Controversies surrounding rooftop solar deployment have reached a fever pitch with the recent release of the California Public Utilities Commission’s proposed decision on NEM 3.0. Yet the focus on compensation has missed an opportunity to consider how structural changes to distributed solar policy might enable more equitable and effective approaches to expanding clean energy.

It is no surprise that rooftop solar inspires debate. The success of the rooftop solar market in California has helped to enable wide investment in clean energy. However, while popular, the subsidy structure in California is also deeply inequitable, as it creates well-documented cost-shifts from adopters to non-adopters while its benefits flow primarily to single-family homeowners.

It turns out that those inequities extend even further. Our recent paper in Nature Energy (available open access here) showed that the capacity of the electric distribution grid to host distributed generation varies spatially, with households in Black-identifying and disadvantaged neighborhoods most likely to face constraints from the distribution network. 

Some are making important arguments that we should not dismantle existing net energy metering (NEM) policies before lower income communities have had a chance to access these benefits. However, our research also confirms that continued deployment of distributed solar on the electricity grid in California will require significant investment in electric infrastructure that will take time and cost ratepayers money. In the meantime, those seeking to adopt solar but unluckily served by grid infrastructure with capacity limits may face expensive interconnection delays and growing bottlenecks. Keeping NEM compensation as-is won't address these fundamental inequities, nor make it possible for many low-income households who don't own their own home to participate.

This finding prompts us to reflect on the extent to which California's approach to distributed solar has realized the potential benefits of PV.

Solar advocates argue, and we agree, that distributed solar has the potential to provide financial, resiliency and grid support benefits in addition to clean electricity. Yet in today's rooftop solar market, bill savings accrue predominantly to single-family homeowners. Resiliency benefits may also accrue individually to solar adopters if they elect to add storage, but such combinations have seen limited uptake under current policies. Grid support benefits could come from careful siting and sizing of solar and storage, but we miss the opportunity to realize those benefits when incentives for individuals to participate necessitate installation at their home. 

Realizing economic, resiliency and grid support benefits for society requires rethinking California's approach to solar PV. We leave detailed commentary on the CPUC's proposed decision to others. However, we note that it omits consideration of a path forward that we think people on all sides of the debate can get behind: community solar.

Expanding the benefits and opportunities of solar

Community solar is an umbrella term for solar deployment models that enable multiple electricity consumers to benefit from one array. A common approach that mimics compensation mechanisms for rooftop solar is to allow consumers to buy in upfront and receive ongoing electricity bill credits. This is often referred to as virtual net metering (VNM). In California, VNM is an option only for solar located on properties with multiple tenants. But in other states, VNM rules are much more flexible and remove site constraints altogether. That means, for example, that a developer could set up an array on a host site, such as a school, allocate a portion of the array's output to that host, and then invite other consumers, such as apartment residents, renters, local businesses, other community organizations, and even single-family homeowners, to participate. 

Current NEM policies compensate site hosts and invite interconnection of behind-the-meter arrays anywhere on distribution circuits, regardless of what benefit they provide to the grid, or even whether existing equipment can accommodate them. Removing the structural limitation on economic benefits from solar accruing primarily to the site host has three important implications: Solar can get sited where it makes sense for the grid, it can be sized in ways that leverage economies of scale, and those who can't host solar at their physical location can still receive the benefits of participation as credits on their electricity bills. 

Community solar offers the opportunity to site arrays where they will benefit the grid (or, at least, avoid too many costly upgrades). A more managed approach also creates the potential for optimizing smart inverter functionality, co-located storage, and perhaps even electric vehicle charging to support the grid locally as electricity demands due to increasing electrification surpass what existing infrastructure can handle. Compensation structures like value of solar tariffs can incentivize such benefits. The upshot is that if participants' bill credits reflect the locational value of a well-sited system, and if community solar arrays cost less due to economies of scale, then the total financial proposition can be large enough to provide participating customers with meaningful revenue. Solar plus storage systems may be particularly attractive under this model. Specific policy choices could further encourage participation from disadvantaged communities or others who haven't been able to benefit from NEM.

On the resiliency front, community solar creates an opportunity for co-siting community-scale storage. This can help keep the power on during a grid outage — but now at a community-accessible site, rather than an individual home. Residents of communities affected by wildfire-related public safety power shutoff events and other service disruptions would be able to charge electronics and receive critical services. Community-scale solar and storage could also form an anchor for a community-level microgrid that could isolate from the larger grid in such situations, but doesn't require waiting for these plans to materialize before creating a basic community resilience resource. If recognized and developed as another value stream, resiliency benefits could also reduce grid fees in key locations.

Current behind-the-meter deployment models in California are not set up to realize the above benefits for society. Adjusting their compensation mechanisms may acknowledge this, but that approach misses the opportunity to actually enable distributed solar to provide these societal benefits. 

The CPUC's Distributed Energy Resources Action Plan sets a goal of maximizing the ratepayer and societal value of a high-DER future. The first goal of CPUC's recent Environmental and Social Justice Action Plan is to "Consistently integrate equity and access considerations throughout CPUC proceedings and other efforts." We must continue to think critically about the societal value that distributed solar can bring, and recognize the opportunities we miss by imposing unnecessary limitations. Community solar can make moot the controversies surrounding behind-the-meter solar and enable new approaches that can maximize societal value for all Californians.