Five critical questions to ask when California’s net metering 3.0 policy is announced next week

California NEM 3 questions

What will happen to rooftop solar in California, the 74,000 Californians working in solar, and all the other states watching its example when NEM 3.0 is revealed? Update: Here is the proposal.

The California Public Utilities Commission is expected to show its hand Dec. 13 on how it will revalue the power that electric utilities buy from residential and commercial solar owners. The CPUC docket says that’s the day we learn the CPUC’s “Proposed Decision on successor to current main Net Energy Metering (NEM) tariff and NEM tariff for fuel cells” – also known as NEM 3.0, because it will replace the current NEM 2.0 rules which date from January 2016.

As a staff member for one watchdog group in the state said, “On Monday, we find out whether California is planning to shrink the solar industry by 5% or by 85%.” The new policy could influence other major states such as Florida, where electric utilities are also pushing for comparable reductions in the value of rooftop solar.

When the CPUC issues its proposed decision, here are five good questions to ask in gauging the impact on California’s residential and commercial solar industry, and the ability of the state to meet its carbon reduction goals:

1. What rate will utilities pay for new residential and commercial solar power that is exported to the utility grid?

The value of exported energy has a large impact on the overall value of customer solar. If the exported energy value is low – the current proposals are 6 cents per kWh or less – it will encourage customers to put in much smaller solar systems to avoid exporting energy. We could see solar PV systems that are 33% the size of today’s norm become the new standard, severely restricting solar deployment in California. This summer, the CPUC published a new Avoided Cost Calculator signaling significant reductions in this value.

2. Is the CPUC adding new monthly fees for solar owners?

The joint utility proposal would add about $75 a month in fees for residential customers and $800 to $3,400 a month for commercial generators with a 250-kWh system. By itself, such new monthly fees would eradicate most of the savings from customer solar systems.

3. What tariff structure will they adapt, with what rules?

CPUC could choose to abandon true net metering and switch to a feed-in tariff (FIT, also known as “Buy All, Sell All”), or net billing, amounting to a fixed price settled monthly for all excess energy from a solar rooftop. As the California Solar & Storage Association (CalSSA) said in its own proposal, “A NEM successor tariff framework must not interfere with a customer’s right to self-generate behind the meter.” Does it?

4. What is required to be grandfathered under NEM 2.0, and how long will that grandfathering period be for?

A short timeframe for projects to meet grandfathering requirements would result in many customer projects already underway suddenly becoming financially unviable. We expect NEM 2.0 grandfathering to last for 20 years, as it currently does.

5. Will NEM 3.0 apply to new additions to existing solar systems or can they be grandfathered too?

Under NEM 2.0, if a customer increases their solar PV system size more than 10% or 1.0 kW, whichever is greater, the entire system could be bumped from NEM 1.0 to NEM 2.0 if the customer does not or cannot install a separate meter for the additional PV system. This does not reset the 20-year grandfathering period.

The answers to these critical questions will have a major impact on California’s ability to meet its ambitious greenhouse gas reduction goals. According to CalSSA, if the state were to rely primarily on utility-scale solar – even if it triples and stays at that level for the next 25 years – it will not reduce emissions 40 percent below 1990 levels by 2030 and 80 percent by 2050.

Distributed solar+storage systems and microgrids will play a critical part in reaching California’s goals, and can be much faster to build than utility-scale farms, according to Bill Nussey, author of the new book Freeing Energy: How Innovators Are Using Local-Scale Solar and Batteries to Disrupt the Global Energy Industry from the Outside.

“Climate policy has become a giant traffic jam where progress has slowed to a crawl,” Nussey says. “Local energy is the fast-moving express lane that nobody knows about.”

As he documented for his book, small-scale solar projects create 10 times more jobs than utility-scale solar. The flip side is also true: a slow-down will affect far more people. “Modifying NEM in California will shift the ground beneath local businesses, affect job rolls, and reverberate beyond the State’s borders,” CalSSA predicts.

As everyone in the industry pores over next week’s decision, watch this space for the answers to these critical questions.

Tom Williard is Principal and Co-Founder, Sage Energy Consulting, an NV5 company

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