The California Public Utilities Commission (CPUC) has released its proposed decision for Net Energy Metering (NEM), implementing a net billing mechanism and slashing payments for excess solar production sent to the grid by 75%. Based on an initial analysis, the new proposed decision would cut the average export rate in California from $0.30 per kWh to $0.08 per kWh, making the cuts effective in April 2023.
NEM has been a critical policy in launching the California rooftop solar market, which has grown to a robust 1.3 million homes covered with panels, representing about 50% of the US residential market. It has also been instrumental in launching the state’s commercial and industrial solar market.
Under the new net metering structure, payments for excess solar production to the grid will be cut to the “avoided cost” to the utility, a minute fraction of the retail rate paid by customers for electricity supplied by the grid. CPUC said the new proposed decision will lead to an average payback of nine years for residential rooftop solar, based on an assumption of a $3.30 cost per Watt. Read the complete proposed decision here.
There is still opportunity for the proposed NEM 3.0 decision to change after the final decision. ROTH Capital Partners managing director and senior research analyst Philip Shen said his firm expects the final decision to be made on December 15, 2022. If implemented, the “sunset date,” or last date by which projects can submit to interconnection to receive the preferable NEM 2.0 rates, would land on April 15, 2023.
“The CPUC’s new proposed decision would really hurt. It needs more work or it will replace the solar tax with a steep solar decline. An immediate 75 percent reduction of net energy metering credits does not support a growing solar market in California. If passed as is, the CPUC’s proposal would protect utility monopolies and boost their profits, while making solar less affordable and delaying the goal of 100 percent clean energy. California needs more solar power and more solar-charged batteries, not less,” said Bernadette Del Chiaro, executive director of the California Solar and Storage Association.
“Maintaining a strong distributed solar and storage market is critical to California’s clean energy future. The CPUC rightly rejected proposals to impose unprecedented grid access fees on new solar and storage customers. However, additional work is needed to ensure a more gradual transition to net billing so that all Californians, including schools, farms and low-income residents can adopt solar and storage,” said Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association.
“This is a temporary, strategic retreat from the indefensible solar tax the CPUC and utilities got caught trying to impose on rooftop solar owners. Even so, by slashing the payments rooftop solar can earn from selling clean, unused energy back to the grid, going forward this proposal will significantly compromise California’s greatest clean energy success story. One look at the changes the CPUC is proposing shows that they’re on an anti-solar trajectory,” said Environmental Working Group president and California resident Ken Cook.
“At a time when California needs rooftop solar to flourish, it’s risky to cut a key incentive without having a viable alternative in place. California’s decision-makers need to make rooftop solar as affordable and accessible as possible so that every household with solar potential can realistically make the choice to go solar. While the revised proposal eliminates the solar tax and protects current solar customers, it will make transitioning to solar power more expensive. If we want to protect the environment, our climate, and our health, we must keep rooftop solar growing and continue incentivizing the growth of clean, renewable energy across California,” said Laura Deehan, Environment California state director.
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Not clear – how many years of grandfathering to NEM 2.0 is offered?
If This proposed NEM 3.0 passes, based on a 9-year payback, after the Federal 30% tax credit, and the 167% of the previous year’s usage of maximum solar panel wattage included, installing a system “off-grid” with batteries has a 7-year pay back and has independent operability during a power emergency, black outs and weather-related outages for smaller roofs that can only produce the previous year’s usage and cannot take advantage of the additional 50% of additional solar panels. Off-grid pure sine wave inverters, batteries, transfer switches all get the 30% Federal Tax Credit. The utilities greed will lead to homeowners going with off-grid solar and back up gasoline generators being used more often rather than grid connected solar only. Like digging a well for water on your own property, harvesting the sun does not need to involve any utility in 90% of California or most of the southern United States where weather and climate are moderate. There has never been a better reason to “Break the Chains” the utilities have on the consumers than going off-grid with solar and batteries with NEM 3.0 implementation.
So is going off grid in CA no longer illegal per Title 24?
You can stay connected to the utility but turn off your main braker unless you need the power during long periods of darkness. There is nothing saying you must buy so much electricity from the grid or even connecting your solar to it. I run a separate system, in my house, for the solar I produce “Off-Grid”. The only thing you pay is the $10.00 per month connection fee that is required to be tied to the grid but beyond that, unless you buy more, that is all you need to keep your backup utility connected.
“The only thing you pay is the $10.00 per month connection fee that is required to be tied to the grid but beyond that, unless you buy more, that is all you need to keep your backup utility connected.”
Did you read the NEM 3.0 proposal though? They are proposing $8/kw installed generation, Which is $72 for my 9kw system.
SDGE and alikes need to transform. They just want to continue milking people just like 100 years ago.
In the latest CPUC NEM 3.0 proposal, they dropped the monthly fee for the installed solar and just decided to take all but 25% of the electricity without compensation.
Oh, thanks. I am lagging.
The CPUC us saying to everyone, it is OK to fleece the public. it’s OK to take $18,750.00 worth of solar electric value away from the rooftop solar customers over 25 years. Every summer, I buildup enough banked electric energy, on the NEM 2.0, to continue powering my home, even though the reduced sunlight months of November through February and all of that is going away with NEM 3.0. Instead of 4 months being covered, now only one month will be covered because the utility will be pocketing the other 3 months plus new customers will be paying also for those three months out of their pockets. 3,000 extra kilo wat hours of summer production will become 750 kilo watt hours. They will keep the other 2,250 kilo watt hours as profits and, at 36 cents per kilo watt hour, that is $750.00 out of the solar roof owners pockets each year. That does not reflect the additional dipping they do to fund their CARE program that gives 37% of their poorest qualified customers a 20% reduction on their bills while raising the bills on the other 73% of us. They claim payback will only take 9 years under the new program but going “off-grid” with batteries and the IRA 30% tax credit for new rooftop solar systems, that are completely off the grid, with no grid ties, only takes 7.5 years to get full payback. The utility gets none of your power and you can power through winter with just a minimal purchase from the utility for nighttime power. Ask your solar installer about going “OFF-Grid” and crunch the numbers. Once you pull the plug, you will have all green power and the so-called cost shifting will become worse since the grid now has one less customer to spread the infrastructure costs around on forcing everyone else to go “Off-Grid” and become “Green” or else they will have $1,000.00 per month electric bills trying to support a failed utility system.
I don’t think it is clear whether the reduction of compensation for power sent back to the grid is only affecting the monetary payments or if it will also reduce kWh credits which are now 1:1 from most utilities.
.25 for 1 will be the new compensation for new systems after March of 2023 if “grid tied”. Off grid installations that are not grid tied would have no utility interference or connection. The increase in allowed solar panel system size could offset the reduction in compensation but at added cost to the homeowner for either extra panels or added batteries to keep all the energy they produce rather than take the 75% discount on the power.
You make some great points on the financial aspects of the NEM 3.0 impacts to residential solar. To make a complete argument, you need to include the required maintenance and upkeep of the installed power distribution network that over 99% of Solar equipped customers benefit from. Almost all residential solar relies on the grid being able to accept excess power during peak production as well as supplying the net difference durning night time and peak usage times. nEM 3.0 arguably is unfair to residential PV customers but it is undeniable that we still mostly rely on grid support. We need a balance of incentives for clean residential energy with the benefits of the installed distribution grid that is owned by the Utilities.
I am ac huge PV supported and owner. We need a reasonable balance of grid usage and interview fees that do not erase the inventive to go solar. Battery backup is out of reach of most potential PV customers budgets. We cannot afford to be to idealistic here.
What you have pointed out is true. Grid tied solar does not need the expense of batteries to work. I have two 8,000-watt solar panel systems on my home. One 8,000-watt system is “off-grid” and requires batteries that must be replaced periodically costing $80.00 per month pro-rated for the required replacement batteries. The second system is a Tesla Solar Glass Roof “without batteries” that does not require any out-of-pocket maintenance for 25 years, so it is a real profit maker on NEM 2.0. When the grid is used for long term financial credits, NEM 2.0 does not provide any compensation to the utility with its 1 for 1 ratio of compensation. If the utilities had a 2 for 1 compensation schedule, for the grid being used as a battery, then the homeowner could place two kilo watt hours of excess electricity onto the grid in order to get back one kilo watt hour at a later date. Adding extra solar panels and a larger grid tied inverter system could profit both the homeowner and the utility with free electricity without the added expense of batteries on the homeowner’s part. The CPUC proposal if a 4 for 1 compensation schedule that would require more solar panels than can fit on most roofs in California and leaves only going “off-grid” with batteries as a clear alternative to grid-tied with the utility.
I am not without sympathy for people being unhappy regarding the change in the tariff structure.
However people should be aware of the power companies “duck problem” which is a graphical representation of supply and demand from the micro-grid tie systems. Power companies are now getting into an over supply situation from the micro-grids at certain times of the day. The “duck graph” shows this as the tail of the duck is in the morning and the head is in the early evening. The logical move would be to incentivize the micro-grid operators to store energy midday and release in early evening rather than a blanket tariff change.
These changes to NEM are to be expected and inevitable worldwide. Grid tied rooftop solar is fundamentally the incorrect way of designing a distributed system. Behind-the-meter utilization was always the correct way of operating a residential system. The sooner we stop begging the grid and utilities to help us the better everyone will be. Rooftop solar and the grid is like mixing oil and water, it was never going to work out. 15-30kw solar +50-100kwh storage is what is needed for all single family homes.
I like the oil and water bit. I always said net metering was like cutting school lunch room tuna with he finest caviar.
If I was there I’d go offgrid or join a microgrid, PPA, etc as the corruption of the Cal utilities will only lead to them going bankrupt as everyone leaves their system and just share a a/few connections.
Smart developers will just make their developments a green microgrid that costs a fraction of IOU cost and much more reliable, as a big selling point.
Blocks will band together into microgrids, cities, counties will leave and make their own utilities. And that is the problem with high prices is makes such a juicy target as RE cost drop by next summer as the world goes deeper into recession, will be so cheap, I’m already selling for under $1.5k/kw at a nice profit, my grid tie generators might drop to $1k/kw.
And even a renter can have one as ‘portable’, just plugs in.
Just 1 of the many coming innovations that make IOUs obsolete parasites, just a waste of money in under 10 yrs as homes, buildings, small businesses and EVs with V2G take over IOUs can’t compete with.
Thus why they are trying to snuff it out.
It is unfortunate that “Grid Defection” will go from theory to practice. Those micro-grids could cumulatively have been part of an energy solution for large portions of the country. Unfortunately many people in financial constraint don’t have the ability build a micro-grids. This is going to tend to make socio-economic stratification even more pronounced. America does not need any more strain on the gaps between haves and have-nots.
As battery costs come down and fess go up or compensation is reduced to a pittance, off-Grid solar will look mighty good to those that can afford the initial expense of getting rooftop solar. All new homes in California are mandated with rooftop solar, on their roofs, and going off grid will make sense to all new homes going forward. Unless utilities take their giant 2 cents per kilo watt hour solar farms and pass the savings onto California customers with under 15 cents per kilo watt hour, then the “War of the Solar Roofs” will go on. “TURN” started that war by making larger homes pay tier 5 rates of 48 cents per kilo watt hour and payback was less than 7 years. The NEM 3.0 9-year plan is still too high because off grid solar is now 7 years pay back. If the utility only asked for 30% instead of 75% reduction in value of extra energy credits, most would just build the extra solar power, into -their roofs, and both the homeowner and utility would profit. With Homeowners going Off-grid, it will be 100% to the homeowner or wasted and 0% to the utility and one more lost paying customer to even more dilute the customer base making grid tied electricity more expensive to those that are left to pay the infrastructure bills.
I have 9kw of rooftop solar with an installed cost of $4 per watt ($36,000). Installed in 2015 and under NEM 2 rates. Project lifetime of 25 years. I’m not aware of any power purchase agreement I have. This lack of contracting appears to be the core problem that is being exploited under the proposed changes.
Question 1. It is not clear to me how the grandfather provisions will affect me. Is my investment even protected? And for how long?
Question 2. My excess generation capacity cost me $4,000 / kw. PG&E has not contributed to this cost . PG&E under NEM 3 will pay me based on avoided cost which is based for the most part on large scale contracted for commercial generation. Since I have no actual power purchase agreement I’m simply a small peanut until you consider the 1.3 million other peanuts involved. HOW CAN THE CPUC JUSTIFY SUCH A RATE MAKING CHANGE?
Question 3. PG&E does not need to spend anything to get my generation to their market (all the wires are in place and paid for by PG&E ratepayers). What is the calculus on this?
For full disclosure I’m retired from SDG&E. Utility training under Ed Guiles and we currently live in PG&E territory.
Any systems install before March 2023 will still be grandfathered into their original NEM 1.0 or NEM 2,0 contracts that have a 20-year term. After the term expires you would either sign up for the then current NEM program or take your system “Off-Grid” and no longer be grid tied.
Here are results of my calculation of the paypack time under NEM 3.0:
installed power 8.0 kWp
PV system cost 16,000 USD (2,000 USD/kWp)
specific yield 1400 kWh/kWpy
degradation 0.3% per y
maintenance cost 1.0% per y
imputed lifetime 20 years
on-site consumption 20% of PV-production
retail tariff 0.30 USD/kWh
feed-in tariff 0.075 USD/kWh
annual increase of electricity cost 2.0% per y
inflation rate 3.0% per y
discount rate 4.0% per y
internal rate of return (IRR) 5.5% per y
pay-back time 17 years
present value 2,981 USD
LCOE 12.3 ct/kWh
If you are interested to try my Excel file for free, here is my email address: email@example.com
if CA residents want to join the bandwagon of the most $$$$$ ‘climate saving technology’ currently en vogue, (there ARE other, less costly alternatives, ClimateGate issues regarding data manipulation notwithstanding) maybe its time they put their money where their mouths are and stop using taxpayer monies to subsidize their lucrative ‘solar power generation’ side businesses. Grid operators should not differentiate between sources when determining rates paid for supply. And in case anyone is unaware, the LA100 dictum promulgated by Mayor Garcetti and whats left of the City Council will result in a tripling or quadrupling of LADWP electric rates in the not too distant future. Pretty sure that will realign the ROI math, as it should be. The cost savings for installing your own personal sun panels should be based on covering your own personal useage and not through the fleecing of all Californians due to overinflated surcharges currently being paid to distributed electricity producers…
This is why making one’s home rooftop solar system, with batteries, and not connecting it to the grid but use it like RV solar users have been using theirs for years is the best way to use Solar power under NRM 3.0. RV uses have two systems on board their RVs. one is what is called “Shore Power” that is AC power from the RV park, that comes from the utility and the other is a 12-volt system coming from their on board batteries. The 12-volt system runs 12-volt lights and 12-volt appliances and can also feed pure sine wave inverters for appliances needing 120-volt feeds. Keeping the AC power from the grid for 240-volt applications and using the 12-volt system for everything else. The AC from the grid can also be used with battery chargers to keep the batteries available when the sun does not shine on rainy days or at night.
November 17, 2022 at 4:32 pm
So is going off grid in CA no longer illegal per Title 24?”
Nope it’s still illegal but most people have no clue. Net Zero 3.0 will bankrupt many solar outfits since sales will slump not to mention the banking crisis. Until the consumer can competently disconnects from the grid you are enslaved to them. If and when it does become legal to go off grid I will install a solar system myself.
Another issue is when the solar companies go bankrupt in Kalifornia consumers will be SOL when they need repairs. Oh My.
Not disconnecting from the grid, to comply with any local or state laws, does not preclude one from installing a second off grid system behind a transfer switch just like backup generators have been doing for homes, during power failures, for years. When the sun is out, run the second system and charge the batteries with the transfer switch engaged and when the batteries get low, dis-engage the transfer switch and go back to utility power. Nothing says you must connect your solar system to the grid or feed any electricity to it. This is how I have been running my off-grid system since 2010 on 12-volt deep cycle lead acid batteries and cut my utility bills by 70%. Once installed, the only major expense is periodic battery replacements and that works out to about $100.00 per month for 80 deep cycle lead acid batteries that last 6 years on average. Dropping the $400.00 per month utility bill to $100.00 average electrical cost plus the $100.00 battery replacement costs adds up to $200.00 per month rather than the$400.00 I would be paying without the solar and batteries. If solar companies just install off-grid supplemental power systems to homes instead of grid tied systems, the rooftop solar industry could keep growing and at the end of NEM 2.0 that most homeowner will come to in 20 years, they can convert existing systems to off-grid supplemental systems as well. As a reference, my home used 40 kilo watt hours per day on average or 1,200 kilo watt hours per month.
The daunting capital outlay for 80 12 volt deep cycle batteries would keep most people from emulating your strategy. Perhaps the LIFe batteries that are available these days would be more economic as the depth of discharge being higher would permit you to use far fewer batteries.
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