The new decision proposal NEM 3.0 has been published. The decision implements a net billing format with a five-year glide path that lowers tariffs based on the avoided costs calculator.
The California Public Utilities Commission (CPUC) has released its proposed Net Energy Metering (NEM) ruling, which implements a net metering mechanism and cuts payments by 75% for excess solar energy fed into the grid. Based on an initial analysis, the new proposed decision would reduce California’s average export rate from $0.30 per kW to $0.08 per kW, with the cuts taking effect in April 2023.
Bernadette Del Chiaro, executive director of the California Solar & Storage Association (CALSSA), said: “The CPUC’s new proposed decision would really hurt. It needs more work or it will replace the solar tax with a sharp solar drop. An immediate 75 percent reduction in net energy meter credits does not support a growing solar market in California.”
NEM was a key policy in launching California’s rooftop solar market, which has grown to a solid 1.3 million panel-covered homes, about 50% of the US residential market. It was also instrumental in launching the state’s commercial and industrial solar market.
Under the new net metering structure, payments to the grid for excess solar production will be reduced to the utility’s “avoided costs”, a tiny fraction of the retail price customers pay for electricity delivered from the grid. CPUC said the new proposed decision will result in an average payback of nine years for residential solar rooftops, based on an assumption of $3.30 cost per watt. Read the full proposed decision here.
Net metered payments are based on hourly avoided cost calculator rates averaged over days in a month with separate rates for weekends and holidays. An “ACC Plus” avoided cost adder is applied to increase net meter payment rates as a constant for nine years and varies by utility. Low-income customers are offered a higher add-on rate. SDG&E customers are not eligible to receive an adder.
The proposed decision comes after a year of rulemaking battles between investor-owned utilities and rooftop solar advocates, including environmentalists, employment and labor groups, small businesses and concerned citizens. A year ago, the proposed NEM 3.0 was launched when CPUC found that rooftop solar customers were cross-subsidizing customers who get their energy from the traditional centralized grid.
(Read: “Coalition Raised $1.7 Million From Three California Utility Companies to Advance NEM 3.0, a Rooftop Solar ‘Killer'”)
CPUC noted that the NEM 2.0 structure “negatively affects non-participating tariff payers; disproportionately harms low-income tariff payers; and is not cost effective.” These assumptions, identified by CPUC in a “lookback study,” have been challenged by the rooftop solar industry. CALSSA said a number of the study’s assumptions were flawed and that the source code needed to examine or replicate the study’s key conclusions was not provided. It said the CPUC also failed to make the Lookback study analysts available for discovery or cross-examination.
Protect Our Communities (PCF) said the Lookback study underestimates the benefits of generating electricity behind the meter because the calculator does not adequately quantify the avoided transmission costs or the resilience benefits of net energy metering from solar power, or account for the air quality and climate benefits.
The CPUC’s NEM 3.0 decision states that the new structure should “encourage equity, inclusion, electrification and the adoption of solar energy coupled with storage systems and provide a glide path for the industry to sustainably transition from the current tariff to the successor tariff and from a predominantly self-contained one.” Tariff for solar systems at a rate that encourages the adoption of solar systems in combination with storage.”
“If passed unchanged, the CPUC proposal would protect utility monopolies and increase their profits, while making solar energy less affordable and delaying the goal of 100 percent clean energy. California needs more solar power and more solar-charged batteries, not less,” Del Chiaro said.
Rooftop solar systems are critical to meeting California’s clean energy goals. With the promise of battery storage for grid reliability and new federal incentives for switching to solar power, a broad coalition of solar advocates is urging the CPUC to continue to expand solar power and keep it affordable for all Californians. More than 160,000 people submitted comments to the CPUC and Governor Newsom calling for a strong NEM-3 decision, the highest number in CPUC history.
“We call on Governor Newsom and the CPUC to make further adjustments to provide more middle- and working-class consumers, schools and farms with access to affordable, reliable and clean energy,” Del Chiaro said.
Hearings limited to three minutes will be held by the CPUC on November 16 from 10:00 am to 12:00 pm PST. Sign in here to view the process.
This is an evolving story. More PV Magazine Analysis, industry response and rulemaking process updates will follow.
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