California shakes up home solar with new net metering tariff
The California Public Utilities Commission (CPUC) Thursday unanimously approved a controversial rate plan to kick-start the adoption of residential battery storage by sharply lowering the state’s Net Energy Metering (NEM) tariff, which had been a source of income to solar-powered households since 1997.
The commission said its NEM overhaul, which they approved 5-0 despite more than two hours of overridingly critical public comments, was a needed update to an otherwise successful program that had helped expand residential solar production to around 1.5 million homes with a combined capacity of some 12,000 megawatts. The commissioners, along with the utility industry, have argued that it was time to move beyond simply putting up more solar panels and that more battery storage was necessary to provide clean electricity at night.
“NEM has left an incredible legacy and brought solar to hundreds of thousands of Californians, but it is also profoundly expensive for non-solar customers and was overdue for reform,” Commissioner John Reynolds said after the 5-0 vote. “The future needs a solar program designed around the value of solar to the grid and one that encourages true carbon reductions at peak energy times, which is after the sun goes down, by creating better incentives for customers to pair solar with batteries.”
The revised NEM tariff, also known as NEM 2.0, is designed to encourage homeowners to add battery storage in their garages to solar panels on their rooftops by reducing the price local utilities must pay for the power placed onto the grid. The incentive is that rooftop-plus-battery systems will fetch a higher rate during the hours after sunset when demand is still high. The CPUC said in a statement that homeowners with batteries would save around $136 per month on their electric bill, but homeowners with only solar panels that shut down at night would save only $100.
The tariff will apply solely to homes built after it goes into effect in April; the rates for current homeowners will not change. In addition, the plan provides a full menu of credits for businesses and low-income residents as well as expanding the allowable size of a rooftop array.
“We are launching the solar and storage industry into the future so that it can support the modern grid,” said CPUC President Alice Busching Reynolds.
However, homeowners, as well as environmentalists and the solar industry itself, don’t see it that way. Critics argued vociferously over the past several weeks that NEM 2.0 was not so much a boost for solar in California as a potential disaster. Commenters told the commission they should be making solar power more attractive to homeowners in order to greatly expand the state’s solar capacity rather than eliminating a key financial incentive; solar homeowners are currently paid the full retail price for their power.
“The solar and storage industry remains concerned that the transition from net metering to the new net-billing structure is too abrupt and threatens to slow the deployment of rooftop solar in California,” said Sean Gallagher, vice president of state and regulatory affairs for the Solar Energy Industries Association. While the proposal provides some support for schools and farms to invest in solar, the failure to adopt a more gradual transition to net billing risks putting solar out of reach for millions of residents.”
The California Solar & Storage Association noted that consumers were already more likely to purchase a solar panel system but less enthusiastic about adding batteries, which can cost several thousand dollars, and under NEM 2.0 would be even less likely to commit to solar at all. “Today, California is installing roughly 30,000 batteries compared to 200,000 solar systems,” the association said. “With high costs, supply chain constraints, inflation and permitting and interconnection delays and challenges, it will take years before the storage market can match the solar market.”
Proponents of the new tariff, however, also saw a potentially dangerous “cord cutting” trend developing in which higher-income Californians, who could more easily afford to add solar, were reaping the lucrative benefits of selling high-priced power to their local utility company, but their lower-income neighbors who likely rely entirely on utility power, would find themselves stuck with higher rates needed to cover the company’s fixed costs.
Some activists said the CPUC did not go far enough because the poor were still shouldering some $4 billion paid out to solar customers. “The current solar subsidy program forces low-income families, renters, seniors and anyone who doesn’t have rooftop solar to bankroll wealthier Californians’ solar systems,” said Kathy Fairbanks, spokesperson for the coalition Affordable Clean Energy for All. “Today’s vote ensures this indefensible cost shift will continue indefinitely.”
