A state entity, the California Public Advocates Office (PAO), released a report suggesting that residents who have invested in rooftop solar should be force-shifted onto a regulatory scheme that would greatly diminish the value of their investments.
The PAO released a fact sheet claiming that rooftop solar net metering will create an $8.6 billion cost for non-solar customers in the state, and that this number is increasing. As a result, it has advised that net energy metering (NEM) 1.0 and 2.0 customers are forced to shift to the far less advantageous NEM 3.0 rate structure.
The issue at hand is justified based on the “cost shift” problem, a claim backed by utilities that electric bill payers that do not have rooftop solar are subsidizing their solar-installed neighbors. By paying solar customers a retail rate for electricity exported to the grid from a rooftop solar array, utilities say they are incurring a cost that must be paid in the form of raised electric rates.
The California Solar and Storage Association (CALSSA) released a factsheet in response to PAO, debunking PAO’s assumptions about the cost shift. Specifically, it rejects that self-generation of electricity poses a cost to utilities, rejects the assumption that grid infrastructure costs are fixed, and challenges the foundation of the Avoided Cost Calculator, which is used to set the rate for solar exports. More details can be found here.
“For years, the State of California has encouraged people to invest in rooftop solar for the benefit of all. As a result, two million consumers have invested $40 billion to collectively build 12 gas power plants-worth of clean energy. If California goes back on its word, it would not only anger millions of people, it would undermine the solar market going forward as well,” said CALSSA.
The PAO is an agency designed to be a voice for California residents, interacting with the Public Utilities Commission (CPUC) on energy related regulatory issues. It has historically repeatedly released guidance that dovetails with the demands of the state’s three multi-billion-dollar private electric utilities.
“This cost burden – commonly referred to as a cost shift – to non-rooftop solar customers of Pacific Gas and Electric, Southern California Edison, and San Diego Gas & Electric has risen from $3.4 billion annually in 2021 to $8.5 billion annually by the end of 2024, and it will continue to grow in coming years,” said PAO.
This was the central argument that led to the passage of NEM 3.0, a regulatory structure which transitioned the state from paying lucrative retail rates for solar grid exports to “avoided cost” rates that are roughly 80% lower. The change led to a nosedive in installations in the state, dropping it out of the number one spot for installations for the first time in over a decade.
California has since suffered numerous solar installer bankruptcies and lost tens of thousands of jobs. Solar advocates have argued that while a full retail rate could not be paid forever, the move to NEM 3.0 was too steep of a cut. It’s an issue so contentious that ongoing litigation has brought the issue of NEM 3.0 to California Supreme Court.
For solar owners, PAO suggested the shift from NEM 1.0 and 2.0 to 3.0, also known as net billing tariff (NBT), would occur upon the sale of a home, or after 10 years of interconnection. Most homeowners signed a net metering agreement along with their 25 year loan or lease with the expectation that their agreement would span the life of the solar array. However, net metering agreements do not have any legally binding requirement to grandfather in existing customers for their system’s life.
The PAO also suggested that NEM 2.0 customers have their compensation rates frozen to the time in which they signed the agreement. Rather than being paid a retail rate that increases with the ever-rising electric utility rates, it would remain fixed, cutting down on the benefit of solar.
Silver linings?
However, NEM 3.0, while a shot to the hamstring for the solar industry, has come with some benefits. More than half of solar installations are now opting to include battery energy storage, up from 20% or less in 2023. This may provide critical for California’s clean energy transition, as the intermittent cycles of generation of solar do not match up directly with when power is being used.
This mismatch can be best described with a chart known as the “duck curve,” which shows the daily imbalance the California grid struggles with. Battery energy storage allows this duck curve to be smoothed out, delivering power when demand reaches a high point. This helps grid managers avoid building out inefficient natural gas “peaker” plants to serve those high-demand hours.
Vincent Ambrose, chief commercial officer, FranklinWH told pv magazine USA about the many ways batteries can help solar evolve and continue to serve California residents’ power demands.
“You can think of PV like a knife, it cuts one way, does one thing, and does it efficiently. It produces electricity,” said Ambrose. “When you take a look at an energy management system with a battery, now you’ve got a Swiss Army Knife. It serves all kinds of functions, whole-home backup, peak shaving, load management, even grid-interactive services.”
While batteries offer customers at home a lot more flexibility, those that were sold a solar array with no battery during NEM 1.0 and 2.0 may find themselves in a financially precarious position on their investment should the PAO’s suggestion become reality.
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My last comment is in moderation, but here’s more from the same article.
“Anyone who puts up solar is being a great citizen for their neighbors and for their local utility. Customers with solar distributed generation are making it so utility companies don’t have to make as many infrastructure investments, while at the same time solar shaves down peak demands when electricity is the most expensive.”
They are all criminals. Time to go off grid
These companies garrentee 8% profit and I am sure buying my solar power for pennies and selling it for much more, they are laughing all the way to the bank.
I will absolutely go off grid if they try and take nem 1.0 and 2.0 from the people. The CPUC is corrupt and so is PG&E and the rest. They are gonna f around and find out. I will literally rip they meter on my house and live off grid in the city. Who is gonna stop me? I guarantee you no one. Solar is power to the people. All people right and left, black and white. Enough with these lies. Solar companies and solar customers have been building out PG&Es grid for them with solar. They get ENORMOUS benefits
1000% to the comment below, I will also go off grid instead of go off NEM 2.0.
We installed solar with battery arbitrage and battery backup. The accompanying monitoring system let’s us control our grid consumption right down to the watt! And if we have a power outage, 20% of our battery is allocated to backing up predetermined essential circuits in our home. Received our 1st bill and our panel power production covered a significant percentage of our total power usage. The rest came from the grid. We learned much that 1st month and our current solar production is covering nearly 90 % of our household power needs. The home runs the entire night on battery as it is charging during the day. We have sent some power to the grid and will get some credits but under NEM3 aka NBT, it is Pennies on the dollar. Best to use as much as possible during the day which takes a little adjustment.
NEM 2 is not paid at retail. At true up, my excess exported kWh is paid at 3¢ while I’m charged 30¢ (avg) for imported.
That number keeps going down. My recent true up paid me at less than $0.02
PG&E gets a lot from installed solar. They are crazy. Everyone will just go off grid as they can afford it. Bye PG&E you will slowly lose millions of customers
The CPUC’s continued capitulation to California’s predatory power companies will likely end up in the courts. Essentially unilaterally eliminating NEM 1.0 and 2.0 will get a lot of solar owners signing up for class-action lawsuits. Of course the attorneys defending the utilities and the CPUC will all get paid along the way ultimately by the customers of same predatory electric monopolies. What a scam…
Does this cost shift problem exist in municipally owned utilities like in Los Angeles, Alameda (city), and Santa Clara (city)? These city don’t seem to aggressively stop solar like the publicly traded capitalist hellscape companies do.
Why would anyone expect their Utility to pay them retail for electricity they generate? It’s a loosing proposition for any Utility. How do they expect to cover operating costs when there’s zero profit? PG&E’s NEM 1&2 played to the greed in people, and NEM 3 was a correction to the problem. Why when you sell power to the Utility do people think the Utility should be forced to pay them more than they pay Commercial power generators? When I first heard that PG&E paid retail prices back to solar customers I thought “That’s crazy!” and indeed it was, which is why they finally switched to NEM 3, which is more in line with what other Utilities are paying.
They made 2 Billion profit last year alone, and have zero competition. It the worst combination of government force and corporate greed. They should be allowed to charge what they want if i can pick what provider i want.
You have the wrong information here. I’m on NEM2 (so far). Last year I generated $1560 more electricity than I used. PG&E gave me a “credit” for $250 at true up. That’s not paying retail for electricity.
The “Duck Curve” is the most misleading and improper way to look at the impact of solar. I have been preaching for many years that this approach has got the solar industry into the mess that it is currently in. The lowest loaded day in spring is the LEAST important day of the year to the state of California. Instead, all of solar’s enemies use this completely meaningless graph to prove that solar is detrimental to California. Nothing could be further from the truth. Try showing the highest load day in the summer and superimpose what that day would look like without solar. That is the real story. As legitimate journalists, these are the facts that need to be put before the politicians in Sacramento and at the Public Utilities Commission–they are not technical people–they are politicians.