Net Metering Battles: California

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Net metering in California

This is the first post of a blog mini-series that will explain the various net metering battles occurring across the United States. We’ve decided to start with the biggest one – California.

The battle for solar-friendly net metering policies is here, and it’s shaping up to be a big one. Most states with net metering policies “cap” the amount of total solar generating capacity that is eligible for net metering credits. As more and more states reach or even exceed these net metering “caps”, they encounter a natural opportunity to revise the policies that govern how homeowners are compensated for the excess solar electricity they create. Utilities, solar installers, and consumer advocates are all now pushing their visions of what the net metering policies of the future should look like.

What’s the big deal with lifting net metering caps?  

Net metering policies regulate how utilities credit property owners who generate solar power in excess of what they consume, and are necessary to achieve a strong return on investment for solar buyers. When a market reaches its net metering cap, it’s a signal that solar has become more popular and cost-effective; this signal can then cause some to argue that solar no longer requires net metering’s financial incentives to survive in that market.

Net metering policies are up for debate in states all across the country, including Michigan, Nevada, Arizona, and Massachusetts. The most significant battle, with the greatest potential to influence regulations across the country, is in California.

California: Re-envisioning the cost structure with Net Metering 2.0

All eyes are on California as regulators begin the process of re-evaluating its ratepayer policies regarding solar power. Solar advocates are aware that some of the policies proposed by utilities could undercut the solar industry in the Golden State. Two years ago, the California legislature mandated that the California Public Utilities Commission (CPUC) develop a plan for “Net Metering 2.0,” which will outline changes in net metering policies as the state’s three largest utilities come closer to hitting the 5% net metering cap.

California is the overwhelming leader in solar installations in the United States. The Golden State has 11,500 MW of cumulative installed solar capacity, more than 9,000 MW ahead of number-two ranked Arizona. Aggressive policies to encourage the uptake of solar power in the state have enabled it to become a sort of pacesetter for solar policy across the country. This prominence is now forcing the state to reckon with the long-term sustainability of its net metering policies

Utilities in the state argue that current net metering policies do not effectively compensate them for the costs of maintaining the transmission and distribution networks – the same networks that enable solar property owners to send their excess solar power back into the grid. The utility company proposals seek to ensure that utility customers who benefit from existing net metering policies pay their fair share of the maintenance costs for the grid. Proposals put forward by utilities in the state feature decreased per-kWh net metering credits and fixed monthly charges, among other policy changes.

Utility customers are currently credited for the solar electricity that they generate at or close to the retail rate (i.e., what they would pay the utility for electricity that they do not generate). Utilities maintain that this policy results in higher prices for customers who don’t have solar panels on their homes, and that solar homeowners should be credited at the wholesale rate of electricity. Pacific Gas & Electric, one of the three largest investor-owned utilities in California, has also proposed that customers pay a “demand charge based on their actual use of the grid, which will pay for a portion of the cost of the distribution system they rely on.” Both of these policies reduce the savings that homeowners would achieve by going solar and, if implemented, would significantly impact the market for solar in the state.

What does Net Metering 2.0 mean for you?

“As California goes, so goes the nation” has never been more relevant for the solar industry. Because California is so far ahead of every other state in terms of solar adoption, the final Net Metering 2.0 policies have the potential to significantly impact solar policies across the country.

That isn’t to say that incentives for solar in California will disappear completely. The California legislature recently mandated that the state meet 50% of its electricity demand with renewable resources by 2030 as part of its new far-reaching environmental policy. That’s an aggressive goal, and residential solar power will certainly play a large part in meeting it, giving the state an incentive to continue to encourage residential solar power in California.

As solar net metering policies continue to be negotiated, keep in mind that most changes will only impact new solar installations. If you are considering going solar, now is the time – as states reach their net metering caps, there’s no guarantee that policies for consumers will remain as favorable as they are right now. Get multiple quotes from solar installers to find the right combination of equipment and financing options for your property’s needs today.

Update: On January 28, 2016, the CPUC voted to uphold net metering at retail rates. Homeowners who install solar energy systems will continue to be credited for the electricity that their solar panels generate at the same rate that they pay for electricity from their utility. Owners of new solar energy systems will pay a one-time interconnection fee to connect their system to the grid. They will also start to pay, and receive net metering credits, for electricity under “time-of-use” rates, which vary depending on time of day and relative electricity demand.

Regarding the vote, CPUC president Michael Picker stated, “Our course is not for the rooftop solar industry or for the utilities or the community clean energy aggregators. Our decision today is another big step toward giving California consumers more choice, more control and more responsibility over energy and climate change issues.”

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