California Should Not Be Cutting Into Solar Net Energy Metering Yet

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Last month, we published an article from a noteworthy, highly helpful and effective environmental nonprofit that basically argued that it was time to cut into (“reform”) solar net energy metering (NEM) in California. We quickly got some significant backlash. I had seen this argument made earlier in this year and was on the verge of writing this article then, but never got to it. With the reader feedback, it seemed now is the time.

To start, let’s briefly explain what solar net energy metering is. If you have solar panels on your rooftop in California, those solar panels may generate more or less electricity than the home needs. If they generate more electricity than your home uses in a month, then the policy requires that utilities pay you for the extra electricity sent into the grid.

There are a couple of issues that solar power flowing into the grid and net energy metering payments raise. They are the reason NEM 3.0, a “reformed” version of the policy that needs to be finalized this year, is a hot topic of debate. The first concern is that a high influx of electricity in the middle of the day has started going above consumer demand, so 1) utilities have to find a way to store it for later use, and 2) the value of electricity when there is oversupply is lower than the value of electricity when there is undersupply. The second concern is that money doesn’t fall from the sky and any policy that requires utilities to pay more for electricity in order to pay relatively wealthy customers who can afford to install solar power systems on their roofs must be covered by increasing consumer electricity rates — which could be regressive and raise the electricity bills of the less wealthy.

Proposed changes include cutting NEM rates to rooftop solar power owners by up to about 75%. Utilities would like to plop fees on solar panel owners that come to a monthly cost of about $100 on average. The goal is to incentivize people to put solar on their roofs by paying them for it but to discourage people putting solar on their roofs by making them pay for it? Wait, what?…

At the moment, the average California solar homeowner reportedly has a payback time of 6–8 years. That is expected to change to 10–15 years if proposals above go through. No doubt about it, that would slow solar power growth dramatically.

Though, note that California law requires that utilities have policies than ensure rooftop solar power grows “sustainably.” We’re getting into quite a complicated noodle soup now.

 Side note: Before anyone in California who has rooftop solar panels right now or is installing them this year* gets concerned, note that it seems very likely anyone who already has solar panels will be grandfathered in and retain the benefits and policies in place pre-NEM 3.0. (Feel free to use my Tesla referral code for $100 off if you’ve been thinking about going solar and are ready to jump in.)

Naturally, watered down or weakened NEM incentives would not incentivize people to install as much solar power, which would theoretically slow the retirement of fossil fuel plants and make global heating and climate change worse — and in the case of California, that means more destructive fires destroying homes and businesses across the state. Without a doubt, it’ll cost all Californians more if half the state burns to the ground in the next couple of decades. So, what to do?

Also, while people who want to slow rooftop solar power’s growth are focusing on the two concerns I noted above, there are also many benefits that come from rooftop solar power — greater grid security, less pollution (which affects the poor much more than the wealthy), more resilient grids (helpful when, for example, you’re facing a blackout), and less need for transmission infrastructure (which costs a fortune). This is actually a super complex mathematical problem and the calculations can change significantly at different levels of solar power market share, different levels of energy storage capacity, different levels of other renewables on the grid, etc.

It makes no sense to me to handicap the solar power industry at a time when we need to urgently retire fossil fuel power plants. I would like to see independent, high-quality analyses of the costs and benefits of rooftop solar power for people of different classes and geographies. For any added costs utilities face from NEM, it seems sensible to me that it should be funded by the state or a specific pool of money that is raised for that purpose. Perhaps the NEM policy could include a system for investing in community solar power installations (even installed on large rooftops) that allow ratepayers without their own roofs to benefit in the same ways that homeowners can from NEM.

What California, the United States, and the world as a whole need is an acceleration of renewable energy adoption, not a deceleration. Installations need to increase, not be slowed down.

Notably, policies being debated right now are not expected to be passed into law until January 2022, going into effect probably in spring 2022. Knowing what’s on the table and knowing that it can take months to get a rooftop solar system installed and connected to the grid (especially in a crunch time like this), all I can say to any individuals is that if you have been considering whether to go solar now or later, it looks like now is almost certainly the better option financially for you. (Not advice, but, well, read the above.)

Also, EnergySage makes a good point for those of us outside of California, which accounts for a huge portion of US solar power capacity: “The final decision of the CPUC won’t only impact California, but the solar industry as a whole; California is the first domino in line for all things solar, and whatever we witness here will undoubtedly influence net metering policies in states across the country.”

Without a doubt, if California solar power policy gets a lot more antagonistic to rooftop solar power, other states will follow — and perhaps even more aggressively and with less notice than California.

Now is not the time to slow down the clean energy transition. To the contrary, we’re in a race with global heating and climate catastrophe, and every piece of information or report I’ve seen on this topic indicates that the clean energy transition is losing the race and the gap may even be widening. We need to find ways to accelerate clean energy adoption, not decelerate it. Come on, people!

A few days ago, Jeff Parr, founder and CEO of Solar Technologies in Santa Cruz, wrote: “Today, I am concerned that an upcoming California Public Utilities Commission (CPUC) decision may severely harm my livelihood and end the good we’re doing for the planet, for working class families, for businesses, for everyone — all because utilities are aiming to force an end to rooftop solar growth in California.”

Indeed. Come on, California!

Jeff also has some strong arguments that NEM 3.0 as proposed would do more harm than good for democratizing energy and bringing more of the benefits of solar to a broader group of people. He writes:

“NEM is the policy that enables consumer solar; it has made rooftop solar affordable and accessible in the Golden State. But the state’s largest utilities are lobbying hard to lower the benefits of rooftop solar, proposing changes that will make consumer solar nearly twice as expensive as it is today. Their proposal would make it such that low- and middle-income families wouldn’t be able to see a reasonable return on their investment.

“The utilities claim solar panels can only be afforded by the wealthy, causing lower income Californians to pay more for traditional energy on the backs of the rich. I can tell you from first-hand experience in this industry that this is not true.

“Today, nearly half of the homeowners we work with are working families. Other clients include schools, houses of worship, non-profits, multi-family housing, affordable housing and others. In the past five years, my company has installed solar panels on 19 schools, 15 houses of worship, and 20 non-profit organizations – places where money is better spent helping our community rather than footing high energy bills.”

Is NEM 3.0 about utilities caring about the little guy? Or is NEM 3.0 about utilities slowing rooftop solar power adoption so that they can make more money simply putting up large power plants, changing more slowly, and reaping more of the profits?

Also consider all of the good-paying blue-collar solar installation jobs that will be los if NEM 3.0 stifles and collapses the rooftop solar power industry. Who will that hurt?

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Zachary Shahan

Zach is tryin' to help society help itself one word at a time. He spends most of his time here on CleanTechnica as its director, chief editor, and CEO. Zach is recognized globally as an electric vehicle, solar energy, and energy storage expert. He has presented about cleantech at conferences in India, the UAE, Ukraine, Poland, Germany, the Netherlands, the USA, Canada, and Curaçao. Zach has long-term investments in Tesla [TSLA], NIO [NIO], Xpeng [XPEV], Ford [F], ChargePoint [CHPT], Amazon [AMZN], Piedmont Lithium [PLL], Lithium Americas [LAC], Albemarle Corporation [ALB], Nouveau Monde Graphite [NMGRF], Talon Metals [TLOFF], Arclight Clean Transition Corp [ACTC], and Starbucks [SBUX]. But he does not offer (explicitly or implicitly) investment advice of any sort.

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