The California Public Utilities Commission is evaluating what changes to make to the state of California’s net metering policy. The utilities want to reduce payments to customers who generate electricity from solar power and add fees, but doing so would damage or potentially destroy the California solar power industry, some say.
Brad Heavner is the Policy Director at CALSEIA, the oldest state-based solar energy association in the US. He answered some questions about the situation for CleanTechnica.
Why is there a change in solar power policy being considered now?
The California Legislature has raised the cap on net metering several times. The utilities are currently required to offer net metering until it makes up 5% of combined customer peak demand. As we began approaching this cap, the Legislature directed the California Public Utilities Commission to look at whether the net metering structure needs to be changed before removing the cap altogether. So the timing is somewhat arbitrary and is potentially disastrous because it coincides with the scheduled changes to the federal Investment Tax Credit.
What is under consideration to change?
The Commission needs to create a new tariff for solar customers. It can be based on a net metering structure or a feed-in tariff structure, or a hybrid of the two as the utilities have proposed. There are three primary questions: 1) How should customers with solar or other distributed generation be compensated for the power they provide to the utility? 2) Should there be any new fees that are charged only to solar customers? 3) What added features are necessary to ensure solar growth in disadvantaged communities?
The current net metering tariff provides for bill credits at full retail rates and no solar-only fees. Utilities want to cut the compensation in half and add fees.
What potential impacts will there be if a policy change is made?
If the Commission adopts the utility proposals, the opportunity for customers to go solar could be virtually eliminated. The utility proposals would result in capital recovery periods of 13-20 years. Data from the National Renewable Energy Laboratory, which is consistent with solar company experience, shows that very few customers would consider solar with a simple payback of more than nine years. Customers going solar with PPAs under the utility proposals would either lose money by going solar or save a negligible amount.
Fortunately, the law says the new tariff has to ensure that solar “continues to grow sustainably,” so the utility proposals are in clear violation of the law and we do not expect them to be approved as written. However, any reduction in compensation or new fees would be damaging to the opportunity to go solar.
California is the US solar power leader currently, and solar power seems to be doing well in California, so it doesn’t seem that sensible to make a policy change. What is the motivation to do so?
Utilities are afraid that when a lot of people go solar there will not be enough customers left to pay for the grid. This is a very long-term problem. Currently, only three percent of California customers have solar. This is not harming the utilities’ ability to recover costs. When half of all customers are generating their own power there will need to be a vastly different rate structure, but that is a long way off. Plus, utilities can modernize their planning and forecasting to spend less money on infrastructure when people buy less power from them.
Is the solar power industry following potential policy changes and do they have any influence in making such changes or responding to proposed changes?
CALSEIA and our allies have been very active in this proceeding. We have filed hundreds of pages of technical analysis and have met repeatedly with decision makers. We also filed a net metering proposal that is being considered alongside the utility proposals. Our proposal includes new fees for solar customers, but those fees would not begin until the industry has recovered from changes to the ITC.
What can concerned California citizens do if they want to voice their concerns to public officials?
California ratepayers can send a message to the CPUC commissioners by emailing firstname.lastname@example.org.
What gives the California Public Utilities Commission authority to make decisions that impact the solar power industry?
All utility tariffs have to be approved by the Commission, which is an important consumer protection. The solar industry is dependent on those tariffs because customer savings are a factor of how much they pay before and after installing solar. It is a necessary arrangement given that utilities are monopolies, but it results in a very top down structure. The solar industry itself is intensely competitive but we operate within a strictly regulated environment.
Instead of the kind of policy changes that are under consideration, what do you think would be better for solar power in California?
The Commission is obligated to consider the utility proposals, but it can and should reject those proposals in their entirety. It can set up a process to look at this question again in a few years after changes to residential rate structure have settled in and the industry has adjusted to changes in the ITC. We will have a better picture at that time what future utility rates will be and how low solar prices can go. We can come back in a few years and set a course for gradual changes to net metering.
Image Credit: BLM