California NEM Policy To Be A Boon For Commercial Solar-Plus-Storage

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A new white paper from SepiSolar reveals the financial benefits of a pending revision to California’s net energy metering (NEM) policy.

On Oct. 5, the California Public Utilities Commission (CPUC) issued a proposal to modify CPUC Decision 14-05-033, the NEM tariff policy for solar and energy storage. The change will allow DC-coupled energy storage systems to become eligible for NEM without the need for thousands of dollars in extra hardware costs and burdensome verifications required by California utilities and the Internal Revenue Service for AC-coupled energy storage systems, explains SepiSolar, a Fremont, Calif.-based design, engineering and consulting service for solar, energy storage and microgrids. 

Once the revision is finalized, according to the white paper, commercial DC-coupled solar-plus-storage installations will be able to benefit from NEM, as well as see increased solar system sizes, reduced installation and permitting costs, and faster interconnection approval times.

To take advantage of this policy change, contractors will need to design solar systems with DC-coupled storage and procure DC-coupled energy storage products that incorporate a new Underwriters Laboratory (UL)-verified inverter firmware solution, according to SepiSolar. NEXTracker’s NX Flow energy storage system piloted this firmware solution with UL; therefore, it is expected to be the first DC-coupled energy storage product approved for the new regulation.

SepiSolar’s white paper reviews and compares the historical challenges of designing AC-coupled and DC-coupled energy storage systems for NEM. It also describes how the new NEM DC-coupled policy and system design will eliminate the need to purchase extra equipment required for non-export AC-coupled systems, such as reverse-power relays, an additional utility meter, switchgear and a second inverter.

“This policy does more than just reduce equipment costs,” says Josh Weiner, CEO of SepiSolar and author of the white paper. “Businesses can now store their excess solar power in a battery system and receive demand charge benefits, as well as the financial benefits from NEM.

“Another benefit is that solar systems can now be ‘supersized’ to exceed the 1 MW behind-the-meter interconnection soft limit,” Weiner continues. “With a DC-coupled design using products that have the UL-verified firmware, excess generation over 1 MW can now be stored in the battery and later exported into the grid at favorable or optimized NEM or NEM-aggregate tariff. As a simple example, a 1 MW stand-alone solar system can be increased to 5 MW with a complementary DC-coupled 4 MW storage system and a 1 MW AC inverter that uses the new firmware.”

The same DC-coupled system design may also eliminate the need for utility infrastructure upgrade costs, the white paper notes. These costs are most often charged to the solar asset owner when the solar system’s export generation is over 1 MW. Typically, the owner either pays for the upgrades or decreases the system size. With the new DC-coupled configuration, solar-plus-storage systems can be designed to meet the location’s grid capacity, reducing the need for upgrades. Any excess solar can be stored and later exported at up to 1 MW intervals. In models developed by SepiSolar, adding DC-coupled energy storage under the pending NEM policy is usually much less expensive than the cost of grid infrastructure costs without storage.

Further, the simpler DC-coupled design also will allow solar-plus-storage systems to qualify for expedited interconnection, reducing difficult verification requirements for utility interconnection. Finally, with the UL-verified firmware, tax equity investors and utilities receive independent verification that the storage system is only exporting solar generation and not charging batteries from the grid. This verification is important for qualifying energy storage systems to receive the 30% investment tax credit, the white paper explains. 

The proposed CPUC ruling is expected to gain final approval by the end of the year or in early 2019.

A copy of SepiSolar’s white paper can be downloaded here

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