The California Net Energy Metering (NEM) 3.0 proposal is set to be decided upon on January 27th, and many are calling the policy a potential death blow to the California solar industry, with one grid expert even dubbing it a “proposed dystopia.”
The proposal calls for a slashing of payments to homeowners for their excess solar generation, reducing the payment from a retail rate ($0.22-$0.36/kWh) to an avoided-cost rate ($0.04-$0.05/kWh). The reason behind this change is to fix a growing problem of a cost shift that solar customers (particularly ones without energy storage) dump onto non-solar customers. Payments to solar customers for excess generation at the retail rate creates an increased cost for utilities, which is then spread among all customers in the form of rising rates.
While this is damaging to the value of non-battery solar, existing customers on NEM 1.0 and 2.0 are grandfathered in to their old rates for an additional 15 years. New solar customers face a rate structure where it doesn’t make much financial sense to buy a system without a battery. Batteries represent a significant increased cost, and while they offer savings from smart import/export rates, are supported by the SGIP rebate, and offer backup power, the picture has worsened for prospective solar shoppers overall under the new rates, said informational site SolarReviews.
Andy Sendy of SolarReviews joined pv magazine to discuss the findings of a recent survey of 4,000 actively shopping solar customers in California, and the results were damning. It found that under the proposed net metering payment changes, 68.4% of people actively considering going solar said they would no longer be interested.
However, the rate change was not the worst element of the proposed decision in Sendy’s view, and SolarReviews website reflected that sentiment. The proposal also calls for an $8 per kW grid participation charge, or as Sendy calls it “a tax on solar customers.” This means each month a solar customer with a typical 8 kW system would pay $64 every month just to be connected to the grid.
The survey’s results spell doom for the California residential solar industry: 95.4% of respondents said they would no longer buy solar under a decision that lowers payments and adds a grid access charge.
Sendy said that this solar industry-killing proposal is built off false assumptions, and the California Public Utilities Commission (CPUC) use of a 2013 grid study to justify the plans is outdated and misguided. He said that if the grid access charge is meant to pay for the cost-shift created by NEM 1.0 and 2.0 customers, it will struggle to generate revenue if nobody wants to buy solar anymore.
For solar shoppers interested in understanding how the NEM 3.0 would affect the economics of buying solar, SolarReviews has integrated the assumptions from the proposed decision into its Solar Calculator.
Another area of concern for Sendy is that the proposed decision is agnostic to new customers whether they have a battery attached or not. He believes battery-attached systems should be treated differently, as they minimally affect the cost-shift problem that standalone solar causes through import-export rates.
Batteries even help reduce costs for the grid, and thereby Californians at large, said Sendy. As electrification of appliances and vehicles commences, and more generation sources enter the grid, a need for upgraded transmission and substations is created. A substation comes with multi-million-dollar upgrade cost, which would then be shifted down to Californians in the form of rate raises.
Sendy said, rather than upgrade the grid and penalize prospective solar owners, why not incentivize batteries? Batteries lessen the need for localized transmission, making the grid more flexible, and reducing the need for substation rebuilds.
Sendy said he’d like to see the $8/kW charge reduced or removed, or only placed on new solar customers who decide they do not want battery energy storage. “For solar to become the dominant energy source, we need to accept that storage is an essential piece,” said Sendy. He suggested the SGIP rebate, which lessens the cost of a battery, to be increased to $350/kW to encourage more storage.
In a state facing increasing extreme weather, wildfires, and blackouts, due to rapidly growing energy demand, an investment in batteries would improve resilience for Californians.
New construction solar mandate?
Another chilling possibility Sendy sees as a result of the proposed decision is its negative impact on the California mandate that requires solar on all new buildings. He said because of the very poor cost picture, builders would likely integrate a very small, maybe 2 kW, “token” system that keeps the building in compliance with law. These small systems would represent a lost opportunity for a state pursuing steep decarbonization goals.
In a recent statement, Governor Gavin Newsom said that there is still “work to do” on the proposed decision, indicating that there is a possibility the proposal is changed in some way.
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