Solar industry, utilities, ratepayer advocates clash over California net energy metering proposal

Source: By Kavya Balaraman, Utility Dive • Posted: Sunday, November 20, 2022

Solar panel installer installing solar panels on roof of modern house.Eloi Eloi Omella via Getty Images

Dive Brief:

  • Utilities, the solar industry, environmental groups and ratepayer advocates in California remain deeply divided over a proposal from the state’s Public Utilities Commission to reform its net energy metering framework, oral arguments before the commission Wednesday made clear.
  • While the solar industry supports transitioning to a set of net energy metering export values that are far lower than current ones, “making that change too quickly will do too much damage,” Brad Heavner, policy director with the California Solar & Storage Association, said during the Wednesday meeting. 
  • But Carla Peterman, Pacific Gas & Electric Co.’s executive vice president of corporate affairs, told regulators that the clock is ticking because the estimated cost shift from NEM customers to those who are not participating in NEM will likely exceed $5 billion when the new tariff comes into effect. “It was $3 billion when you started this proceeding — let’s not delay,” Peterman said.

Dive Insight:

Last week, the CPUC issued the latest version of its proposal to changeCalifornia’s net energy metering tariff, which involves moving to a system of net billing where the retail export compensation rate — what customers are paid for the energy they export back to the grid — is based on the value that behind-the-meter systems provide to the grid. The solar industry opposed the first proposal the CPUC issued last December, and it was eventually shelved.

The revised proposal would ease the transition to the new tariff by adopting a five-year “glide path” methodology that increases the export compensation by a fixed amount. In addition, it would include electrification retail import rates with a high differential between winter off-peak and summer on-peak rates that regulators hope will incentivize customers to shift their energy use to the middle of the day and export electricity in the evening, promoting the deployment of storage paired with solar.  

Solar industry representatives warned that the proposal could still harm the sector. The Solar Energy Industries Association has concerns about the proposal’s strategy to get the industry to transition from solar to solar-plus-storage as its primary product, said Sean Gallagher, SEIA’s vice president of state and regulatory affairs, at the meeting.

“Other states that have implemented a similar cliff in the export compensation rate have seen sharp declines in the pace of solar deployment,” Gallagher said. “A similar decline in California would be counterproductive.”  

Rooftop solar will play an important role in California meeting its climate targets, according to Katherine Ramsey, Sierra Club staff attorney. To meet the targets outlined in a draft scoping plan from the California Air Resources Board, “we need to exceed our best year of solar deployment by 60% and sustain that pace for the next decade. Rooftop solar can and must play a part in that deployment,” she said at the meeting.

Ramsey said the proposed decision is a considerable improvement over the previous version, but she recommended that regulators make changes, including by adopting a more gradual glide path with step downs based on installed solar capacity instead of time.

“NEM reform in other states shows that you can maintain steady solar deployment by reducing solar export values with gradual and predictable step downs,” she said.

On the other hand, PG&E’s Peterman urged regulators to consider adopting a fixed charge to address inequities in how costs are borne between NEM and other customers. She also recommended other changes to the proposed decision, including making the “rooftop solar subsidy” more transparent. 

“Specifically, the decision should require the utilities to report on the size of the NEM subsidy annually using the methodology used by the commission in this decision” and to share this information with customers and policymakers, Peterman said. 

The Natural Resources Defense Council largely supports the CPUC proposal, Senior Scientist Mohit Chhabra told regulators. Retail NEM rates in California have far outgrown the value of clean distributed energy, he said. 

“This raises rates for all. High rates and bills hamper our decarbonization goals by making it harder for Californians to adopt clean electric cars and appliances,” Chhabra added. 

Matthew Freedman, staff attorney with ratepayer group The Utility Reform Network, voiced disappointment that the proposal fails to reduce the “rapidly growing portion of retail rates that all customers pay to subsidize participants in the net metering program.”

That cost shift is poised to grow substantially in the coming years under the modest reforms the commission proposed, Freedman said. The proposal does not account for key developments that will shorten the payback period for new rooftop solar customers, including new and expanded federal tax credits, he said.