California is a leader in solar power generation. The abundance of sunshine makes California the ideal place to go solar. Utilities often generate solar power through large-scale solar farms. Homeowners and other property owners generate solar power to offset their own consumption in a small-scale format. Those generation methods have value. However new legislation threatens the future of small-scale solar.
Solar Regulation in California
Solar panels generate large amounts of power during the middle of the day. The excess energy a home does not use either routes to a battery for storage or back to the grid for use locally by neighbors.
California law requires that utilities compensate property owners for the solar energy they contribute back to the grid. Those laws are known as net energy metering (NEM) policy. Most power bills in California include a few basic charges:
- a monthly charge to connect to the grid
- the cost to generate power
- the cost to deliver power across the grid
- various government taxes
It’s important to note that the total cost of electricity is expressed in “bundled rates.” The savvy ratepayer should always look for unbundled rates to understand the breakdown of the total cost of electricity into each of the bottom three categories. Solar customers pay for power based on when they use power, much like long distance calling in the 80s. As of this writing, the tariff on my rate plan E-TOU-C looks like this:
| Per kWh | Peak Rate | Off-Peak Rate |
|---|---|---|
| Bundled Rate | 0.42 | 0.36 |
| Generation | 0.16 | 0.11 |
| Distribution | 0.14 | 0.13 |
| Taxes & Connservation Adjustment | $0.12 | 0.12 |
I’m only looking at summer rates as the winter rate differential is much smaller (peak $0.33 vs off-peak $0.31). Also, I’m not including the discussion around baseline usage – which is it’s own post.
NEM 2.0 – What’s currently in play
NEM 2.0 customers pay about $12 a month to connect to the grid. In simple terms, when you consume energy, the meter runs forward. When the solar panels return excess power to the grid meter runs backward. Once a year, the utility trues up with each ratepayer. If the ratepayer owes the utility money, they pay the retail power rate above per net kilowatt-hour used. Suppose the utility owes the ratepayer at the end of the year. In that case, the utility pays out the wholesale rate of energy (~$0.025) for any excess kWhs used.
NEM 3.0 – What’s changing
NEM 3.0 significantly devalues rooftop solar for homeowners. First of all, the grid interconnection fee jumps to eight dollars per kilowatt of solar.
NOTE: Solar systems are sized in kilowatts, which is different from the energy they produce, measured in kilowatt-hours.
In my part of the world, an 8 kW system isn’t unusual. For an 8 kW system, the grid interconnection fee jumps from $12 a month to $64 a month, which adds about $600 per year to the solar customer’s bill. NEM 3.0 also reduces the credit for power back to the grid from about $0.375 per kWh down to about $0.05.
This specific move incents rooftop solar owners to invest in batteries, so they return less power back to the grid.
Re-learning farm to table
When it comes to food, the farm-to-table movement has popularized reducing the amount of carbon in the food chain. In other words, eat food that is physically close to you. Doing so increases the freshness of the food and reduces the time, labor, and energy required to get that food to you. For example, people in the San Francisco Bay Area can reduce greenhouse gases by eating oranges grown locally rather than shipping oranges from Florida.
In the same way, homeowners should prioritize using electricity produced close to home. Solar panels produce massive amounts of electricity in the summer that one home likely cannot use. When that solar customer returns their excess power back to the grid, the neighbor will use that locally produced power. This reduces overall strain on the grid as energy travels short distances rather than long distances.
Furthermore, this power-sharing often happens during peak periods when power is in short supply. Californians consume massive amounts of energy to cool their homes throughout the summer and early fall. Power usage goes way up in the afternoon and well into the evening. Solar panels in the neighborhood can cover most of this demand during the first half of the summer, with reduced benefits into the fall due to the earlier sunset.
Large solar farms add significant power making the grid greener. However, these solar farms require transporting high-voltage over long distances. These long distances often cross fragile terrain prone to fires in the fall.
NEM 3.0 significantly reduces the benefit of rooftop solar for the homeowner and the surrounding community. Homeowners that install batteries recoup some of those benefits. However, moving power into batteries when it’s better used in real-time in the community doesn’t seem to be the best energy use.
Rethinking medium-scale solar
Many of us think about solar in one of two extremes: residential rooftop solar or large-scale solar farms. Mountain View – Los Altos high school is a model for medium-scale solar. The district built a 755 kW solar system at Mountain View High School. They also coupled it with 26 EV chargers for the community. How does this benefit the community of Mountain View?
- reducing the school’s overall cost of power
- providing free charging for faculty and staff during the school day
- providing reduced cost charging in the neighborhood after school and overnight
- adding covered parking for the staff
- returning locally produced excess energy back to the grid during the peak park of the day for use throughout the community.
With the abundance of large-scale rooftops in urban areas like shopping malls, parking decks, offices – there’s a huge opportunity to build a community of locally produced power bringing the cost of energy down.
Reimagining the grid
Today we often think of the power company as the producer of energy and everyone else as consumers. The utility has large generation plants as hubs in the grid. The rest of us as consumers are spokes throughout the community. The power grid will truly function more like a grid in the future. Energy producers and consumers will be spread out throughout the entire geography more naturally.
With new ideas like electric cars that can power homes overnight and batteries available more readily, the grid will play a different role in distributing power throughout California. However, NEM 3.0 gets it wrong.
If you’ve read this far, leave me a comment or, even better, write your state legislators with feedback. What happens in California often makes its way across the United States. Make it clear you oppose NEM 3.0 that small and medium-sized solar producers play an essential part in our state’s footprint.
The CPUC votes on rooftop solar on January 27, 2022. Send a note to the governor and each of your state representatives to save rooftop solar!
Cover image: https://enphase.com/blog/professionals/installer-stories/how-new-enphase-iq-system-makes-solar-simpler-and-faster
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