The California Public Utilities Commission (CPUC) has issued a decision that modernizes the Net Energy Metering (NEM) solar tariff to promote grid reliability, incentivizes solar and battery storage, and controls electricity costs for all Californians. The decision has no impact on existing rooftop solar customers, maintaining their current compensation rates, according to CPUC.
“We are launching the solar and storage industry into the future so that it can support the modern grid,” says Alice Reynolds, CPUC’s president. “The new tariff promotes solar systems and battery storage with a focus on equity and advances the new clean energy technologies we need to meet our climate goals and help ensure grid reliability.”
“The decision strikes the right balance between many competing priorities and advances our overarching goals of ensuring California meets its climate and clean energy goals equitably,” adds CPUC Commissioner Clifford Rechtschaffen.
The decision improves the pricing structure and credits to new rooftop solar customers of Pacific Gas and Electric Co., Southern California Edison, and San Diego Gas & Electric for the electricity they export based on its value to the grid, CPUC explains. The new tariff supplements and bolsters federal incentives provided by the Inflation Reduction Act for solar and battery storage. The new tariff also works together with an additional $630 million in state funding that the Legislature has dedicated to upfront incentives for low-income customers who install solar plus battery storage.
“This decision will bring rooftop solar into a new and more sustainable age. 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,” comments Commissioner John Reynolds. “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 Net Billing Tariff will sustain solar and reduce costs to non-solar customers while driving a new era of storage adoption.”
Under the new tariff, average residential customers who install solar are expected to save $100 a month on their electricity bill, and average residential customers who install solar paired with battery storage are expected to save at least $136 a month, CPUC continues. With these savings on their electricity bills, new solar and solar plus battery storage customers should fully pay off their systems in just 9 years or less on average.
To support the evolution and growth of the solar industry, the decision provides extra bill credits to residential customers who adopt solar over the next five years, allowing California businesses to gradually transition from solar-only sales to solar plus battery storage sales, fostering a stronger local economy. The decision also allows residential customers, small and large businesses, nonprofits, schools, and governments to lock in their export credits for 9 years to provide certainty and predictability of bill savings.
The tariff promotes equity by providing low-income customers, residents living in disadvantaged communities, and residents living in California Indian Country more than double the amount of extra bill credits to improve access to solar and storage, CPUC suggests. The new tariff applies new residential rates to encourage electricity use when it is most beneficial for grid reliability. These rates have significant differences between peak and off-peak prices to incent battery storage and load shifting from evening hours to overnight or midday hours. The rates incentivize adoption of technologies to replace the use of fossil fuels such as battery storage, electric vehicles, and heat pump water heaters, all of which are important for achieving carbon neutrality.
The move credits solar and solar plus battery storage customers for the electricity they export to the grid based on its value, as determined by the avoided cost to their utility of buying clean electricity elsewhere. This will promote solar exports during the late afternoon and early evening hours, particularly in the summer, when the grid is the most stressed.
The tariff provides extra electricity bill credits to residential customers who adopt solar or solar paired with battery storage in the next five years, which are paid on top of the avoided cost bill credits. Customers are guaranteed these extra bill credits for 9 years.
CPUC explains that the tariff expands access to solar and storage for low-income customers, residents living in disadvantaged communities, and residents living in California Indian Country by providing a larger amount of extra bill credits. It is expected to increase the allowable size of rooftop solar systems to cover 150% of a customer’s electricity usage to accommodate future electrification of appliances and vehicles. It does not include any charges specific to solar customers.
Assembly Bill 327 (Perea, 2013) requires the CPUC to reform the NEM program, as well as conduct rate reform and distribution planning activities. Since 1997, California has supported the rooftop solar market through its NEM tariffs, which have enabled 1.5 million customers to install more than 12,000 megawatts of renewable generation. Due to the success of California’s Renewables Portfolio Standard policies and the NEM tariff, California supplies a significant amount of its electricity needs during mid-day hours from renewable and zero-carbon energy resources.
In response, Environment America, which is part of The Public Interest Network, says the CPUC’s “revised decision” contained only minor changes from the commission’s November draft. Clean energy advocates warned that the proposal would discourage Californians from “going solar” at a time when the state is committed to more, not less, renewable energy to replace polluting fossil fuels.
History shows that when drastic cuts are made to NEM programs, people stop putting panels on their rooftops. Nevada’s January 2016 cut to NEM compensation led to a 47% reduction in residential solar installations year over year, Environment America explains. After Nevada restored net metering in September 2017, residential solar adoption returned to its earlier level after two years. California’s Imperial Irrigation District abandoned net metering in July 2016, causing residential solar installations to decline 88% over two years.
“It’s devastating to see California’s utility commission vote to dismantle solar incentives that have made California the nation’s leader in solar power,” says Environment California State Director Laura Deehan. “Rooftop solar is a critical part of our clean energy transition, and we need to accelerate deployment. Governor Newsom and the CPUC should be making clean energy more accessible and affordable so that rooftops across the state can catch the sun to power our lives. This misguided decision, which undervalues solar’s numerous benefits for all Californians, will dim the lights on the growth of solar in the Golden State.”
“Given our urgent need to transition to clean energy, it’s mind-boggling that America’s undisputed solar leader is cutting incentives for solar,” comments Johanna Neumann, senior director of the Campaign for 100% Renewable Energy at Environment America. “Without robust alternatives in place to make sure rooftop solar can thrive, this decision by the world’s fourth-largest economy puts the future of one of America’s best and most popular clean energy technologies at risk. Given what we know about all the clean air and climate benefits that come with rooftop solar, this decision in California flies in the face of the state’s climate and clean energy goals.”
Ken Cook, the Environmental Working Group’s (EWG) president and a Bay Area resident, also speaks to the negative effects the tariff may have on solar energy is California.
“What the CPUC did today is a disgrace and a disservice not only to Californians, but to the nation,” states Cook. “The commission’s decision will hammer the residential solar market in California and undercut Gov. Newsom’s pledge to be the nation’s leader in building a 100 percent clean energy grid. By making residential solar economically untenable for millions of working families, the CPUC will crush the only competition the big utilities face.
“Instead of California having a robust solar and storage market, the utilities’ plan could lead to more reliance on dirty fossil fuel plants to make up for electricity shortfalls caused by hobbling solar,” adds Cook. “It’s beyond a setback. It’s a complete retreat from California’s unrivaled position of leadership in the clean energy revolution. This debilitating precedent by the leading rooftop solar state will threaten rooftop solar programs across the country.”