Energy Experts and Terminator Blast CA's Reduced Support for Rooftop Solar

Those calling for overhauling the California Public Utilities Commission's proposed changes in rooftop solar’s Net Energy Metering now include a former federal energy commission chair and former Gov. Arnold Schwarzenegger. The pending decision’s “discriminatory fixed fees on existing and new solar and storage customers are unprecedented,” wrote a group of 10 energy experts in a Jan. 17 letter to the CPUC, Gov. Gavin Newsom, and California Energy Commission. The commission proposal would increase the average solar plus storage customer’s charge to $116/month for utility service, they estimated. That charge and a reduced per kWh credit to rooftop solar owners for generation exported to the grid would extend the investment’s payback period from the current seven to nine years to over 20 years, making solar plus storage “essentially unaffordable for just about all customers,” they said. “Most people agree that NEM needs to be reformed,” but this proposed decision “does grave injustice to the state’s ambitious goals for electrification and decarbonization,” added signatory Ahmad Faruqui, retired Brattle Group Principal and an economist-at-large . It offers a rebate for batteries but makes rooftop solar essentially out of reach financially, defeating the goal of growing storage to enhance system reliability. Signatories also include former Federal Energy Regulatory Commission Chair Jon Wellinghoff and Jim Lazar, author of the handbook Electricity Regulation in the U.S . Schwarzenegger agreed with their arguments in a Jan. 17 New York Times editorial . While he was the state chief, California’s 10-year “ Million Solar Roofs ” initiative was launched, kicking off California’s rooftop solar boom. California leads the nation in distributed solar, which has reached 1.3 million rooftop solar systems and over 10,000 MW of generation , but this achievement “is now under threat,” Schwarzenegger warned. The new fixed charges are essentially a “solar tax” discouraging the progress it claims to support. But he also welcomed proposed incentives to encourage adding batteries to existing and new solar installations and proposed funding of installations for low-income and disadvantaged communities. A CPUC-ordered study found the existing NEM “disproportionately harms low-income customers” and a January 2021 Lookback Study showed cost shifts to all customers, wrote CPUC Administrative Law Judge Kelly Hymes in her decision. This proposed decision meets Assembly Bill 327's mandate to protect both rooftop solar growth and avoid cost shifts to other customers, she concluded. The studies reference by Judge Hymes were flawed, many solar advocates countered . The cumulative impacts of the proposed decision's significant changes to the NEM incentive violate AB 327’s requirement to support solar growth, agreed the energy experts and Schwarzenegger. The pending NEM is a “massive” shift of system costs from low income non-solar owning customers to high income solar owners, argued University of California Energy Institute at Haas Director and Professor of Business Administration and Public Policy Severin Borenstein, a member of the California Independent System Operator Board of Governors, in support of the proposed decision. Rooftop solar is a “much more costly way to provide renewable energy, and creates less value for the grid than alternatives,” Borenstein added. Even if it is a good idea, the current NEM “is a very bad way to subsidize it.” More storage connected systems needed To offset rising rates, customers and installers have turned to installations “without storage or grid communication , which do little to reduce grid costs or cut GHGs,” Borenstein wrote on Jan. 10 . NEM has enabled rooftop solar now providing up to 25% of the state’s midday electricity, according to the commission. But California’s “needs have shifted” and far more than the current 10% of customers must have storage with their solar to support system reliability and reduce peak demand when the sun is setting, it added. But there are big disagreements over whether the CPUC proposal will help or hinder solar plus storage. Borenstein does not agree with everything in the proposed decision, but it is “a bold step towards a more rational climate policy” and can lead to “a cost-effective and equitable path to zero emissions.” The $8/kW Grid Access Charge will cost an average solar and/or solar plus storage customer $57 per month, bringing the monthly charges to $116, the experts warned in their letter to California policymakers. Of 4,000 Californians actively shopping for solar, 95% would not buy solar under the proposed compensation plan, according to <a style="background-color: rgba(255, 255, 255, 0); font-family: var(--body_typography-font-family); font-size: var(--body_typography-font-size); font-style: var(--body_typography-font-style,normal); font-weight: var(--body_typography-font-weight); letter-spacing: var(--body_typography-letter-spacing);" href="https://pv-magazine-usa.com/2022/01/13/survey-says-95-of-shoppers-would-not-buy-solar-under-nem-3-0/">a “recent survey” published Jan. 13 . Retroactive ratemaking By “retroactively” shortening the duration of the existing NEM agreement, the proposed decisions would be “unethically abandoning regulatory certainty and undermining confidence in government,” they added. And the complexity of the changes violates the commission requirement that an NEM be “understandable to customers and uniform across the utilities,” they wrote. Finally, more rooftop solar is being installed at the residences of working and middle-class families,” but that could be disrupted because their finances do not allow “speculative investments with long payback periods,” the experts argued. They urged the commission to rethink the proposed decision’s rate design and to propose an alternate set of changes, including highly differentiated time-of-use rates, minimum bills for solar customers, and gradual step-downs in solar export compensation that more accurately reflect the value of solar. “The principal role of utility regulators is to enforce on monopolies the pricing discipline that markets enforce under competition,” wrote Lazar, who also co-authored “ Smart Rate Design for a Smart Future. ” He said the CPUC proposal “deviates from that foundational principle.” A smarter design would reduce today’s NEM by about half, “which would follow the regulatory principle of gradualism,” Lazar said. The commission needs to assure rates to non-solar-owing customers are based on utility revenue requirements, remain fair, just, and reasonable, and do not shift system costs to solar customers as this proposed decision would do, he added. The Seven Key Changes The proposed decision’s net billing plan provides a 10-year payback to protect the solar industry, according to Hymes’ ruling. It specifically: Reduces the export compensation credit from electricity’s retail rate to the annually updated hourly avoided cost , as calculated by the commission, and makes netting instantaneous; Adds 10-year $/kW Market Transition Credits for existing residential customers, with higher credits for low-income customers, as a “glide path” to the new tariff, and makes the credits available over the first four years of the transition, but drops them 25%/year to speed adoption; Imposes Grid Participation Charges of $8/kW on solar owners to cover costs otherwise potentially shifted to non-solar owners for system infrastructure, low-income discounts, and wildfire mitigations; Provides somewhat more differentiated time-of-use rates and allows “oversized” systems of up to 150% of load as incentives to adopt batteries and support transportation and building electrification by shifting usage to reduce demand peaks; Introduces an Equity Fund of $150 million/year for four years to finance low-income customers’ access to solar and other clean energy resources; Requires reclining rebates over the next four years for customers that include battery storage in their systems, and creates a Storage Evolution Fund financed through utilities’ forecasted savings from the new plan; and, Changes the current “grandfathering” of the 20-year NEM compensation agreement for existing customers and new customers to 15 years. The final vote on the proposal, originally scheduled for the commission’s January 13, 2022, voting meeting, is now expected at the Jan. 27 meeting. It could be delayed again due to the turnover of commission personnel and the complexities of the debate.

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Energy Experts and Terminator Blast CA’s Reduced Support for Rooftop Solar

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