California is the center of solar growth in the United States, with over a million homes, schools and businesses using rooftop solar. In Southern California alone there are over 200,000 homes using solar, a penetration rate of over 15%. The regional utility company, San Diego Gas & Electric (SDG&E), claims this is the highest per capita in the continental United States.
However, this ever-growing demand for solar from consumers is currently under attack. The California Public Utilities Commission (CPUC) is expected to update regulations for solar consumers regarding Net Energy Metering (NEM). They have been receiving proposals for the new regulations from both utility companies and solar advocates, leaving the future of solar growth in the state a mystery.
NEM has long pitted utilities against the solar industry. Through the NEM program homeowners are able to generate credits for their energy bills by selling excess energy generated by their system back to the utilities through the energy grid.
Originally set-up in 1995, CPUC created the NEM program to encourage growth in the sector. Solar advocates are adamant that rooftop systems help fight climate change while lowering energy strains on the grid by reducing demand and assisting supply.
CPUC updated the rules in 2016 to what is now known as NEM 2.0. In a big win for solar advocates the commission agreed to keep solar credits tied to retail rates, drastically increasing the value of solar energy systems. Solar customers are able to offset most of or all of their entire monthly energy bill through the use of NEM.
California utilities have long despised the current rules. Under the current rules solar users are able to use the grid for power consumption at all hours of the day, while getting to sell their excess power at the highest rate possible. As more and more consumers have turned to solar it has led to utilities claiming the fixed costs of maintaining the power grid is spread to non-solar customers. Solar advocates have pushed back claiming that infrastructure and maintenance costs have long been bloated by an industry where utility companies are guaranteed a rate of return.
Five years after NEM 2.0 the utilities are pushing CPUC to update the program again to new rules and regulations under NEM 3.0. The three largest California utility companies, SDG&E, Southern California Edison (SCE) and Pacific Gas & Electric (PG&E) are jointly proposing major changes to how solar owners are credited for generating power and “selling it” back to the grid.
The proposed “modernization” of the current NEM policies would shift significant costs to solar consumers. To minimize the pushback from the passionate solar community, the utilities are proposing changes that would only affect new solar customers.
The utility company’s want new customers to be limited in how and when they can sell back their excess energy. Instead of being able to accrue credits over the course of a year (which gives consumers more benefits to use the credits at more pressing times), the update calls for a “true-up” of credits on a monthly basis. Furthermore, these credits could only be used for the same time period of the day the solar was generated. This would eliminate the ability for new solar customers to generate excess energy at off-peak hours and then sell it back to the grid during the peak (when it’s most beneficial).
On top of that, the utilities also propose a monthly tariff of around $24 and charging solar users a monthly per kilowatt rate of about $11. With an average system at around 6 kilowatts, this would work out to around $90 a month for a solar customer to pay in fees. That’s over $1,000 a year per solar customer just to maintain a system that is connected to the grid.
Ultimately, the solar industry rejects these proposals that they believe would cripple the industry. By drastically limiting the value of NEM credits and instituting monthly maintenance fees for solar systems, there is a real threat that California’s progress on carbon-free energy will be halted. Not coincidentally, these changes would reduce the value and attraction to solar, essentially hurting the industry that the utility company’s see as their competition.
The process is just getting started though, as workshops and hearings will be held in the next few months. Sometime in Fall the CPUC’s five commissioners will have a final vote and the future of solar growth in California will no longer be a mystery.
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