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Rising Costs Complicate the Future of California’s On-Site Rooftop Solar Battery

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Energy regulators in California are about to release a new proposal for offsetting rooftop solar power.
Source: moodboard/Image source via Getty Images

California’s bold ambition to completely decarbonize what is effectively the world’s fifth-largest economy by mid-century has become a defining mission for the state.

But concerns are spreading over how to keep California’s clean energy transition on track amid soaring electricity rates, as evidenced by the heated debate over reforming California’s rooftop solar program. decades-old condition known as net energy metering. This is part of a larger discussion about the future of distributed power in the semi-deregulated market.

“Our position is that California … has done a lot of good and led the way in a whole bunch of areas and is a world leader, but we’re really at a crossroads right now,” Matt Baker, director of California Public Advocates Office of the Utilities Commission, said at a recent solar industry convention in Anaheim, California. “And unfortunately … [the policy] don’t help us now. We have passed it.”

California regulators are expected to release a revised net metering proposal soon after shelving a heavily criticized version in February that would have cut payments for solar exports to the grid, imposed hundreds of dollars in new annual fees on customers and scrapped a previous grandfather agreement. (R20-08-020)

The Public Advocates Office of the California Public Utilities Commission, or CPUC, along with utilities and some environmentalists, supported the proposal. Many environmental groups and most solar companies called it draconian. An independent economist who previously represented utilities in net metering battles across the United States called the proposal “extremely sweeping” in an interview with S&P Global Commodity Insights.

As state regulators seek to strike a better balance between costs and benefits, some are calling for more moderate adjustments.

In a September letter to CPUC Chairwoman Alice Reynolds, 16 California congressmen warned against using expanded tax incentives for small-scale solar and battery power in the Cutback Act. of inflation as a “perverse justification for imposing discriminatory charges on these assets”. Instead, they demanded “reasonable reforms”.

Solar and storage companies are poised to adapt, adjusting their business models and focusing on growing opportunities outside of California.

“If they make it anti-consumer here in California, we’ll move our operations elsewhere,” Sunnova Energy International Inc. President and CEO John Berger said in an interview. The executive believes reform will ‘always end up on the side of public services’ but said Governor Gavin Newsom, who faces re-election in November, risks a ‘huge negative repercussion’ if the decision goes too far .

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“Crisis Point”

For Baker, whom Newsom named the state’s top taxpayer advocate in February, the need to move forward with aggressive reform comes down to affordability and fairness.

“We are in a period of relatively extreme price inflation: over the past 10 years, prices, according to the utilities, have increased by 50%.[%] nearly 80%,” the state’s top taxpayer advocate said during a panel discussion at the RE+ symposium and trade show. “We are beyond using tariffs as a means to advance many of these policies. We just can’t take it anymore.”

The Public Advocates Office calculates that net metering is responsible for about 15% of the average residential rate for customers of the three major utilities owned by state investors who do not have on-site solar panels, of which 25% for San Diego Gas & Electric Co. customers, Baker said.

Sempra’s utility subsidiary, Pacific Gas and Electric Co., an operating subsidiary of PG&E Corp. and Edison International’s Southern California Edison Co., booked the annualized “change in costs” at $4 billion in June, according to a regulatory filing.

Because wealthier households are more likely to have rooftop solar, California’s net-metering system, which currently provides payments for solar energy exports at the full retail rate, makes an “effective electricity tax” in the state “significantly more regressive”, according to a university. of the California-Berkeley paper published September 22.

The report, co-authored by Professor Severin Borenstein, a member of the board of directors of the California network operator ISO, defines the effective electricity tax as the growing gap between retail electricity prices and the cost to the utility of providing additional electricity to customers. . The report considers relying on the state budget rather than taxpayers to offset rooftop solar — an approach Baker also supports.

But net metering is only part of the cost conundrum rocking California’s power system, the report notes.

“There is a fundamental tension between how California pays for electricity and its stated goals of decarbonization while promoting equity and ensuring energy is affordable for all,” the report said. UC Berkeley. Escalating costs, caused by climate change and grid upgrades to support the state’s broader ambition to replace fossil fuel use in buildings and vehicles with electricity, “bring the state at a point of crisis,” he said.

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Business model migration

As net payments for solar power generation are expected to drop significantly in the coming years, solar power and energy storage companies are innovating new uses for their technologies.

Earlier in September, Sunnova applied to the CPUC for permission to operate as a new “micro-utility” operator. solar-powered and battery-powered planned communities. Microgrids would be designed to operate independently of or connected to the primary power grid.

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Sunnova CEO John Berger (second from left) wants to operate microgrids that can disconnect from California utilities.
Source: Sunnova Energy International Inc.

“I’m sick of getting lip service when I want my electric bill lower and my reliability higher. And if you think you’re going to get this out of a monopoly, think again” , Berger said. “That’s why we have the Federal Trade Commission. That’s why we break up monopolies.”

California’s investor-owned utilities face some competition for retail power, including from about 12,000 MW of metered solar in homes and businesses. Additionally, Community Choice Aggregators, or CCAs, owned by the local government, now purchase power for more than 11 million residents, or about a quarter of the state’s population.

But utilities still supply physical power to CCA customers, handle billing and provide other services, and there remain legal hurdles for proposals like Sunnova’s.

“It’s crazy. I can’t cross a power line, no matter how small, across the property line because it’s a monopoly right for [investor-owned utilities]”, Berger said.

“There’s some merit to this model,” Enphase Energy Inc. founder and chief product officer Raghu Belur said of Sunnova’s proposal. The power electronics supplier of solar panels, energy storage systems and electric vehicle chargers considered a similar concept. But Enphase is more focused on working with grid operators to deliver grid services, including through software-controlled clusters of distributed energy assets, sometimes called virtual power plants.

Whatever form net metering reform in California takes, “technology will find a way,” Belur said. “There is value in the investments that have been made over the past 125 years. There is tremendous value in the network effect…but if things go well, owners can choose [to go off-grid].”

Companies such as Sunnova, Enphase, Tesla Inc., Shell PLC subsidiary Sonnen Inc., and Sunrun Inc. are working on various virtual power plant projects to provide grid services that could help displace small-scale solar power in California beyond the net energy measurement. These clusters of software-controlled solar-plus-storage systems showed their capabilities during a recent record-breaking heat wave, when tens of thousands of customers helped keep California’s lights on.

And this economic model is only beginning to emerge.

“We’re not concerned about net metering,” Sunrun vice president of public policy Walker Wright said. The California Solar and Storage Association and the Solar Energy Industries Association have already proposed 20% annual reductions in solar export rates over five years in 2021, Wright noted. “We don’t want to discuss the value of an electron exported at three o’clock in the afternoon on a Tuesday in July. We actually want to keep that electron in the battery and we want to export it as much as possible when it’s valuable to the network.”

Imposition of new discriminatory fees on customers with solar and battery systems could hinder this, however, Wright warned.

“You can’t have a conversation about cost change here and ignore all the good things these customer aggregations can do for taxpayers,” Wright said.

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