Storage Surges, but Will Rooftop PV Payment Changes Affect its Pairing with Solar?

By Published On: November 30, 2021

Well before California signed international agreements to slash climate-harmful emissions from the energy and building sectors at last month’s COP-26 climate summit in Glasgow, Scotland, the state was far ahead on battery storage. And it continues to charge ahead of other states, with more than 2.8 gigawatts of large and small batteries online that help grid resiliency, including by balancing intermittent solar and wind resources. Feeding battery supplies powered by renewable energy into California’s grid to lower demand as the sun sets also curbs climate pollutants by decreasing the need for peaking plants fueled by natural gas, the price of which is spiking.

As of Nov. 1, nearly 2.1 GW of utility-scale batteries were connected to the California Independent System Operator’s grid. It is expected to reach 3 GW by the end of this year, with community energy contributing nearly 500 megawatts.

Battery packs at California residences and small businesses also have surged, reaching more than 740 MW, according to the California Solar & Storage Association Policy Director Brad Heavner.

Last year, battery storage in California was 590 MW, representing one-third of the nation’s total, followed by Texas with 323 MW, according to a November 2021 report by Environment America.

Between 2023 and 2026, large storage is expected to grow even more to meet the California Public Utilities Commission’s mandate for 11.5 GW of new largely clean energy to meet peak demand in the late afternoons and early evening hours as solar power drops off. The additional storage is projected to include systems coupled with solar and wind resources to increase grid resiliency.

Pairing storage and solar

Optimal storage systems operate in tandem with solar systems because batteries can capture the mid-day excess power and send it back to the grid as the sun sets.

Last year, 58% of the projects in CAISO’s transmission queue were paired with storage. Of the 493 MW to be proposed by community choice aggregators by the end of this year, about half will be paired with solar, said Leora Broydo Vestel, California Community Choice Association spokesperson.

Of today’s 740 MW of behind-the-meter batteries, which provide roughly 1,440 MWh, about 70% of the 62,555 systems, are connected to rooftop solar, according to Bernadette Del Chiaro, California Solar & Storage Association executive director.

A recent report calculated the benefits of significantly increasing distributed solar coupled with storage in the state. If it climbs to 65 MW of local solar and 65 MW of behind-the-meter storage by mid-century, it could create $120 billion in savings, including by avoiding transmission upgrades, according to the analysis by local solar advocates. It also would avoid 4.1 million metric tons of carbon dioxide and create about 374,000 jobs.

But the growth of local solar may be slowed by a CPUC vote expected in January on a decision to reduce compensation paid for excess solar sent to the grid and to raise the costs PV owners are required to pay to investor-owned utilities. Whether the decision, with a proposal expected around Dec. 10, will discourage or encourage the growth of distributed paired solar and storage depends on who you ask.

Mohit Chhabra, NRDC senior scientist, expects the upcoming Net Energy Meter 3.0 decision to boost solar and storage pairing by providing higher export compensation in the evening as solar power drops off and demand remains high. The compensation would encourage “people to lower their electric use in the evenings by using stored solar energy.” That is because payments would “be based on grid need and hourly energy price trends” and set better time-of-use electric rates. “These benefits will be hard to get unless new NEM customers pair solar and storage,” Chhabra said.

Ed Smeloff, Vote Solar senior director, also is a proponent of time-of-use rates to keep solar plus storage growing. However, he contends rates that provide a considerable difference in off- and on-peak payments to drive battery adoption are needed, similar to what is in place to encourage off-peak electric vehicle charging. One example he pointed to is Pacific Gas & Electric’s EV time-of use rate that has an off-peak charging rate of 19 cents per kWh from midnight to 3 p.m., which rises to 50 cents from 4-9 p.m. He also said that allowing opt-in residential critical peak pricing would benefit batteries paired with solar.

NEM 3.0 tug of war

The CPUC’s upcoming NEM 3.0 vote in January will affect systems that come online after the adoption of the revision, with earlier rooftop PV payments remaining under the higher NEM 2 rate structure for 20 years.

CalSSA, the California Energy Storage Alliance and other solar advocates warn that slashing payments to owners of rooftop solar systems would disrupt the technology’s growth while California is working to decarbonize.

Investor-owned utilities and some ratepayer and environmental advocates counter that the current high payments to PV owners benefit the well-to-do and unfairly saddle those without solar rooftops, including low-income and disadvantaged households. The IOUs want state regulators to increase the monthly fixed charge and add a grid benefits charge for distribution and transmission costs, which would significantly raise costs.

Under today’s net energy metering policy, home and small businesses with solar rooftops are credited with the per-kWh retail rate for the electricity their systems send to their utilities. But that imposes costs on other customers because residential solar customers pay less than what it costs utilities to serve them, according to the CPUC-ordered Lookback Study from last January.

The aim of the governing legislation is to have the solar credit drive solar installations while protecting those without PV rooftops from higher costs.

There is no disagreement that the payment is currently too high. The disagreement is over how much to lower it, with CPUC staff wanting to tie it to a reworked controversial Avoided Cost Calculator that cuts the value by about 75%. That is estimated to extend the payback period for rooftop systems from about five years today to 15 years or more.

Opponents of the 2021 cost calculator say it fails to factor in benefits provided by solar. That includes California’s 10.3 GW of behind-the meter solar reducing the amount of significantly above-market priced utility-scale renewables in IOU portfolios that also impose costs on customers, including use of gas generation and resulting emissions to fill production gaps.

Increasing incentives for emissions-free distributed batteries would presumably help drive down costs as they did with the burgeoning rooftop solar market. Distributed batteries not only keep power flowing to homes and small businesses during outages but also help avoid maxing out the grid when residential air conditioners remain cranked up as solar power diminishes.

Unlike utility-scale storage projects, the costs of which get spread out among ratepayers, distributed batteries are financed by the individual homeowner or business. Distributed installations cost around $500 to $1,000 per kilowatt-hour, said CalSSA’s Del Chiaro.

 

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