California regulators want to take another year to evaluate potential changes to the state's net energy metering policy— a controversial reform process with broad implications for the residential solar and storage industries.
A draft decision first reported by Bloomberg on Aug. 15 calls for the statutory deadline for completion of the so-called NEM 3.0 to be extended to Aug. 27, 2023. The draft is dated July 25 and labeled "CONFIDENTIAL." Bloomberg said the draft was initially flagged by the market analysis firm ClearView Energy Partners.
The CPUC is permitted to extend a statutory deadline of a ratesetting or quasi-legislative proceeding when the deadline cannot be met. The current deadline of Aug. 27, 2022 does not allow time for the CPUC to review all comments on the NEM 3.0 proposal and the fuel cell tariff proposal, which is also part of the proceeding.
"It is necessary to extend the deadline by one year to allow adequate time to address the remaining issues of this proceeding," the draft reads.
Vote Solar executive director Sachu Constantine joined a recent episode of the Factor This! podcast to discuss the California NEM 3.0 proceeding. Subscribe wherever you get your podcasts.
California's net metering reform process has been a rollercoaster, to say the least.
The CPUC is required by law to reassess how rooftop solar customers are compensated for surplus energy that they send to the grid. This proceeding is commonly referred to as NEM 3.0 as the third generation of net energy metering reform in the state.
The changes will apply to all customers of Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric.
Released last December, the CPUC's NEM 3.0 proposal was met with immediate and fierce backlash from solar advocates, Gov. Gavin Newsom, and two Hulks.
A thread for those interested in why we should all care about policy that promotes (not discourages) mass adoption of residential solar energy: 1) we’re in a transformational moment for our society. We MUST confront the dire threat of climate change & the disruptions
— Edward Norton 🌻🇺🇦 (@EdwardNorton) January 11, 2022.@GavinNewsom you must not let this happen. #SaveSolar @mzjacobson https://t.co/vD29Ld0Z4Z
— Mark Ruffalo (@MarkRuffalo) January 15, 2022Analysis from the consulting firm Wood Mackenzie predicted that the proposal would cut California's residential solar market in half by 2024 and more than double payback periods from 5-6 years to 14-15 years, depending on the utility.
Industry advocates have called a proposed monthly $8 per kW grid access fee a "solar tax." Grandfather periods for NEM 1.0 and NEM 2.0 would be reduced under the proposal. And the switch to a time-of-use rate structure, based on an avoided cost calculator, would slash the credit customers receive for sending surplus solar energy to the grid.
Outrage to the NEM 3.0 proposal led the judge overseeing the proceeding to indefinitely pause the process. That work resumed on May 9, though, pressing play on rooftop solar's biggest fight yet.
Vote Solar executive director Sachu Constantine believes now is an appropriate time to reassess California's net metering program. On June 10, Vote Solar and the Solar Energy Industries Association submitted a list of recommendations in response to the judge's request.
The CPUC is "one of the most technically proficient" commissions in the country, according to Constantine, who served as a senior regulatory analyst for the CPUC from 2007-10.
The multitude of challenges before the CPUC, and the maturity of the California solar market, puts this net metering fight in a different category than other states. California, meanwhile, has ambitious climate and labor goals that also factor into the debate.
Vote Solar has identified three objectives in the California NEM 3.0 proceeding:
- Gradual decline (ramp or glide path) to the avoided cost rate
- Protection for low-income customers: simplify the market adjustment credit by holding the export value flat
- Eliminate the grid access fee
The potential impact of the California NEM 3.0 decision on the broader rooftop solar market can't be overstated.
The vast majority of distributed solar generating capacity -- 12 of 18 GW -- is installed in California. In many ways, the rooftop solar industry can exist in some states because of the strength of the California market.
Not only that, Constantine adds, but California and a stripped-down net metering program could be used as ammunition for states looking to dismantle or squash distributed energy deployment.
The CPUC ruling on net metering is not just about California. It's about the future of distributed solar energy in the U.S.
"If you undermine the market here — if you destroy the value proposition of rooftop solar — not only will it have a significant effect on the availability of financing and capital and technical know-how and the general volumes in the market, it's also going to send a signal (to other states) which we already see happening, just from the proposal in December," Constantine said.
