‘It’s going to cut solar off at the knees’: reaction to California net metering proposals ahead of key vote

The Californian rooftop solar market has global importance – the state is currently on course to surpass Germany as the world’s fourth-largest economy. Image: Sunnova.

On 15 December, the California Public Utilities Commission will vote on the latest net energy meeting (NEM) proposal regarding the state’s rooftop solar market. Ahead of the vote, activists have taken to the streets in a series of demonstrations against the legislation, and the California Solar and Storage Association (CALSSA) and other representative groups have been vocal in their criticism of the proposal.

The most recent volley in the back-and-forth exchange between legislators and the industry came on 10 November this year, in the form of a proposal that would cut export rates for consumers selling excess electricity back to the grid by 75% and set aside US$900 million in upfront incentives for adopters of solar-plus-storage systems, US$630 million of which would go to lower-income adopters.

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Recent EY research highlighted distributed generation and storage as key to ensuring an effective energy transition in developed nations.

However, industry figures have expressed concerns that the glidepath towards scaling residential battery installations is too extreme. Speaking to PV Tech, Walker Wright, vice president of public policy at solar installer Sunrun said: “We want to be installing solar plus batteries, but we also know that there simply aren’t enough batteries out there to deliver what customers want.”

PV Tech sister site reported on the supply chain issues and rising component costs affecting the US’ energy storage industry in September this year. In its original 2021 proposal regarding NEM 3.0, CALSSA said that “the Commission must allow time for the distributed energy storage market to mature”.

Wright said: “All of a sudden if there’s a giant influx in batteries, are we ready for that? And the question is, what happens if we’re not ready?” Should it pass, the proposal will affect all residential solar installations submitted after 14 April 2023, four months from the voting date.

“It cuts against everything California stands for”

“This proposal is still too extreme,” said Bernadette Del Chiaro, executive director at CALSSA. “It moves us in the wrong direction on every measure.”

She said that Californian electricity utilities have traditionally been subject to the state government’s pro-distributed solar stance, maintaining favourable policies despite utilities’ “attacks”. But, according to Del Chiaro, “[utilities] just really feel threatened by consumers generating their own energy, and batteries have supercharged that threat in their minds.

“This is going to cut solar and storage off at the knees, and they’re laughing all the way to their 10% return on investment for transmission lines.

“What I’d love to see is for California to put in place a million solar batteries initiative,” she said, “bring batteries to scale, just like we did solar panels in 2006, and really show the world that this is how you get to 100% clean energy.”

Drastic or sudden changes to net metering in other US states have consistently led to drop-offs in solar deployment, according to a study from sustainability analyst Frontier Group, Environment California Research & Policy Centre and Environment America Research & Policy Centre.

In 2016 Arizona replaced net metering with a less generous compensation scheme based on the wholesale price of utility-scale solar power. By 2019, the state was adding 124MW of residential capacity a year, only slightly up from 114MW in 2016, the year of the policy change, despite consistently falling solar energy prices.

A release from the Save California Solar Campaign said: “A study filed by California’s investor-owned utilities as part of the current NEM 3.0 proceeding found that Nevada’s January 2016 cut to net metering compensation resulted in a 47% reduction in residential solar installations over the next year.”

California has been a historically stable state in terms of net metering. Del Chiaro described it as “a house of steel, and other countries and other states can’t really claim that”. The 75% cut in export rates could see this concrete foundation begin to shake.

“This proposal would truly make solar only for the rich”

“Why is there so much more interest in rooftop solar issues [than utility scale]?” Wright asked. “People feel an emotional attachment to seeing that solar system on their roof, or that solar and battery system at their school, at their church. Many feel like they’re part of the solution.”

According to 2021 research from the University of California’s Berkeley Lab, almost half of the solar adopters in California are from middle- or lower-income communities. In September, governor Gavin Newsom signed off a community solar programme aimed at helping low income communities benefit from solar PV.

Wright said that the main expense for residential systems in the US comes from “soft costs”. Permitting, interconnection with the utility, and labour costs all drive up the price of solar-plus-storage installations. Soft costs increase with the addition of batteries, and the slashed export rate significantly decreases the economic draw of a residential system, with or without storage.

“When you really crunch the numbers, which we’ve been taking the time to do, it doesn’t move the needle on energy storage,” said Del Chiaro. California has over 1.5 million residential rooftop systems installed, and CALSSA said that around 150,000 of those are atop low-income homes. Del Chiaro said that the US$630 million proposed to go towards low-income adopters would represent about 20,000 new installations.

“It’s progress, we’ll take it, but it’s not really a game changer.”

With California’s historically significant position in the rooftop PV landscape, the outcome of the 15 December vote could have wide-reaching ripples. In October, Wood Mackenzie published research saying that, though the US rooftop solar market is in growth mode, California’s net metering decision could knock it from its upward trajectory.

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