The Future of Rooftop Solar in California is at Risk
What you need to know and what you can do about it
It looks very likely that without extraordinary action on our part before March of 2020, the current deal for solar in California is over beginning next year. Under new regulation, future solar customers or anyone who installs a significant expansion to their solar system moving forward will get less money for their solar power.
The bottom line, under proposed regulation solar will be a worse option for Californians and the only ones that will benefit from this change will be the utility companies. Although existing systems are grandfathered in for 20 years, the new rules will slow solar adoption moving forward and make it more expensive for Californians to install clean energy and resiliency solutions.
The utilities have been trying to do this for years and now the California Public Utility Commission looks like it may actually give them what they want. Please take direct action today to do what we can to preserve your right to put clean affordable solar energy on your home or business!
The end of the article provides links to some steps you can easily take to make a difference. Details follow below.
There are big changes afoot at the statewide level in California that will significantly devalue rooftop solar. The Net Metering Tariff in California is up for re-evaluation with changes currently planned to go into effect at the beginning of 2021. What’s the big deal? As usual, it comes down to money. Behind-the-meter solar (let’s call it all rooftop even though you may put it out in a field) has been booming in California, largely due to a rule that allows solar customers to receive cost-effective compensation for the power they generate. Well, that looks like it’s over unless we do something drastic to change the currently proposed policy revision.
What is Net Metering (NEM)?
Net metering refers to your electric meter’s ability to read forward and backwards, counting the “net” power used at your facility, ie. the difference between the power generated and the power consumed. Up to this point in California, solar customers have enjoyed the ability to push power back into the grid and get credited for that power at the rate we would have paid for it. This effectively allows solar customers to use the power grid, while it is operational, as a huge virtual battery. Your solar power flows right over to your neighbors if you have excess production at any given time while you generate monetary credits. Then at night or anytime you are using more power than your solar is producing, you use up those credits. This structure is referred to as “retail net metering.”
How we got here –
California was an early net metering pioneer. In 1996, SB 656 established that residential customer generators with solar installations of up to 10 kW could participate in retail net metering. Overall system capacity was limited however to 0.1% of your utility’s peak demand. Subsequent legislation continually expanded systemwide renewable capacity, eventually up to 5%. In 2001, AB 29 expanded the individual system size allowable from 10kW to 1MW.
Nationwide legislation also went into effect. The Energy Policy Act of 2005 signed by George W. Bush established the availability of net metering throughout the country. Quoting from the text of the bill:
Subtitle E: Amendments to PURPA – (Sec. 1251) Amends the Public Utility Regulatory Policies Act of 1978 (PURPA) to require each electric utility to make available upon request net metering and time-based (smart) metering service.
NEM 2.0 –
In 2013, the passage of California AB 327 created a new set of NEM rules (NEM 2.0) to be triggered when the number of renewable ratepayers on the grid reached each utility’s 5% capacity cap. In PG&E territory, NEM 2.0 became effective on Dec 15, 2016.
What changed compared to the old NEM structure? While retail net-metering was largely preserved in NEM 2.0, minor changes were made, most notably requiring all solar customers to go onto a time-of-use (TOU) rate schedule and establishing certain unbundled charges as “non-bypassable charges” ineligible for offset by solar generation.
NEM 2.0 is effectively an interim transitional set of rules that was put in place while a new NEM tariff is being developed. While NEM 2.0 is temporary, there is a safeguard in place ensuring that the utilities can’t pull the rug out from under solar customers. Your solar investment is protected and this ruling is determined by the state of California, not the utilities.
Importantly, all existing solar customers who sign up under NEM 2.0 are grandfathered in under this set of rules with retail net metering for 20 years from the date they go online with their solar.
NEM 3.0 –
What’s next after NEM 2.0 expires? NEM 3.0 It is due to go into effect, as of this writing, on January 1, 2021. There is significant evidence that under NEM 3.0 retail net metering is at risk.
All rules effecting the utilities, including NEM, are overseen and adjudicated at the California Public Utility Commission (CPUC). According to the CPUC:
Evaluation of Successor Tariff Rate – Pursuant to direction in the NEM Successor Tariff Decision, the CPUC will review the NEM successor tariff in 2019 (now extended into 2020). Energy Division staff will explore compensation structures for customer-sited distributed generation other than NEM, as well as consider an export compensation rate that takes into account locational and time-differentiated values.
What does this mean? Net metering itself, not to mention retail net metering is under revision at the CPUC and is being dramatically shaped by a concerted effort from the utilities. The utilities see NEM as a threat to their bottom line and are lawyered up and lobbying hard, hoping to finally get rid of it beginning in 2021.
For a more in-depth look at how the battle is shaping up, see this article from the San Diego Union Tribune:
The Meat of their Argument –
To rationalize getting rid of NEM, the discussion is primarily being framed by the utilities as one of social equity, something to the tune of “it’s not fair for non-solar ratepayers to be subsidizing solar for the minority that do have solar.” Solar power is now about a third to half the price of PG&E power on a typical home. Rather than continuing to support the adoption of a solution that offers obvious financial benefit to ratepayers and continues reducing pollution, the utilities want to protect their bottom line instead. The removal of retail net metering would push the price of rooftop solar further out of reach for a significant portion of families and businesses and reduce the likelihood that a typical household or business could realize the savings inherent in solar. The chart below shows energy costs for the ratepayer and utility revenue pre- and post-solar.
Too Much Solar? –
This particular argument against adding more solar capacity is seemingly bolstered by the fact that at this point we are ahead of the goals set by the Renewable Energy Portfolio Standard as shown below.
However, this June 2019 article by the LA Times: https://www.latimes.com/business/la-fi-solar-batteries-renewable-energy-california-20190605-story.html
points out that it is actually better for ratepayers and more cost effective to overbuild solar in California. Quoting:
“In a study published in March, New York-based researchers Richard Perez and Karl Rábago argue that solar power has gotten so inexpensive that overbuilding it will probably be the cheapest way to keep the lights on during cloudy or overcast days — cheaper than relying entirely on batteries. Solar power can meet high levels of daytime electricity demand without energy storage, the researchers say, as long as there are enough solar panels on the grid during times when none of them are producing at full capacity.”
Bigger is better? –
The utilities are also arguing that we don’t need more solar in California because at certain times of year, we generate more power than we need and pay to export it to Arizona for example.
This occasional seasonal overproduction of power in California is not primarily due to rooftop solar, but is largely a result of the coincidence of large hydropower production with the power from the many utility scale solar projects that the utilities themselves and large developers are rolling out across the state. The amount of rooftop solar is minor by comparison (see below).
The utilities must comply with California’s Renewable Energy Portfolio Standard updated in SB100 in September 2018. Accordingly, 60% of the state’s energy generated by the Investor Owned Utilities must be renewable by 2030 with a goal of 100% of all retail sales of energy by 2045 to be from renewable and carbon-zero resources.
Consequently, the utilities are driven by law to implement solar projects themselves while they are simultaneously attempting to curb the amount of distributed generation from rooftop solar feeding into their grid.
From PG&E’s website:
“A portion of the solar energy on PG&E’s energy grid comes from eight solar plants in Fresno County, three in San Francisco and one in Solano county that we own and operate. We add solar energy to our energy supply through significant contracts with third-party developers. Additionally, we support our customers who choose to install their own solar systems. PG&E leads the nation with more than 380,000 private rooftop solar customers connected to the energy grid.”
While PG&E is touting their renewable energy mix and how many rooftop solar customers they have on their grid, they are simultaneously doing everything they can to gut net metering and devalue rooftop solar to curb ratepayer adoption of it.
How? Through actively and consistently implementing rate changes and policies that erode the value of solar on Time-of-Use rates:
Through consistently lobbying the state legislature and filing policy briefs before the CPUC designed to end net metering:
Similarly, Sacramento Utility District (SMUD) is trying to circumvent the new solar home mandate by allowing utility scale solar projects to qualify instead:
Recently, SMUD also tried unsuccessfully to dramatically increase fixed monthly costs for solar customers. Public outcry stopped that effort dead in its tracks.
These strategies are short-sighted and not actually in the public’s best interest in the long run. Rather than erroneously perceiving rooftop solar as competition, utilities could recognize the value of it and adapt to an integrated grid. https://www.utilitydive.com/news/epri-distributed-energy-is-coming-and-grid-operators-need-to-plan-for-it/254588/
Distributed generation actually reduces the amount of infrastructure upgrades required by the utilities thereby creating net cost savings for them. As population increases in any given area, power demand does too. If more of that demand is supplied at the point of use by rooftop solar, less substations need to be built, fewer new power plants are needed and it is far more efficient to generate the power where it is needed rather than incurring transmission and distribution losses through the grid from centralized power production, whether it be renewable or not.
You would think that the utilities would follow the above logic and save money by reducing expenses related to new construction and grid upgrades, but this is actually a disadvantage to the utilities. Why? because the investor-owned utilities really make money from construction projects rather than power generation or distribution. They bundle together any construction projects that they can create and are then able to take these expenses before the CPUC to justify a rate increase. Anyone who has tried to get a meter drop to a new facility recognizes the outrageous prices that PG&E for example charges for construction. As a corporate monopoly with a captive audience they can get away with it and inflate their primary source of revenue with impunity.
The Economics of Utility Scale versus Rooftop Solar
There is also the argument of cost-effectiveness of Utility scale versus rooftop solar.
The chart above shows for example that residential solar has decreased in price from $7.34/w to $2.70/w from 2010 to 2018 while utility-scale solar has declined from $4.63 to $1.06/w over the same time period.
While huge utility-scale projects may appear to be less expensive overall than installing thousands of tiny solar installations, this is not actually the case when considering delivery costs and self-consumption by owners of rooftop solar. As shown below in this study conducted by the Institute for Local Self-Reliance in 2018, small residential solar is on par with utility scale solar when these factors are included. Also, there are huge economic benefits to communities from local spending that are realized with rooftop solar that don’t occur with centralized power production from utility scale plants.
So, who do utility scale solar projects benefit financially? The utilities themselves and large solar developers. Again… there are almost always huge accompanying construction projects involving upgrades to transmission or distribution lines, substations and infrastructure to accommodate the back-feed from the large solar farms. The utilities make money from these construction projects.
Utility scale solar also lowers the acquisition cost of electricity for the power companies without passing savings onto the ratepayer. The consumer isn’t benefiting, except perhaps by being subject to less drastic rate increases because of the lower cost of utility solar compared to building a new natural gas power or nuclear power plant.
Additionally, ratepayers are encouraged by the power companies to further subsidize the utility scale projects by paying more for green power through special programs such as PG&E’s Solar Choice program.
I can see that if you don’t have enough sun shining on your property then Solar Choice could be an easy way to get a greener power mix. Otherwise, why pay even more than the already exorbitant utility rates when you could generate the power on your own property for much less and own your own solar?
Solar plus Storage –
Utilities also argue that the variability of solar and other renewable resources require them to maintain a certain amount of always available “baseload” production capacity on the grid sourced from existing generation facilities, thereby delaying the sunsetting of less efficient polluting power plants and reducing the value of putting more solar on the grid.
The solution to renewable resource variability is storage. Increasingly, new utility scale solar projects are being implemented as solar plus storage, so that solar power is available when it is needed, not just when the sun is shining.
While as shown above, the adoption of utility-scale battery storage has increased dramatically in recent years both nationwide and in California, residential and small commercial storage solutions continue to remain out of reach for most customers in CA. Adding a backup storage component to a typical residential system could easily tack on an additional 50% to 100% to the price of grid-tied solar. The current break-even point for many grid-tied residential systems is typically 5 to 8 years without storage. Removing retail net metering will substantially extend the payback period. So fewer people are going to be able to afford an increasingly crucial storage component because their grid-tied solar will effectively be more expensive without retail net metering.
If the value of rooftop solar is eroded by eliminating retail net metering in CA, it will prohibit a significant number of people from creating resiliency and implementing necessary storage solutions in response to recent and future public safety power shutdowns. This endangers both the health and safety of potentially tens of thousands of California households, causes significant economic loss to businesses and encourages customers to adopt fuel powered generator backup solutions instead, creating more pollution and pushing us further away from the goal of resilient clean energy in CA.
Take Action Now
It may not be too late to make a difference and change the outcome for net metering in CA. It is certainly an uphill battle at this point. The utilities have a huge head start and are well down the road toward achieving their objectives before the CPUC. What can you do to help?
Stay informed. While you may need a law degree to decipher some of the language in these proceedings, to receive up-to-date information on the NEM revisit, anyone can join the service list for the NEM 2.0 proceeding (R.14-07-002),
Wood-McKenzie, aka Greentech Media is a solar industry subscription-based research and publishing company that is a great source of information on current policy and market trends. They often publish free reports available if you sign onto their mailing list.
The California Solar Storage Association occasionally files briefs before the CPUC. While none have been listed publicly on their website since 2016, here is a list of historic filings:
Get involved. Right now! The timing is crucial. The public comment period is currently open for stakeholder input re: NEM 3.0. Your voice matters.
As a utility ratepayer, you are a stakeholder. You can submit public comment to the CPUC specifically addressing the R1407002 Proceeding for the NEM Successor Tariff at:
Also, here is the contact email address for the person overseeing the NEM re-evaluation at the CPUC:
You can also team up with other citizens through the Solar Rights Alliance, a consumer lobbying group addressing the need to protect solar in California. In August, 2019 I went to Sacramento with David Rosenfeld, Solar Rights Alliance director and many other concerned citizens and directly lobbied state senators and assembly members advocating for protection of consumer rights to solar. You can too!
Here is how to contact the Solar Rights Alliance:
Sign our SEG online petition calling for the preservation of retail net metering in California.
Do you also use change.org? Here is the petition to also sign there.
Lastly, please directly contact your state senator and assemblyman and Governor Newsom’s office. If you find them responsive, then please encourage them to directly communicate to the CPUC your policy position. The CPUC takes direction from the state government officials. Any progress made toward helping state officials understand and appreciate your position may well influence the CPUC proceedings.
Again, your voice matters, and collectively, we may be able to forestall or even prevent the utilities’ attempt to prevent your access to clean renewable energy! Every little bit helps! Also, you can install solar now. There is never a better time to go solar than 2020 while NEM 2.0 is still in effect and retail net metering is available to you for 20 years. Get grandfathered in.
References and Resources –