Regular readers of this blog will know that solar-friendly policies are under constant attach by the utilities, especially the three Investor-owned utilities (or IOUs as they are known), PG&E, SDG&E and our own SCE. Well they are at it again, with rate proposals before the California Public Utilities Commission (CPUC) that could harm both solar and energy efficiency measures alike. Fortunately, we have an opportunity to have our say - here’s our take. (H/t our friends at CalSEIA.)
Current policies in California, most notably net metering, along with a tiered rate structure (whereby you pay more for electricity as you use more) have provided powerful incentives not only for consumers to install solar, but to also take proactive measures to reduce their energy consumption. As a result, energy use in California over the past twenty years has grown slower than the growth in population despite the explosion of new electronic devices in homes and businesses during that time. Indeed, California has lead the way for the rest of the Nation, proving that you can have a twenty-first century lifestyle and still reduce your energy demand.
In other words, these policies have been a success.
The proposals being floated at the CPUC would change rates throughout the three IOU service areas (i.e., much of California) and threaten that success. In particular, they are seeking to add a flat, monthly fee to everyone of $10 to all bills, regardless of use and to reduce the number of tiers from four to two. In addition, the rate for the lowest tier would increase, making this a double-whammy not just to solar owners, but to the poorest electric customers who will see a rise in their rates. (So much for the utilities’ concern over hurting the poor!)
Fortunately these changes are not yet cast in stone and the public, particularly advocates for solar and energy efficiency, have a chance to have their voices heard. The CPUC is holding a series of public hearings, some in the Run on Sun service area, as well as others around the state. Here are the upcoming hearings:
September 29, 2014
2:00 pm & 6:30 pmFontana City Council Chambers 8353 Sierra Avenue Fontana, CA 92335
September 30, 2014
2:00 pm & 6:30 pm?Temple City Council Chambers 5938 Kauffman Avenue Temple City, CA 91780
October 2, 2014
2:00 pm & 6:30 pmPalmdale City Council Chambers38300 Sierra Hwy, Suite APalmdale, CA 93550
October 9, 2014
2:00 pm & 6:30 pmHoliday Inn Chico – Conference Center685 Manzanita Ct.Chico, CA 95926
October 14, 2014
2:00 pm & 6:30 pmFresno City Council Chambers2600 Fresno StreetFresno, CA 93721
We are planning on attending the hearing in Temple City. If you attend one of these important hearings, please let us know about your experience in the comments.
When Governor Brown signed AB327 last October, one thing was clear: net metering as we presently know it was going to go away, we just didn’t know how soon. Now, thanks to a ruling yesterday by the California Public Utilities Commission (CPUC), we know: 20 years. Here’s the scoop.
Around the country, utilities have been pushing hard against net metering—the tariff under which solar customers receive credit for surplus energy production (say during the day when no one is home or on a weekend when a commercial facility is dormant) that offsets energy consumed from the grid (for example, at night). The solar customer’s bill reflects the “netting out” of those two quantities (total energy exported versus total energy imported from the grid) and the customer only pays for the difference. If the solar customer is a net energy producer (quite rare), the utility has to cut the customer a check for the surplus. (Unless you are an LADWP customer, sorry.) Last year’s bill sought to end the squabbling and provide certainty to solar customers.
Under the law, the CPUC is required to devise a replacement for the current net metering arrangement, but yesterday’s ruling does not disclose what that will be. Instead, the ruling establishes a sundown provision for customers who are either currently, or will become net metering customers under the current rules before July 1, 2017 (at which time the present net metering rules will be closed to new participants).
Solar system owners will be entitled to operate their systems under the net metering rules for a full 20 years from the year in which they interconnect their system. That, decided the CPUC, will provide sufficient time for solar customers to recoup their investment. However, solar customers can transition to the new rules, whatever those may turn out to be, sooner at the customer’s election. The year of interconnection is determined by the date on the Permission to Operate letter received from the utility, and the twenty-year term ends on the last day of the twentieth year.
What happens to systems that are modified after July 1, 2017? Does the new portion of the system get its own 20-year net metering extension or is it simply subsumed into the term for the original system? The CPUC split this into two possible scenarios: repairs or modifications that did not increase system capacity by more than 10% of the original design will operate under the original 20-year term, neither resetting or ending it. But system changes beyond the 10% limit will either have to be metered separately, or the entire system will have to be transitioned to the new tariff structure.
The next question to be resolved was what happens if the system is sold or relocated? After all, many solar customers purchase systems expecting it to increase the value of their home—but if the sale eliminates the net metering agreement, that added value could be lost. The utilities, of course, disdained any such concerns, arguing that the net metering term should be tied to the original owner only.
Fortunately, the CPUC sided again with solar system owners. Thus, systems will remain under net metering for the full twenty-year term, regardless of changes in ownership, as long as the system remains at the original location. However, if the system is physically moved to a new location, the CPUC deems that to be a new interconnection and the old net metering agreement would no longer apply.
The decision yesterday also took an important step in addressing the impact of adding energy storage systems to an existing solar system operating under the twenty-year net metering rule. The CPUC ruled that “to the extent that energy storage systems are considered an addition or enhancement to a renewable electrical generation facility utilizing a NEM tariff, we find that they should be treated in the same way, and subject to the same transition period, as the underlying renewable generation system to which they are connected.”
The July 1, 2017 deadline is an absolute cutoff, but the actual end of new net metering agreements can actually be reached sooner if the utility in question has reached its “net metering cap.” The CPUC previously set the cap at 5% of the utility’s “non-coincident aggregate peak load.” To allow perspective solar customers to know if their utility is going to hit that peak before the July 1, 2017 deadline, the CPUC ordered the three IOUs to report to the Commission (and on the utility’s website), on a monthly basis, their progress toward that cap.
Finally, the ruling addressed whether solar installers should be required to provide prospective clients with disclosures about the ruling, specifically as to the duration and limitations on existing net metering agreements. According to the decision, IREC and SEIA opposed such a requirement on the grounds that it exceeds the authority of the CPUC. As a legal matter, that may well be true, but SEIA’s position strikes a sour note. Frankly, the solar industry is in serious need of mandated, standardized disclosures on everything from system components, warranties, energy yield, true costs, etc., to say nothing of issues surrounding the changes to net metering. SEIA should be producing model documents for its member installer companies to use and drafting model legislation to mandate their use.
In any event, the CPUC punted the requirement issue for installers, saying:
Solar installers have a legal [citing Business & Professions Code § 17500] and ethical responsibility to disclose to their customers the terms that will apply to renewable distributed generation systems for the foreseeable future, including the applicable tariffs as well as the timing and terms for transition to a successor tariff. Such disclosures provide customers with the information that they need to make educated decisions about their future electric service. Because of this, we expect solar installers to provide honest and complete disclosures on the NEM transition, and we encourage customers to report to the appropriate authorities any misleading or fraudulent information that may be provided to them. At the same time, we require the large IOUs to post information on the NEM transition clearly on their Web sites along with other information about NEM terms, eligibility, and progress towards the statutorily mandated transition trigger level.
Of course B&P section 17500 is entirely generic and provides no guidance as to what disclosures solar companies should provide to their potential clients. Clearly this is an area that requires legislation and California, as the most mature solar market in the country, should be leading the way here.
As for Run on Sun, we will revise our Return on Investment materials to reflect a 20-year window instead of the 25-year model we have used previously. Hopefully that will provide clients with a more accurate estimate of their true ROI.
Last year the legislature passed a major piece of legislation, AB 327, that deals with the future of net metering. While that was a short-term victory for solar advocates, it put the long-term future of net metering in the hands of the California Public Utilities Commission (CPUC).
Alas, that result was a decidedly mixed blessing, as departing Commissioner Ferron recently noted:
But recognize that this is a poisoned chalice: the Commission will come under intense pressure to use this authority to protect the interests of the utilities over those of consumers and potential self-generators, all in the name of addressing exaggerated concerns about grid stability, cost and fairness. You – my fellow Commissioners — all must be bold and forthright in defending and strengthening our state’s commitment to clean and distributed energy generation
Which brings us back to the petition campaign over at Vote Solar.
Here’s the petition text in full:
Dear California Public Utilities Commissioners,
I am signing this petition because I believe in protecting Californians’ right to go solar and receive full credit for the clean energy they deliver to the grid.
California has more than 200,000 solar roofs, and we expect to boost that number to half a million by the end of 2017. The policy of net metering has been crucial to recent growth and the creation of local jobs around the state. Rooftop solar systems reliably produce electricity for 30 years or more, and Californians invest in rooftop solar because they expect long-term bill savings over the life of the system.
Under Assembly Bill 327, the Commission must decide how long solar customers may continue under current net metering rules. Changing the rules unexpectedly for customers who have already made solar investments and signed contracts would be unfair and would drastically slow our state’s solar momentum.
I urge you to stay the course and allow customers who install solar under the current program to continue under current net metering rules for at least 30 years.
We believe that the CPUC needs to hear from as many Californians in support of solar as possible. Trust me, they are already hearing plenty from the lobbyists for SCE, PG&E and SDG&E.
Please take a moment to add your name in support of rooftop solar by signing Vote Solar’s petition.
A key to the growth of solar, particularly commercial solar, is the availability of affordable storage solutions. Two recent developments suggest that we are about to see dramatic growth in this vital market sector.
One week ago the California Public Utilities Commission (CPUC) voted five to nothing approving a plan to require the three investor-owned utilities (SCE, PG&E, and SDG&E) to procure 1,325 MW of energy storage by 2020, with installation completed by no later than the end of 2024. Both SCE and PG&E are required to procure 580 MW each, with the remaining 165 MW allocated to SDG&E. 200 MW of that 1,325 MW total is to be interconnected at the customer’s site. In addition, the decision provides a timeline for this to happen with the first 200 MW to be procured by the end of next year.
Other electric service providers, like the munis, will have to procure energy storage equal to 1 percent of their annual peak load by 2020. Those storage systems can also include customer sited and/or customer-owned storage devices as long as they were installed after January 1, 2010.
Large scale pumped hydro storage (greater than 50 MW) is excluded from the program, but storage obtained from plug-in electric vehicles can be counted.
This is a tremendously significant decision as the mandate will surely drive R&D as well as deployment investment and help provide a ready market for these emerging technologies.
An announcement this week during Solar Power International shows how that investment is already starting to happen.
Stem - the company with the clever technology for using storage to “smooth out” the demand peaks that drive commercial energy costs - just announced a $5 million project finance fund with Clean Feet Investors (CFI). From the parties’ press release:
The new financing model, which Stem developed in collaboration with CFI, is designed to open access to a wider pool of customers by removing barriers to adoption, enabling up to 15 MW of energy storage to be deployed. With this financing capability, Stem hopes to follow the dramatic growth trajectory pioneered by the third party ownership model in the solar industry. Stem and CFI plan other innovative financing offers for customers including performance-based and shared savings financing solutions with the capital from this financing.
“In addition to breakthroughs in technology, Stem is focused on driving business model innovation,” said Prakesh Patel, Stem’s vice president of capital markets and strategy. “By working closely with CFI, I believe we have created a unique offering to help accelerate customer adoption of Stem systems. This transaction paves the way for Stem to become one of the first efficiency technologies to achieve bankability.”
“Deployment capital is essential for Stem to get their technology in the hands of their customers – many of whom prefer a “pay as you save” offering,” added Jigar Shah, a principal at Clean Feet, and founder of the largest solar services company, SunEdison.
Allowing companies to install Stem’s technology with little or nothing down will help those companies save money at the same time it allows Stem to ramp up. This is great news for the solar industry since it is posed to provide the energy that Stem’s system later distributes as needed to offset those costly demand peaks.
Of course, this isn’t exactly great news for the utilities who, if this technology were widely adopted, would see a huge revenue hit as more and more commercial customers were able to lop-off the most expensive energy they now have to procure. Whether it is the continuation of net-metering on the residential side or the ability to eliminate the worst of demand charges on the commercial side, the pressure on the utilities will only continue to grow. But for their customers, things have never looked brighter.
In a curious bit of timing, two reports of great significance are being released today. The one that will get all of the headlines is the latest assessment on climate change coming from the UN’s Intergovernmental Panel on Climate Change. The second report will see far less attention, but is inevitably linked - the report for the California Public Utilities Commission on the costs and benefits of Net Metering. We will have more to say about both in the coming days, but here is our first take.
Since 1947, the Bulletin of the Atomic Scientists has kept a “Doomsday Clock” showing how close to midnight - and thus, human-induced annihilation - the world was. At the depths of the Cold War the clock was as close as 2 minutes away, but by 2007 the clock was wound back to twelve minutes to midnight - the “safest” the world had been since the dawn of the Atomic Age.
But for Rajendra Pachauri, the lead scientist on the IPCC report, climate change has replaced nuclear destruction as mankind’s greatest threat. According to him, “we have five minutes before midnight." The report’s Summary for Policymakers, which can be downloaded now from the IPCC website, includes numerous graphs and illustrations to buttress Pachauri’s conclusion, here are two:
That map makes it pretty clear that the globe is heating up and in some parts of the world, heating very significantly.
But what about the “Global Temperature Standstill” that deniers like to tout? Isn’t it true that for the past decade, surface temperature rise has leveled off and thus, Climate Change is nothing to worry about?
The short answer to that is, not so much - take a look:
That last bar is for the past decade and it clearly shows yet another decadal increase - and that is based on observed temperatures, not computer models. And keep in mind that these are surface measurements - yet many climate scientists believe that the majority of the warming effects are occurring in the deep ocean.
So no, warming hasn’t halted, and we need to do all that we can to reduce emissions of Greenhouse Gases if we are to avoid making the clock strike twelve.
Which brings us, sadly, to the other report just released on the Costs and Benefits of Net Metering in California. Currently, the overwhelming number of residential and commercial solar installations in the state benefit from Net Metering which provides a one-for-one credit for energy produced and exported to the grid against energy consumed at a later time. In a sense, the grid acts as a storage device for solar clients, allowing them to bank credits during the day and then drawing on those credits in the evening, at night, or on cloudy days when the solar system cannot meet current needs.
The take-away from the 319-page draft report is summarized in this chart:
According to this analysis, the net cost of Net Metering by 2020 when the caps on how many net metering customers the IOUs must allow is reached, will be over $1.1 billion, or slightly more than 3% of the “revenue requirement” of the three utilities studied.
That sounds like a significant imbalance—until your realize that the report contains this incredibly important caveat which renders the entire analysis suspect:
Lastly, it is important to note that the attached NEM [i.e., Net Metering] Cost-Effectiveness Evaluation is focused exclusively on the utility ratepayer impacts of NEM, and does not include the overall societal benefits from the deployment of clean energy resources, although significant environmental, public health and other non-energy benefits occur.
We are supposed to suspend consideration of environmental, public health and other non-energy benefits, even though we know that they are significant? How can that make any sense? Worse still, we are supposed to suspend those very considerations at the same time that we are being told that it is “five minutes to midnight” for the world if we do not reduce our GHG emissions. Talk about a disconnect.
It is patently absurd to ignore the societal benefits provided by solar installations, particularly in light of the existential threat posed by climate change brought about by burning fossil fuels. The entire analysis views the world from the perspective of the status quo in which fossil-fueled utilities have a “revenue requirement” that the rest of us are expected to provide. Such a world view - and such a business model - leads to skewed results like these and if followed, would push us all closer to Midnight.