Dive Brief:

• California regulators on Thursday approved a controversial decision to reform the state’s net energy metering solar tariff, which compensates customers who generate their own electricity and export some of that back to the grid.
• The new tariff adopted by the California Public Utilities Commission includes a retail export compensation rate that is based on the value that behind-the-meter generation provides to the grid, and import rates that are designed to incentivize electrification as well as solar systems paired with storage, according to the decision
• Revamping the net energy metering framework has been a challenging process, in part because the agency had to balance competing priorities, CPUC Commissioner Clifford Rechtschaffen said at the meeting. “We want to make sure that distributed generation grows in a sustainable manner … we need to make sure that the benefits to all customers and the grid are approximately equal to the costs. We want to make sure that whatever growth occurs doesn’t unduly burden ratepayers, and that we also expand the access of low-income customers to rooftop solar…” he said.

Dive Insight:

California’s NEM tariffs have allowed around 1.5 million customers to set up over 12 GW of renewable generation. However, the overall portfolio mix of the modern grid is very different than it was when the framework was first put in place, according to CPUC President Alice Reynolds.

“[T]he electric grid is now powered largely by renewable systems, both large and small, and there are even moments when we need to curtail, meaning shut down, clean renewable generation because we have too much on the grid at once,” Reynolds said.

At the same time, the state still needs to fire up natural gas and other carbon-emitting resources to meet demand during the evening hours, when solar energy has waned.

“Rooftop solar is not displacing dirty power in California in the same way that it might in other states,” Reynolds said. 

The CPUC released the first version of its proposal to reform the NEM framework last December, but eventually shelved it following heavy criticism from multiple parties, including the solar industry. The new proposal was released last month, but also drew criticism from the solar industry. One analysis from the California Solar & Storage Association indicated that the proposal could cut the average export rate in California from 30 cents/kW to 8 cents/kW starting in April. 

The decision approved on Thursday adopts export rates based on the value distributed generation provides to the grid and electrification retail import rates that have high differentials between winter off-peak and summer on-peak rates. Regulators hope that this will encourage customers to install storage paired with solar systems to draw more energy during the middle of the day, and export energy back to the grid in the evening. 

Under the new structure, the average residential customer installing solar is expected to save $100 a month on their electricity bills, while those who install solar paired with battery storage will save at least $136 dollars a month, according to the commission. The CPUC estimates that new NEM customers will be able to fully pay off their solar systems with these savings in nine years, or less, since the amount saved will likely increase every year as utility bills increase over time, Reynolds said at the meeting. 

The solar industry, however, remains concerned about the impact of the new decision on rooftop solar installations in the state. CALSSA said in a statement that the decision would slash the value of solar energy put back on the grid by 75%, leading to “an expected cliff in the growth of new solar installations.”

In addition, the group said the decision does not do enough to advance energy storage in California, as it extends the payback periods for these combined systems beyond what they currently are.

“For the solar industry, it will result in business closures and the loss of green jobs. For middle class and working class neighborhoods where solar is growing fastest, it puts clean energy further out of reach,” CALSSA Executive Director Bernadette Del Chiaro said in a statement. 

“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,” Laura Deehan, state director of Environment California, said in a statement. 

Rechstchaffen, however, pushed back on the notion that the decision will lead to a drop in bill savings of 75%, stating that the number is a contested fact. Moreover, compensation for electricity exported back to the grid is only one part of the customer savings equation, he said, and a much larger portion of savings from rooftop solar comes from customers powering their electricity needs with their own solar energy. 

Matt Baker, director of the CPUC’s Public Advocates Office, said in a statement that the NEM update is “a win for all parties.”

“We need solar. It has helped turn California into a clean energy world leader. But we need to do more. Clean energy use during the day must be extended into the evening. Solar with batteries does exactly that,” Baker said.