavin Newsom to advocate for major changes.
Newsom stated that he reviewed the proposal on January 10 and concluded that changes needed to be made, saying: “We still have some work to do.”
A modernized grid prioritizes distributed energy
The US energy grid serves and connects people in all corners of the continent. We all share it and rely on it daily. As we reduce our dependence on fossil fuels moving forward, it will become essential to transform the grid so that peaks in demand are satisfied by clean energy resources that ordinary people may have on hand, whether it be rooftop solar or an EV parked in the driveway.
Rooftop solar offers enhanced energy efficiency for homeowners as distributed energy resources become the bedrock of a modernized power grid. When paired with smart inverters, sensors and other technology, distributed energy resources can be used to solve many of the problems inherent in the traditional model of energy delivery. These include a lack of two-way communication between utilities and customers as well as the inability to manage energy generation, transmission and distribution in real time.
Smart inverters and electric vehicle chargers that support vehicle-to-grid technology promise to change the ways we think about and consume clean energy, and will become indispensable in the future. Rooftop solar plays a fundamental role in meeting climate goals, and policies related to it should focus on making the technology a win-win for all stakeholders, instead of hindering its economic viability.
Rooftop solar should be accessible to all
A key metric in any residential solar project is the payback period: How long will it take to see a return on investment? While installation costs are going down, and more homeowners are showing interest in investing in this technology, solar panels remain expensive. Generous net metering credits help reduce payback time, but their economic rationale can be debated.
The bigger issue comes from the proposed move to add extra monthly charges for solar panel owners, which by some estimates would prolong the payback period by five or even ten years.
As this burgeoning industry begins to mature, it’s natural to entertain new proposals that seek to reform incentives so they can evolve. The key is striking a balance that makes rooftop solar buyers feel confident in their investment while ensuring that all utility customers can benefit from inexpensive clean energy, even indirectly. This likely means that we should focus on reinforcing and updating the power distribution infrastructure we have today so that congestion does not become an issue as more homeowners adopt rooftop solar.
Collaboration is the only way forward
Transforming the electric grid requires deep collaboration between legacy institutions and innovators. The shift towards decentralized energy sources is not without complexity, which is why it’s so important that utilities and governments support new ideas and allow them to flourish. Residential solar can bring the state closer to its clean energy goals in the long term while offering enhanced electrical stability to communities in the near term.
The network of power lines crisscrossing the country already connect us all, but the power grid of the future will allow even deeper connections, namely by allowing consumers of electricity to become producers as well. When people want to contribute renewable energy to power their towns, cities and states, the grid should be ready to accept it.
Given California’s role as a leader in residential solar adoption, the precedent that NEM 3.0 will set is significant. How will CPUC’s new policies shape the future of rooftop solar, stationary batteries, energy prosumers and utility-scale renewables? The country is watching.