California revised NEM 3.0 proposal removes fees, but cuts average export rates 75 percent

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The California Public Utilities Commission (CPUC) released a revised proposed decision today on solar net energy metering. Though the proposal avoids the steep solar taxes and fees the previous proposed decision laid out, this revised proposal would scale back export rates in a big way by replacing retail rate compensation with a net billing structure for new solar and storage customers. Although, crucially, it has no impact on existing rooftop solar customers, who maintain their existing compensation rates.

The CPUC says the new residential rates are meant to incentivize electricity use when it is most beneficial for grid reliability, which is why there is a significant differences between peak and off-peak prices to incent battery storage and load shifting from evening hours to overnight or midday hours.

The credits that solar and battery storage customers receive for the electricity they export to the grid will be “based on its value, as determined by the avoided cost to their utility of buying clean electricity elsewhere.” Again, this is aimed at late afternoon and early evening hours.

Adopters of solar + storage in the next five years will be paid an extra credit on top of the avoided cost bill credits. Customers can lock in these extra bill credits for nine years. It also allows solar systems to cover 150 percent of a customer’s electricity usage to accommodate future electrification of appliances and vehicles.

The original unpopular NEM 3.0 proposed decision stood out for dramatic solar fees that added up to more than the cost of the system itself. That was shelved earlier this year after intense backlash and public disapproval from California’s governor.

This proposal will be on the CPUC’s Dec. 15, 2022 Voting Meeting agenda.

Here are four takeaways from Solar Builder contributor Dej Knuckey on the revised proposal. Below is the initial reaction from the California Solar and Storage Association.

CALSSA’s initial reaction

The solar industry and clean energy supporters are still reviewing the CPUC’s proposed decision, but based on an initial analysis it would cut the average export rate in California from $0.30 per kilowatt to $0.08 per kilowatt and make those cuts effective in April 2023, resulting in a 75 percent reduction in value of exports.

Bernadette Del Chiaro, executive director of the California Solar & Storage Association (CALSSA) issued the following statement on the CPUC’s proposed decision:

“The CPUC’s new proposed decision would really hurt. It needs more work or it will replace the solar tax with a steep solar decline. An immediate 75 percent reduction of net energy metering credits does not support a growing solar market in California. If passed as is, the CPUC’s proposal would protect utility monopolies and boost their profits, while making solar less affordable and delaying the goal of 100 percent clean energy.

California needs more solar power and more solar-charged batteries, not less.

We urge Governor Newsom and the CPUC to make further adjustments to help more middle- and working-class consumers as well as schools and farms access affordable, reliable, clean energy.”

The argument here is that playing around with that export rate incentive too much based on time of day, (to drive battery attachments and be more “valuable” for the grid), could reduce the main reasons homeowners installed solar in the first place and thus curtail the number of installs from here.

And that matters because distributed energy, driven by net metering, has added 13 GW of solar energy to the state, roughly the size of six Diablo Canyon nuclear power plants. In addition, consumers have added nearly 1 gigawatt of energy storage which played a meaningful role in keeping the lights on during recent heat waves.

These are just early reactions, relayed as we’ve received them. More insight and analysis will be coming soon.

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