On January 27 2022 the California public utilities commission (CPUC) is scheduled to vote on a proposed decision (PD) that will derail on-going net energy metered (NEM) rooftop solar adoption in California. For more information about the PD’s consequences, click here. For analysis and comment, click here.
California has ramped up a seventy-six billion dollar investment in all types of solar generation capacity over the past decade. California’s retail solar industry enabled half of the total investment. Rooftop solar has been a bright spot for California’s renewable energy transition even as the CPUC and California utilities continue to make other energy democracy enablers - community choice, community solar, community microgrids - hard or impossible to finance.
The CPUC’s staff is proposing rule changes that impose heavy “grid access” fees on rooftop solar adoption. Staff is also recommending drastic reductions in compensation for electricity that feeds into the grid from rooftop solar arrays.[1] The result will be a decisive setback for a balanced and robust renewable energy transition in California.
The PD will have the effect of repurposing California’s retail solar industry to sell and install battery storage. The PD seeks to compel this change by degrading the economic benefits of solar per se and making them contingent on adoption of “solar paired storage”. The upfront costs of appropriately sized residential solar plus battery installations will be at least fifty percent higher than those of “solar only” systems of the past, resulting a low adoption rates. Payback periods for new solar only installations will not only be hard to predict credibly predict, but they will also approximately double. Solar paired storage may not pay back at all.
The proposed changes will also make cost recovery for residential solar investments much harder for California retailers and property owners to accurately forecast. Sales of NEM solar systems will plummet. California’s retail solar industry will be derailed rather than continue to grow, installed system prices will increase in areas where competitive bids are not available, and more areas will lack experienced local solar retailers.
Batteries are starting to be paired with grid-tied solar arrays in California and elsewhere, mostly as insurance against extended power outages. They have the potential to enable more timely flows of electricity into local grids, but to date differences between peak and average grid electricity rates have been too small to be a primary reason to invest in solar paired battery storage.
Low level investment in solar paired energy storage for energy resilience purposes is likely to continue in California, but solar retailer and installer business closures and turbulence in the retail solar industry will redirect electricity customer attention to more conventional energy resilience options, including engine generators, fuel cells and combined heat and power systems.
The logic of the PD appears to hinge on an assumption that the residential solar industry’s loss of revenues from its current core business will be off-set by revenues from a new core business convenient to the CPUC’s need to mitigate future grid electricity rate increases. This will not happen.
The CPUC should slow down and take time to check its assumptions. At a minimum, the CPUC should engage with the retail solar industry, give its recommendations the same weight as utility recommendations, and account for the increasing economic stake cities and counties have in NEM solar. Solar-enabled energy resilience is a benefit of solar paired storage but it requires a stable, profitable retail solar industry and faster electric vehicle adoption.
The PD attempts too much, too fast, while plunging NEM solar adopters and local solar retailers into uncharted territory. It attempts to repurpose a thriving and technically specialized industry to deliver a new product line (battery energy storage) that is unfamiliar to both solar installer employees and prospective customers. Long term economic benefits of the new product line hinge on unpredictable future regulatory decisions beyond the ability of the either the industry or its customers to predict or influence.
Last minute opposition to the PD may turn out to be California energy democracy’s last stand.
[1] The proposed CPUC decision is not accompanied by case studies indicating how it will work out for ratepayers.