Net Energy Metering Proposal Jeopardizes Rooftop Solar in California

We previously wrote about the Net Metering Successor Tariff (“NEM-3​”​) in late 2020. (See original NEM-3 article here.) On March 15, 2021, PG&E and the two other major Investor-Owned Utilities (“IOUs”) in California submitted a Joint Proposal to the CPUC, ​requesting drastic changes. The IOUs​’​ basic claim is that customers who do not have solar are subsidizing those who do, to the tune of about $3 billion per year and growing, and that this subsidy should stop.

Further, the proposal states that because customers without solar tend to be lower income, this subsidy disproportionately hurts low- and middle-income customers. The solutions proposed include eliminating subsidies for “customers that do not need them,” giving a time-limited subsidy to lower-income customers to go solar, and providing more incentives for storage. The IOU proposal suggests eliminating the purported subsidies by adding large monthly usage fees and drastically cutting payments for energy sent from residential solar systems back to the grid. Credit for this exported solar energy is what makes rooftop solar systems cost effective today under NEM-2. Even if only half of the measures proposed are adopted, it will, in the words of Bernadette Del Chiaro, Executive Director of the California Solar & Storage Association (CalSSA), devastate rooftop solar in California.

Timing

CPUC hearings begin in June 2021; a final decision is expected in January 2022. Implementation date is uncertain but will probably begin a few months later. The NEM-3 changes in the IOU joint proposal appear to be aimed at new solar customers, meaning the 20-year grandfathering for existing solar customers (on NEM-1 or NEM-2) would not be directly affected. However, existing solar owners should not rest easy: a proposal from the CPUC’s Public Advocates Office would shift all NEM-1 customers to NEM-3 immediately, and all NEM-2 customers to NEM-3 within 5 years.

Key factors for NEM-3 decision

Determining how much and even whether customers with solar are subsidized by those without it, is far from straightforward. Some studies say yes, non-solar customers are subsiding solar customers. Other studies disagree. For example, a study published in the March 21, 2021 issue of the peer-reviewed Renewable and Sustainable Energy Reviews journal concludes: “Grid-tied utility [solar] customers are being grossly under-compensated in most of the U.S. as the value of solar eclipses the net metering rate.” Generally, the studies that support the IOU proposal assert that utilities are currently paying the retail rate for solar energy exported to the grid, which is far more than their avoided cost (their incremental cost to generate or purchase energy). This claim is simplistically correct: current solar customers are paid at (almost) retail rates. But it ignores many benefits of rooftop solar systems.

Benefits of distributed rooftop solar energy systems ignored by the IOU proposal

• Solar owners pay for their own energy-generation facilities, reducing the need for new central generation capacity;
• Solar energy is clean, emitting no toxic pollution and no greenhouse-gases;
• Rooftop solar is generated close to where it’s consumed, so there is less energy lost to heat over long distances, and the need for transmission and distribution infrastructure is reduced. PG&E’s transmission lines have recently caused many wildfires which took scores of lives and destroyed thousands of structures;
• Utility-scale solar plants often require hundreds of acres and in California require numerous environmental compromises. Rooftop solar of course requires no new land;
• Pairing rooftop solar with electric vehicles is a win-win-win, for clean energy, clean driving, and (possibly in our near future) grid stability through Vehicle-to-Grid (V2G) adoption;
• As rooftop solar is increasingly paired with battery storage (in the Bay Area, 60% of the largest installer’s solar systems include batteries), we create more opportunities for microgrids which are less vulnerable to outages from wildfires, and from physical and cyber attacks, than a fully centralized grid;
• We need much more solar energy to limit the significant and potentially catastrophic impacts of climate change, as well as to meet California’s climate goals. Drastically slowing the growth of the rooftop-solar segment would derail our progress.

It’s difficult to assign an exact dollar amount to most of these rooftop solar advantages. For several, their value starts small but grows exponentially. Few are given significant financial value in the IOU proposal. Despite this, the proposal praises rooftop solar, how it helped reduce the price of solar, and how the IOUs “continue to support California’s important and ambitious climate change and greenhouse gas reduction efforts.” But the proposals from PG&E and the other IOUs would grossly reduce payments to solar customers for exported solar energy, impose large monthly fees, and explicitly stretch the average payback time from 4 years to 15 years for rooftop solar without attached battery storage, and from 6 years to 13 years for solar plus storage. If this doesn’t destroy the growth of rooftop solar in California, it will certainly slow it to a crawl. While there are some time-limited cost advantages for low-income people,  NEM-3 makes rooftop solar much less affordable for all, including low-income people. Leveling the playing field out of everyone’s reach does no good. Less rooftop solar means continuing climate change, and this too hits low-income people hardest.

Why does PG&E want to discourage the growth of rooftop solar? 

One factor may be that PG&E profits aren’t based on the sale of electricity, but from a guaranteed return on construction of infrastructure such as transmission lines. When the need for these transmission lines is reduced, so are PG&E profits. Also, the movement toward distributed energy resources, meaning primarily rooftop solar and attached batteries, competes with the centralized grid operated by PG&E. 

What can you do?

• Stay informed. Follow or join the California Solar and Storage Association CalSSA which is in the forefront of the effort to Save California Solar. Be wary of organizations with rosy-sounding names, such as FixTheCostShift.com, which promote the IOU arguments without mentioning the counter-arguments;
• Sign this petition created by SaveCaliforniaSolar.org, a coalition of groups supporting the protection of Solar Net Metering. If you’re part of an organization, please endorse the Save California Solar campaign here; 
• Fight California Assembly Bill AB 1139 which also tries to end Net Energy Metering. Take the steps outlined in the Stop Anti-Solar Bill AB1139 Toolkit which includes a sample letter with a link to contact your legislator. (Effective June 3, 2021, AB 1139 was defeated.); 
• Spread the word. Please pass links to this article or the petition to friends and neighbors and co-workers;
• Go solar and help move us toward a sustainable future.