Net Metering 2.0: What’s in Store for the Policy in California?

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Solar advocates around the country await a number of decisions from the California Public Utilities Commission on a bill passed last year in the state, AB 327. The decisions will shape Net Metering 2.0 in California, which could set the stage for what happens with the policy in other states.

Net metering is likely to heat up again this year as a major issue in solar. In the midst of the net metering battles, what’s happening with this policy in California? And what else is on the horizon for solar in the state? 

Behind these questions is a bill that was signed into law last year, AB 327.

 

Reactions to the bill were mixed. Initially, solar advocates opposed it. But enough amendments were made to make the bill palatable, and even welcome, for many in the industry. Without AB 327, net metering in California would have expired at the end of 2014. The bill preserves net metering into 2017 and contains a number of other important provisions, some having to do with rate structures.

 

At a recent meeting of the Local Clean Energy Alliance in Oakland, Brad Heavner, Policy Director for the California Solar Energy Industries Association (CALSEIA), gave us the scoop on what’s happening next with AB 327.

 

The bill leaves a number of details to be decided by the California Public Utilities Commission (CPUC). Heavner detailed six questions the CPUC is tackling:

 

1. How will existing net metering customers by grandfathered?

 

Current customers have the expectation that their specific net metering agreement will continue for the life of their system — and even if they sell their house. Solar advocates are asking for a grandfathering period of 30 years, while utilities lobby for 10-15 years. What the CPUC will decide remains to be seen, but it will likely be somewhere in the middle.

 

The CPUC is scheduled to make a decision on this item by March 31, with an initial proposal expected around the first week of February.

 

2. How will tiered rates change?

 

Some changes are already in place. AB 327 lifted the rate caps on lower tiers to ease the pinch that customers in higher tiers have felt as utility costs have increased. Although utilities would like to flatten rates, the existing tiers have succeeded in promoting energy conservation, as they were meant to do. And they’re good for solar, since customers who install solar can keep their power bills in the low tiers and realize more savings.

 

According to Heavner, the question for the the solar industry is, How can we survive without tiered rates? California’s solar industry is robust, but we need to find ways beyond economies of scale to ensure that continues.

 

3. Will time-of-use rates be put in place for residential customers?

 

AB 327 allows the CPUC to require time-of-use pricing. Heavner thinks it’s likely to be put in place for all customers. That could be good for solar, since higher rates generally coincide with times the sun is shining.

 

4. Will a fixed charge be imposed?

 

The bill authorizes the CPUC to implement a fixed charge of up to $10. This would be separate from any existing daily meter fees. With concerns that even the small fixed charge recently imposed in Arizona could be adversely affecting solar adoption, this item will be watched closely.

 

5. What will Net Metering 2.0 look like?

 

This question, set to be resolved by December 2015, is the biggest one on the list. The CPUC must decide what will replace the current net metering system. Heavner thinks it’s likely that net metering customers will no longer get full retail credit for the power they produce. But what will replace that?

 

One option is some kind of feed-in tariff, though perhaps by another name. Although Heavner thinks that’s possible, he cautions that getting the numbers right is crucial.

 

Whatever happens, we can expect a bloody battle over this one in the next couple of years.

 

6. How does distributed solar affect the grid, and what’s needed to manage that?

 

Utilities around the country have been sounding the alarm about more distributed solar coming onto the grid. They say the grid can’t handle more than a small amount of this input. The CPUC’s response: Show us where, and tell us what’s needed to manage increasing distributed generation.

 

The real question here, though, is what’s the actual problem: distributed solar, or the outdated grid? I don’t have to tell you how solar advocates answer that!

 

Moving forward

 

At the heart of the net metering issue is the discussion of avoided costs and the value of solar. A number of studies have been done recently. The utility-friendly E3 study was deemed out of date as soon as it was written, because it was modeled on rates that were changing. So that study will need to be redone. A Vote Solar study commissioned from Crossborder Energy found that net metering’s benefits outweigh its costs. While competing studies have arrived at different results, the definitive word is yet to come in.

 

Whatever the value of solar, tiered rates and net metering are closely interconnected. As tiered rates are flattened, the benefits of net metering are lessened. That’s what the utilities want, but it could also be beneficial to solar. It behooves us not to over-subsidize solar, Heavner said, if we want a continuing strong industry.

 

That’s where Net Metering 2.0 comes in. What remains to be seen is what shape that will take.

 

To take action and let the CPUC know that you don’t want them to change the rules on Californians with rooftop solar, you can sign this petition.