California electric utilities allow on-site solar electricity to spill over into local grids when production exceeds usage. Net usage and net production are metered. Property owners are credited for solar electricity that feeds into the local grid at the same price they pay for electricity they get from the grid. They are not allowed to size their solar arrays to produce more electricity annually than got from the grid in the past.
More than 7% percent of California’s electricity usage is supplied by more than a million net metered solar arrays. Their cumulative production capacity has been increasing at more than 16 percent per year. Installed system costs plummeted in the past ten years, are leveling off and have become more predictable.[1] A decade ago, when utilities were not purchasing much solar electricity from solar power plants, on-site solar helped reduce electricity demand during summer afternoons when air conditioning usage was high. Now, because of solar power plant capacity growth, the high cost period has shifted to early evening hours when solar production slows and stops.
The California Public Utilities Commission (CPUC)[2] is reported to have invited utility proposals to make on-site solar less economically attractive to property owners. Utility sponsored legislation to mandate utility proposed changes failed in a recent state assembly vote[3]. In parallel, Sacramento’s municipal utility, SMUD, whose net metering rates and rules are not subject to CPUC approval, is reported to be considering steps to make on-site solar unattractive to potential future adopters.[4]
The utilities’ goal is to rein in the growth of on-site solar by charging on-site solar generators full price for their net usage of grid electricity while providing minimum compensation for the electricity their on-site solar equipment feeds into the local grid. They argue that net metered solar subsidizes wealthy electricity customer at the expense of low income customers and under-served communities. Their claim resonates with a vast menu of legitimate and long-neglected economic equity and environmental justice concerns only lately coming into focus.
But is there really a cost shift from rich to poor? Caused by solar energy? I doubted it. Then I read the “independent” consultant studies funded by utilities. Still doubt it and won’t change my mind unless there is independently funded, peer reviewed modeling and analysis that confirms it. In the meantime, I will continue to view the demographics of net energy metering adoption as primarily reflecting frugal, environmentally responsible decisions by middle income homeowners – and as also reflecting the business bottom-line concerns of local, mostly small businesses doing what all for-profit businesses try to do - minimize costs to maximize net income.[5]
In the past, attempts to restrict access to on-site solar have aimed to slow and cripple rather than kill outright. Past recommendations have led informed observers to suggest that utilities’ long term goal for on-site solar is “death by a thousand cuts”. [6] The pattern is likely to continue until there is strong public demand for long term, win-win local solar outcomes for communities.
Viewed through the lens of electric utility business models, relentless utility proposals to undermine on-site solar are unsurprising. Electric utilities see on-site solar through a revenue lens. They want revenue growth, not revenue erosion caused by customer “self-generation”.
But there are other lenses available to other stakeholders.
A thousand or so local solar retailers across California are concerned about the continued viability and stability of their businesses. They are under siege. They want stability. Instead, they face a business environment disrupted by threatened legislative interventions and rule changes that confuse prospective customers and cast doubt on life cycle cost information they provide to prospective customers.
Current and future solar adopters have little visibility to utility proposals and related regulatory process. So do the rest of us. The CPUC decision-making process is so opaque that no factual public media coverage is possible. In Sacramento, SMUD’s story is the Sacramento Bee’s story. So much for balanced journalism.
Energy users and local economies benefit from strong and highly competitive retail industries. But until California has a stable policy favoring local investment in clean energy, consumer decisions based on life cycle cost and value will continue to be clouded by unpredictable regulatory decisions. As a result. all solar adopters, past and future, will face disruption of long term equipment warranty service and lack of access to competent future on-site system upgrades.
Do California city and county governments have a stake in the matter? They do. A big stake. Benefits of on-site solar to local economies include: 1) desirable local jobs, 2) more money recirculating locally instead of leaving town to pay for grid electricity imports, 3) property tax base growth, and 4) increased sales tax revenues. The quantifiable positive economic impact can exceed $500 per year per capita.[7]
Strengthening local economies strengthens state economies as well. And there’s more. Local solar capacity can be harnessed to minimize economic impacts of public safety power shutoffs and enable faster recovery of local economies in the wake of disasters, physical attacks and cyber-attacks.
For decades, analysts have struggled to quantify the “value of solar”. Even when local economic and energy resilience benefits in the preceding paragraphs were not included in the benefits “stack”, analysis results tended to support policies that valued net on-site production and net imports equally. When local economic and resilience benefits are considered, net on-site solar electricity may prove to be an economic bargain at current prices.
Public interest in energy resilience and in stronger local economies will be served if utilities and solar retailers work together to increase life cycle benefits of on-site solar. Their shared goal could be to make each on-site and community solar project as cost-efficient as possible. With all stakeholders at the table, and with city and county governments providing leadership, imagination could substitute for mistrust and could result in greater economic benefits to all electricity customers.
Problem solving might be possible. The lack of local plans to reduce the cost of electrification/decarbonization of building energy use is a problem facing all stakeholders. Delays and unnecessary costs to match on-site supply to future on-site usage is another. Transparently devised local plans would be a welcome substitute for opaque utility and regulatory decision-making.
Problem solving could lead to brainstorming, even to the exercise of imagination. For example, what if utilities agreed to allow property owners to devote as much of their roof area to solar as possible in return for agreement to a fair price for annual feed-in amounts exceeding on-site usage? A fair price might be the “levelized” cost of equivalent new centralized supply and transport infrastructure plus benefits to the local economy.[8]
In the long run, the public’s interest in equity, decarbonization and energy resilience will not be served by curtailing on-site solar production in order to ensure maximum reliance on larger renewable energy projects. Energy transport, storage and non-solar infrastructure investments necessary to maintain current levels of service reliability at high utility scale solar penetration percentages are not accurately forecastable at this time. The negative economic consequences of on-site solar curtailment will not be off-set by lower grid electricity prices as the percentage of utility scale solar in the California supply mix expands.
On-site solar is the lowest impact, most economically beneficial renewable supply option available to California legislators, policy makers, utilities and energy users. The best state-wide balance between locally produced solar electricity and the output of large solar power plants depends on the best balance for each California city and county. Striking the right balance should be a local choice. For now, the option to produce solar electricity to meet local needs must be expanded, not curtailed.
Gerald (Gerry) Braun
© 2021 IRESN
[1] Ref: Solar Cost, Benefit and Capacity Shifts
[2] Ref: NEM 3.0 Updates,
[4] SMUD secured an exemption from state mandates to require on-site solar on new residential buildings, a key segment of Sacramento’s retail solar market. Ref: California Rooftop Solar Mandate
[5] California residential net metered solar is 65% of the total, non-residential 35%.
[6] SMUD’s recently unveiled and actively publicized carbon neutrality initiative assumes significant further customer adoption of on-site solar – an unlikely scenario if changes under consideration are adopted.
[7] Ref: Valuing Local Renewable Energy Benefits
[8] Requires trustworthy estimates of the costs of expanding and reliably operating regional electricity systems to achieve carbon neutrality goals.