A late November rule change by California’s utility regulator undermines the benefits of investing in rooftop solar+storage, dealing yet another blow to a renewables industry reeling from previous changes, industry spokespeople say.
The California Public Utilities Commission (CPUC) recently approved changes to its rooftop solar regime that were proposed by two of the state’s biggest utilities, reports Canary Media. Solar groups say the new rules will prevent owners of solar+battery systems from getting paid the full value for the grid services they can provide.
The change follows a string of CPUC decisions that have weakened the benefits of installing rooftop solar. Earlier in November, CPUC limited properties like farms and schools with multiple electric meters to receiving the lowest possible rate for the excess power their solar installations generate. The change diminishes those installations’ economic viability.
And last year, the regulator cut the rates that rooftop solar owners can receive for selling power to the grid by basing compensation—once set at retail rates—on avoided costs, which in turn are linked to the time of day when energy is sold to the grid. As solar energy peaks around mid-day, the value of energy at that time is very low, since there is an excess.
Rooftop solar owners saw a 70 to 80% cut to the value of their installations as a result. Demand dropped for rooftop solar, slowing growth and leading to job losses across the industry.
Utilities argued that there is a silver lining: owners of solar and storage could store energy and sell it back at times of day when it would be worth more. Selling mid-day solar production later, between 4:00 PM and 9:00 PM in August and September, could generate earnings that pay off a solar and storage system within eight or nine years, writes Canary Media.
“The average across the year of those exports are horrible, but at least there are those few hours when we have batteries, and we can help the grid,” said Brad Heavner, policy director for the California Solar and Storage Association trade group.
But the latest CPUC decision undermines that silver lining, making it harder to justify the costs of buying solar and storage, the news story states.
The new decision concerns how customers can apply the compensation from their installation, which is allocated through credits, to their electricity bill. Customers’ bills are separated into delivery and generation costs, accounting for two-thirds and one-third of the overall bill, respectively. Credits for selling power back to the grid had previously been bundled together, but after the recent rule change, the two utilities succeeded in their request that CPUC “limit delivery-related retail export compensation credits to offsetting delivery-related charges and to limit generation-related credits to offsetting generation-related charges.”
Importantly, the majority of avoided cost benefits of non-utility-owned solar+storage installations are tied to offsetting the need for utilities to invest in new infrastructure, like peaker plants. But these costs are tied to generation, which accounts for the lesser share of a home electricity bill. So customers can now only apply the majority of their credits to the minority of their electricity bill.
“You can see the problem,” Heavner said. “You get all these generation-related credits, but you don’t have that many generation-related costs on your bill.”
When the costs were bundled together this didn’t pose a problem, but because community choice aggregators (CCAs)—which procure electricity for a growing number of California’s consumers—don’t have the authority to mitigate the delivery-related costs on the bills they send to customers, the value will accumulate over time instead of being resolved through a payout.
“So customers are going to get a statement from their utility every year that says, ‘you’ve earned another $230 in credits that we’re not going to pay you,’” said Tom Beach, principal consultant at Crossborder Energy and a consultant to the Solar Energy Industries Association (SEIA), who calculates that amount as a 10 to 15% reduction in compensation value. “And the next year it will be $460, and then $690—and then in 10 years, $2,300.”
“In his view, that runs the risk of undermining the CPUC’s goal of using price signals to encourage battery-equipped solar customers to support the state’s power grid,” Canary Media writes. “Customers may decide, ‘I’m not going to export power in the summer evenings when it’s most valuable—I’ll just offset my usage at other times of the day. I won’t make as much money, but at least it’s not going to be taken away from me.’”
Summing up the CPUC’s new rules as “a series of damaging decisions that completely change the environment for rooftop solar in California,” SEIA President Abigail Ross Hopper said in a statement that the latest move “weakens the grid by disincentivizing energy storage additions.”
