Aaron Halimi is the founder and president of Renewable Properties, a community solar developer headquartered in San Francisco.
The California Public Utilities Commission has a short window to leverage billions of dollars in federal incentives to implement California’s Community Renewable Energy Bill (AB 2316), a law designed to bring community solar and storage's grid reliability, resiliency and electric bill savings to over a million Californians, including low-to-moderate income, or LMI, residents.
California has led the U.S. solar industry for years, but not in the community solar market. The recent passage of AB 2316 follows 23 community solar states where homes and businesses can receive bill credits from the generated power of nearby community solar projects. The program is popular because it enables any ratepayer to enjoy solar power savings, even if they don’t have a suitable roof for solar, rent, live in an apartment or have poor credit scores.
Now, California is finally poised to lead in community solar as well, with legislation that has the potential to bring on new renewable energy capacity and reduce the utility bills of over a million Californians, including LMI households. But these electric bill savings and other benefits could disappear if the CPUC does not approve a community solar program soon.
Here’s why:
While AB 2316 has become law, the proof of any legislation pudding is in its design and implementation. Different stakeholders have submitted program designs, and the top proposal currently being evaluated is the Net Value Billing Tariff, or NVBT, sponsored by the Coalition for Community Solar Access. If NVBT gets swift approval from the CPUC, California’s implemented community solar program will be in a prime position to access billions of dollars in extra incentives from the Inflation Reduction Act. These extra incentives have an expiration date. As a result, if the CPUC swiftly approves NVBT, the extra incentives will spur community solar developers to quickly begin developing projects.
Why NVBT is the top proposal
NVBT is the top proposal because it incorporates the best designs from other state community solar programs and because it’s relatively simple to implement and understand:
- NVBT establishes minimum bill credits for low-income subscribers that start at 20% and can be as much as 25%. For example, if the solar project generated $100 in bill credits for a subscriber, then low-income customers would be guaranteed a $20-$25 bill credit under a shared savings model.
- NVBT includes “simplified billing,” which would require utilities to include bill credits from community solar on existing utility bills. That means program participants will still pay one electric bill that includes the savings from the community solar generation, not two bills.
- NVBT prohibits the use of credit scores and termination fees for low-income subscribers, eliminating two barriers that often prevent people from going solar.
- NVBT includes the requirement that projects have at least four hours of energy storage. This provision will help with California’s grid reliability challenges, particularly during extreme heat and weather events.
- NVBT ensures that community solar projects start construction after the CPUC authorizes the program. As a result, only new solar projects will qualify for the program, creating more renewable energy for California and creating more local, good-paying California jobs.
- NVBT requires community solar projects to reserve at least 51% of their capacity for LMI customers. The baseline household savings from community solar is expected to be $300 per year, NVBT households could see even greater annual savings if the NVBT is implemented in time to receive extra benefits from the Inflation Reduction Act.
Billions in incentives are now at risk
Community solar projects take time to develop and construct. If the CPUC approves the NVBT this summer, community solar developers will quickly start their projects so that they can receive incentives from the IRA’s Greenhouse Gas Reduction Fund. The fund makes $7 billion available to states and local governments for community solar.
The clock is ticking because the State of California must submit an application for the $7 billion in federal Solar for All funding by Sept. 26. Only the NVBT proposed by the Coalition for Community Solar Access meets state and federal laws and goals and is supported by a broad coalition of environmental justice organizations, ratepayer advocates, building industry associations, labor and business groups. Unlike a well-designed community solar+storage program like the NVBT, current California programs are unlikely to comply with certain provisions referenced in AB 2316. The existing programs are also non-compliant with federal requirements for how community solar integrates with housing assistance and energy assistance programs.
Furthermore, the Solar for All awards will be made in March 2024 with monies delivered in July 2024. From that date, states have up to five years to spend the funds.
Consequently, the sooner the CPUC opens California’s community solar program, the more likely that California will get enough community solar projects online in time to qualify for these strong community solar incentives.
More than extra incentives are at stake
Implementing the plan quickly will also contribute to California’s net zero goals. While the community solar project’s size is limited to what can be interconnected to the distribution grid, the NVBT does not have a program cap. Using existing utility infrastructure with no expensive transmission level upgrades, conservative estimates project that the NVBT could lead to the deployment of nearly 8 GW of community solar; with some utility upgrades, this number could get substantially higher.
The faster NVBT is implemented, the faster consumers will be able to reduce their utility bills. In fact, under NVBT, more than 1.1 million California households are expected to subscribe to community solar projects. If the CPUC moves swiftly to implement the NVBT — enabling projects to maximize federal incentives — more projects will be developed, allowing over 2 million Californians to receive the benefits of community solar.
Utilities will also see savings. Community solar projects can be deployed close to where people live and work, rather than in remote locations, which saves billions of dollars in transmission costs. Because community solar projects are smaller than large utility projects, they can also be deployed faster, allowing utilities to quickly increase their renewable energy capacity and meet California’s 2045 net zero carbon emission goals. In addition, with NVBT’s paired energy storage requirement, these new distributed solar+storage projects will provide utilities with increased grid reliability, benefiting all ratepayers.
With all these advantages, NVBT has gained strong support from the Solar Energy Industries Association, ratepayer advocates like The Utility Reform Network and the Public Advocates Office at the CPUC, as well as numerous other stakeholders, such as environmental justice organizations, the building industry association and labor unions.
Prior community solar programs have failed in California due to poor designs, discouraging projects from being built. As evidenced by its broad base of support, the NVBT is designed to ensure community solar program success for all stakeholders and ratepayers. A proposed decision from the CPUC for implementing AB 2316 is expected as early as September, and to build the most projects and deliver the maximum benefits for all stakeholders, we urge the CPUC to approve and implement the NVBT without delay.
