## CPUC proposes revising Net Energy Metering rules to push customers to install storage with rooftop solar

##### 14 December 2021

For more than 20 years, California has aggressively supported the rooftop solar market through its Net Energy Metering (NEM) program in Pacific Gas and Electric Company (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric Company (SDG&E) territories. NEM allows customers who generate their own energy (customer-generators) to serve their energy needs directly onsite and to receive a financial credit on their electric bills for any surplus energy fed back to their utility.

NEM has enabled 1.3 million customers to install roughly 10,000 megawatts of customer-sited renewable generation, almost all of which is rooftop solar. Now that California has nearly 25 gigawatts (GW) of solar on its grid, needs have shifted, according to the California Public Utilities Commission (CPUC). It is now essential to address grid reliability shortfalls during “net peak” hours in the early evening when the sun is down and the grid has to rely on fossil fuels to meet demand.

One solution to the problem is distributed storage, but the current NEM program lacks the price signals necessary to incent storage adoption, the CPUC said. Thus, less than 10% of existing NEM customers have paired storage with their solar systems.

On top of that, the CPUC said, the current NEM rules are disproportionately beneficial to solar customers:

• All ratepayers pay as much as 10 times more for exported NEM energy than for other sources of renewable energy. Californians today spend more than $3 billion a year to support NEM programs. • An independent third-party evaluation of NEM 2.0 found that its costs substantially exceed its benefits as residential NEM 2.0 participants only pay 9 to 18 percent of what it costs their utilities to serve them, even considering the value of the energy produced by their NEM systems. • Under current NEM rules, the typical solar customer pays for the solar energy system through energy bill savings in 3-5.5 years depending on utility, and then receives substantial bill savings for the remainder of the current 20-year tariff. • Ratepayers without NEM systems, who are disproportionately low-income, pay significantly higher electricity rates due to NEM. The Public Advocates Office at the CPUC estimates that households without NEM systems pay$67 to $128 more per year, depending on the utility, due to the costs of the NEM 1.0 and NEM 2.0 programs. Without NEM reform, these amounts will increase substantially by 2030. The CPUC has now issued a proposal that would revise current NEM rules and create a Net Billing Tariff. The proposal will be on the CPUC’s 27 January 2022 Voting Meeting agenda. The new proposal, formally called a Proposed Decision, determines that NEM must be modernized to incentivize customers to install storage paired with rooftop solar to help California meet its net peak shortfall and ensure grid reliability. The proposed new Net Billing Tariff has four key components: 1. Pays Net Billing customers for the electricity they export to the grid based on its value, determined by the avoided cost to the utility of buying clean energy elsewhere. 2. Charges Net Billing customers for the electricity they receive from the grid based on high differential time-of-use tariffs, creating more benefit for customers who install storage and incentivizing them to store solar energy and shift exports later in the day. 3. Creates a Grid Participation Charge based on the size of the solar system to ensure that Net Billing customers are paying the same fixed costs of the electric grid as non-Net Billing customers. 4. Provides a Market Transition Credit so that customers can pay back the cost of a new solar plus storage energy system in less than 10 years, ensuring that the solar industry in California continues to grow and rooftop solar remains economic. The credit will phase out for new customers over four years. The proposal also creates an Equity Fund with up to$600 million to improve low-income customer access to distributed clean energy programs.

The proposal for a new Net Billing Tariff also provides additional measures to incentivize distributed solar plus storage for low-income and tribal households, including an exemption from the Grid Participation Charge. It also allows Net Billing customers to “oversize” their systems by up to 150% of the customer’s historical load to allow for future vehicle and appliance electrification.

The proposal also:

• Adopts a monthly residential Grid Participation Charge of $8 per kilowatt (kW) of installed solar to pass some of the costs to maintain the grid and fund public purpose programs to residential adopters. • Creates a four-year glide path for the industry through a monthly Market Transition Credit of up to$5.25 per kW for residential solar plus storage and solar-only systems. Customers will lock this amount in for 10 years. During the four-year glide path, the credit will step down 25% a year for prospective customers, who will also lock in their amount for 10 years.

• Establishes a Storage Evolution Fund to provide storage rebates to existing NEM 2.0 customers who transition to the Net Billing Tariff within the next four years.

• Transitions residential NEM 1.0 and 2.0 customers (except for low-income customers) to the Net Billing Tariff after 15 years of being interconnected to the electric grid, which will incent storage adoption and reduce costs paid by other ratepayers by billions of dollars.

Assembly Bill 327 (Perea, 2013) required the CPUC to reform the NEM program, as well as conduct rate reform and distribution planning activities. The CPUC made initial revisions to the NEM program in 2016, resulting in what is called NEM 2.0.

The Solar Energy Industries Association (SEIA) slammed the proposal, saying that it will create the highest solar tax in the country and tarnish the state’s clean energy legacy.

Only the wealthiest Californians will be able to afford rooftop solar, shutting out schools, small businesses, and the average family from our clean energy future. The only winners today are the utilities, which will make more profits at the expense of their ratepayers. We urge Governor Newsom to act quickly to change this decision — at risk are 65,000 solar jobs, the security of our electricity grid, and the health of California residents and our planet.

—Abigail Ross Hopper, president and CEO of the SEIA

About 40% of all rooftop solar installations in California were going to low- or middle-income homes in California, according to SEIA. The new costs and fixed fees will take away the value proposition for virtually all Californians, the association said.

Sounds to me if they want me to install storage as well as solar, then I would just disconnect from grid completely. Then they lose ALL income from me.

Why do they think charging $8 per installed kW solar would incentivize people to get solar?? In the same program that adds incentive for storage?? Just use the credits at time of install and have utility disconnect me. As for low income households - do they also realize that those will more likely also NOT own the home?? Most landlords probably won't be in a hurry to install the solar just to have lousy tenants destroy it (talking from experience here). More feel good regulation to get improvements in living conditions that will probably not have the intended results. Jason ereading the article the study's findings are basically pointing out where they made mistakes in the first version of the program. 1)All ratepayers pay as much as 10 times more for exported NEM energy than for other sources of renewable energy. Californians today spend more than$3 billion a year to support NEM programs. So why didn't they benchmark the buy back rate on what it cost the utility to procure the renewable energy?

2)An independent third-party evaluation of NEM 2.0 found that its costs substantially exceed its benefits as residential NEM 2.0 participants only pay 9 to 18 percent of what it costs their utilities to serve them, even considering the value of the energy produced by their NEM systems So how does this work? FPL, who serves me, charges me for generation and transmission separately. So why doesn't PUC set the net metering to only reimburse for generation? No charge for transmission of energy you didn't use and the utility only charges transmission for what I use. Some questions on how they came up with this number.

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3)Ratepayers without NEM systems, who are disproportionately low-income, pay significantly higher electricity rates due to NEM. The Public Advocates Office at the CPUC estimates that households without NEM systems pay $67 to$128 more per year, depending on the utility, due to the costs of the NEM 1.0 and NEM 2.0 programs. Without NEM reform, these amounts will increase substantially by Everybody pays surcharges due to programs in place. Difference is people who have solar are offsetting that surcharge with cost savings of solar generation. Also I may be stereo typing here but lower income households have higher percentage renters. Landlords will be less likely to install expensive systems with risk of damage. Program need to put incentives for landlord to install the systems, and so both the renter and landlord benefit, and penalties to prevent renters from damaging systems.

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4)Under current NEM rules, the typical solar customer pays for the solar energy system through energy bill savings in 3-5.5 years depending on utility, and then receives substantial bill savings for the remainder of the current 20-year tariff. Why is this a problem??? Seems like this is one of the biggest incentives to get solar. Instead of trying to take this benefit away they should be figuring out a plan to allow more people to benefit.

Why is this a problem??? Seems like this is one of the biggest incentives to get solar.

Because the incentive costs other consumers, and costs way more than its benefits.

Adding battery storage to PV systems increases their net CO2 emissions OTOO 20 g/kWh.  Contrast nuclear energy at maybe 6 grams, less than wind.  Actual "greenness" requires paying attention to facts, not trendy notions.

IMHO, the whole policy of ownership was a political stunt founded more in Libertarian derp than any kind of sound engineering or economics. What's really happening is that the utility is using someones roof to put up PV. If they just said this up front and paid rent, this debate would be moot. Instead, they created this Kabuki theater around a private chunk of infrastructure and hilarity ensures.

One can make the case for outlying areas, but the demographic trend is to urbs and burbs. Utilities have to build for the worst, meaning they need to be able to back up all the "private" capacity. Also, given the option, most people would rather not own extra hardware. In many urban areas, it's thoroughly impractical. The consumer view of "electricity comes from the wall" is a preferred and workable illusion.

A grid built on intermittent renewables is bound to have a large amount of storage to act as buffers. All the economies of scale (e.g. redundance, maintenance, upgrades)
argue for the utilities to worry about banking and dispatching excess.

The big three Utilities in California are huge monopoly stock companies and as such their focus must always be on the bottom line which is profits. Currently their plans are one of bamboozling the users with complicated calculations designed to assure they meet their Wall Street numbers...as a stock company, it can't be any other way.
Looking at power from the user's perspective, the best utilities are not investor owned but Public owned, i.e., SMUD.
It's time for the Governor to create a commision to break up these monopolies and return control back to the people so we can advance renewable energy usage unencumbered by the money motive.

What's really happening is that the utility is using someones roof to put up PV. If they just said this up front and paid rent, this debate would be moot.

Well, not exactly.  RE mandates would still create the problem of the "duck curve", when demand is heading to the evening peak exactly as PV output dies.

Utilities have to build for the worst, meaning they need to be able to back up all the "private" capacity.

And that backup costs money to build and maintain.  This begs the question of who should really be paying for what.

A grid built on intermittent renewables is bound to have a large amount of storage to act as buffers.

You mean they ought to, but they don't.  Net-metering schemes are built on the assumption that the grid functions as one huge battery, which of course it does not.  Forcing that assumption against the physics is causing problems which can no longer be ignored, which is why the CPUC has been forced to act.  (For the record, I TOLD YOU SO!)

All the economies of scale (e.g. redundance, maintenance, upgrades) argue for the utilities to worry about banking and dispatching excess.

Batteries are way too expensive for things at this scale.  One thing we DO have is cheap bulk-scale molten salts, from which we can generate steam on demand.  That's what Natrium is doing, and there's no reason we can't dump excess electric power to heat and make electricity from it later.  Of course, doing this sanely requires compensating the unreliable generators at WAY below retail rates, and charging them for transmission and upkeep too.  The rich people who zeroed out their electic bills that way won't like it.

Engineer-Poet, I think we are talking about different things here.

Can I presume from your "I TOLD YOU SO" line that you felt the that the NEM agreements would come to tears since the economics were bound to go sideways at some point? I certainly concur. I also see these NEM programs (essentially an offtake guarantee) as a small example of the greatest challenge to a renewable-friendly grid being the current structure of local operators and their place as issuers of (really really close to) safe assets. I can't see it happening without the Fed buying all the existing bonds and even then , I don't see the local operators going away without a fight. The only certainty is that everyone will accuse everyone else of being a Socialist.

So I stand by my assertion that in the grand scheme of the national green grid of tomorrow, the Solar Rollout 1.0 effectively did no more than lease roof space

I also can't agree that batteries will be too expensive to perform adequate buffering for the grid though they may be so today. It's like Amory Lovins said back when "Fuel cells are expensive because they're all hand-made by PhDs". If Li-ion, with its heat management and density requirements can drop under \$100/KWh at the pack level, I can't imagine zinc or flow batteries shouldn't beat that handily.

Can I presume from your "I TOLD YOU SO" line that you felt the that the NEM agreements would come to tears since the economics were bound to go sideways at some point?
Precisely.
Solar Rollout 1.0 effectively did no more than lease roof space
It does look that way.
I can't imagine zinc or flow batteries shouldn't beat that handily.
First you have to see if there's enough, e.g. zinc resource in the world to do the job.  If not, no point trying to press it into such widespread service.

We have teratons of elements like sodium, potassium, nitrogen, oxygen and sulfur (which I understand Form Energy's flow battery uses).  But we have roughly a million times as much energy-equivalent in uranium and thorium.  I know which way I'm betting.

@ EP: "That's what Natrium is doing, and there's no reason we can't dump excess electric power to heat and make electricity from it later."
Of course. I agree with you that this is one solution to compete with the overall problematic. But at what expense? Do you think that the overall efficiency will equal at least 30% of the original RE invested? I have great doubts that it will.

Likely closer to 40%, but if that's what we have to do to get 24/7 zero-emission electric power (not to mention all the OTHER energy we need), then it has to be done... and the cost of the losses added into the price of "renewables".

If nuclear winds up cheaper after RE's system costs are added up, then game over.

I'm extremely critical of waste of all kind. It drives me almost mad to know of the inefficiencies of deep-freezers, fridges, electric motors of all sizes, heat pumps etc. etc. and also knowing that nothing is done about this waste just to favor scales of economy, even though acceptable solutions were possible. This is of no concern to the power utilities because the more electric power they can sell, the higher their profits. In my eyes that is criminal behavior. As long as such behavior is perfectly legal, inefficiencies will dominate in every aspect. What a waste of resources of all kinds!

There's also the waste involved with the extra resources put into more expensive motors, etc. which aren't recycled.

Nuclear heat is cheap enough that we can afford to "waste" it to conserve other resources while increasing recycling rates.

CAES can store renewable energy,
plenty of empty natural gas fields in Texas,
use them to store CO2 and power

You'd pump air into NG fields and then dump it back into the atmosphere on discharge, with residual methane (and other pollutants too) in it?  Fortunately, I'll bet that their permeability is way too low for that to work.

Storing CO2 might work, also in the East Texas oilfield.  That's currently the realm of stripper wells, pumping a mix that's 99% water.  The CO2 would only be used to extract more fossil carbon to burn, though.

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