California’s net energy metering (NEM) policy has been a key driver of the state’s solar deployment, incentivizing adoption by allowing utility customers to sell excess power generated from rooftop solar back to the grid for a profit. With approximately 1.5 million homes and businesses participating, policies like this have made California a clean energy leader in the United States, and even the world. However, the California Public Utilities Commission recently changed the solar-friendly policy.
The approved new framework (known as NEM 3.0) is expected to slash the rate paid for solar energy sold back to the grid by 75%. This revision significantly lengthens the five- to seven-year average payoff period for installing solar and puts the growth of solar power at risk. Californians must embrace an additional clean energy technology in order to shorten payoff periods and continue the momentum behind solar: batteries.
Under the new NEM 3.0 rate structure, the value of excess solar generated during the day is diminished. But, there is a strategically designed loophole – homeowners and businesses can maintain the value of solar power generated by incorporating a battery into their system. The battery can store excess energy for later use, including hours of the day when energy demand and prices are at their highest.
This new structure will benefit the California power grid by reducing dependence on fossil fuels during peak demand periods. As a state that commonly experiences electricity supply shortages and rolling blackouts, California has the opportunity to mitigate these issues by leveraging batteries and renewables as distributed energy resources. Further, battery systems will enable California businesses to accelerate their paths to decarbonization, which regulation will mandate in the coming years.
As demand for solar-plus-storage grows, lithium-ion battery manufacturers are racing to keep pace. However, despite the urgent need for storage as electricity prices skyrocket and grid reliability nosedives, many home and business owners remain hesitant. Lithium-ion batteries have their own risks, including rising costs and fire hazards.
In 2022, the average lithium-ion battery pack price reversed its downward trend and rose 7% to $151/kWh. As of 2021, first costs (including cost of all hardware and cost of full installation) for a 10 kWh to 14 kWh residential battery system were in the range of $10,000 to $15,000 before state-specific incentives, which is cost prohibitive for the average homeowner. Lithium is also an inherently flammable material that can make batteries a liability rather than an asset.
Lithium battery fires burn hot and fast, and are difficult and dangerous to extinguish. Burning batteries also release a range of toxic gasses harmful to humans and the environment. While it’s true California needs battery storage, it will require innovation beyond lithium for mass adoption to meet the scale needed.
The next wave of clean technology adoption must take advantage of batteries that are inherently safe and affordable. Non-lithium energy storage alternatives exist, and many more are currently being developed. These new battery technologies can help California ensure that NEM 3.0 has no adverse effects on the clean energy transition, and instead kick it into high gear.
Once deployed at scale, these new battery chemistries will serve as invaluable assets to help shape the clean and resilient power grid of the future. Much like solar panels once were under previous NEM policy, batteries will respond to and be rewarded for giving energy back to the grid when it’s most needed.
Mukesh Chatter is the president, CEO and co-founder of Alsym Energy, a battery technology company developing high-performance, low-cost batteries to enable a zero-carbon electrified future for all. He is a successful serial entrepreneur with a track record of developing advanced technology products and leading startups from launch to success. Mukesh co-founded Nexabit Networks, a terabit switch/router company, and led the company as CEO until its acquisition by Lucent Technologies. After the acquisition, Mukesh served as the vice president and general manager of IP Products at Lucent. Mukesh also co-managed NeoNet Capital LLC, an investment firm focused on funding out-of-the-box, innovative ideas.
The views and opinions expressed in this article are the author’s own, and do not necessarily reflect those held by pv magazine.
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