Tag Archives: net energy metering

AB1139 would undermine California’s efforts on climate change

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Assembly Bill 1139 is offered as a supposed solution to unaffordable electricity rates for Californians. Unfortunately, the bill would undermine the state’s efforts to reduce greenhouse gas emissions by crippling several key initiatives that rely on wider deployment of rooftop solar and other distributed energy resources.

  • It will make complying with the Title 24 building code requiring solar panel on new houses prohibitively expensive. The new code pushes new houses to net zero electricity usage. AB 1139 would create a conflict with existing state laws and regulations.
  • The state’s initiative to increase housing and improve affordability will be dealt a blow if new homeowners have to pay for panels that won’t save them money.
  • It will make transportation electrification and the Governor’s executive order aiming for 100% new EVs by 2035 much more expensive because it will make it much less economic to use EVs for grid charging and will reduce the amount of direct solar panel charging.
  • Rooftop solar was installed as a long-term resource based on a contractual commitment by the utilities to maintain pricing terms for at least the life of the panels. Undermining that investment will undermine the incentive for consumers to participate in any state-directed conservation program to reduce energy or water use.

If the State Legislature wants to reduce ratepayer costs by revising contractual agreements, the more direct solution is to direct renegotiation of RPS PPAs. For PG&E, these contracts represent more than $1 billion a year in excess costs, which dwarfs any of the actual, if any, subsidies to NEM customers. The fact is that solar rooftops displaced the very expensive renewables that the IOUs signed, and probably led to a cancellation of auctions around 2015 that would have just further encumbered us.

The bill would force net energy metered (NEM) customers to pay twice for their power, once for the solar panels and again for the poor portfolio management decisions by the utilities. The utilities claim that $3 billion is being transferred from customers without solar to NEM customers. In SDG&E’s service territory, the claim is that the subsidy costs other ratepayers $230 per year, which translates to $1,438 per year for each NEM customer. But based on an average usage of 500 kWh per month, that implies each NEM customer is receiving a subsidy of $0.24/kWh compared to an average rate of $0.27 per kWh. In simple terms, SDG&E is claiming that rooftop solar saves almost nothing in avoided energy purchases and system investment. This contrasts with the presumption that energy efficiency improvements save utilities in avoided energy purchases and system investments. The math only works if one agrees with the utilities’ premise that they are entitled to sell power to serve an entire customer’s demand–in other words, solar rooftops shouldn’t exist.

Finally, this initiative would squash a key motivator that has driven enthusiasm in the public for growing environmental awareness. The message from the state would be that we can only rely on corporate America to solve our climate problems and that we can no longer take individual responsibility. That may be the biggest threat to achieving our climate management goals.

Making Community Solar Gardens Work

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California has been quite successful at encouraging the development of (1) large utility-scale renewables through the renewables portfolio standard (RPS) and other measures and (2) small-scale, single structure solar generation through the California Solar Initiative (CSI) and measures such as net energy metering (NEM).  However, there have been numerous market and regulatory barriers to developing and deploying the “in-between” community-scale and neighborhood-scale renewables that hold substantial promise.

Community-scale and neighborhood-scale distributed generation (DG) includes some technologies that simply are not cost-effective at the small scale of a single house or business, but are not large enough to justify the transaction costs of participating in the larger wholesale electricity market.  These resources, such as “community solar gardens”, can meet the demands of many customers who cannot take advantage of adding renewables at their location and can also reduce investment in expensive new transmission projects. Examples of these types of projects are parking structure-scale solar photovoltaics, solar-thermal generation and space cooling, and biogas and biomass projects, some of which could provide district heating.  Technology costs are falling so rapidly that these mid-scale projects are becoming competitive with utility-scale resources when transmission cost savings are factored in. SB 43 (Wolk 2013) recognizes that the promise of mid-scale renewables has not been realized.

In response to SB 43, each of the large investor-owned utilities–PG&E, SCE and SDG&E–have filed proposed tariffs with names such as Enhanced Community Renewables Program or Share the Sun. I filed testimony in the PG&E and SCE cases on behalf of the Sierra Club addressing shortcomings in those programs that would inhibit development of community solar gardens. SDG&E’s proposal, while not perfect, better meets the law’s objectives. After the hearings, the CPUC postponed a proposed decision from the July 1 deadline to October.

SB 43’s requirement that the investor-owned utilities “provide support for enhanced community renewables programs” is a critical step forward for California’s distributed energy goals.  The CSI is the state’s premier distributed generation program.  In SB 43 the Legislature expressed its intent that the “green tariff shared renewables program seeks to build on the success of the California Solar Initiative by expanding access to all eligible renewable energy resources to all ratepayers who are currently unable to access the benefits of onsite generation.”  SB 43 advances the success of the CSI into the area of multifamily residential and multitenant commercial properties and introduces all types of renewable energy resources.  Customers who, for various reasons, cannot benefit from the current net metering programs, will be able to benefit through SB 43.

The Legislature clearly intends for this program to lead to a transformation in the energy market akin to the success for single customers of the CSI. This necessary market transformation extends to multifamily and commercial lease properties that are currently beyond the CSI and Self Generation Incentive Programs (SGIP). The Commission should ensure that utilities’ programs under SB 43 provides the market transformation that is necessary for this underserved segment.

State regulations calls for all new residential dwellings to consume zero-net energy (ZNE) by 2020, and all new commercial properties by 2030.  Fully implementing the market transformation identified in SB 43 is one of the obvious means to achieve this target.  The CSI option has already facilitated many examples of feasible ZNE single-family homes using renewables well ahead of the 2020 deadline.  There are several market barriers to integrating renewables in a similar manner on multifamily and commercial leased properties and on single-family that are not favorably located or that have other impediments.

A properly-designed community solar garden program should provide a critical work-around for the split-incentive problem that has plagued local renewable development in California.  The split-incentive problem arises from the fact that multi-tenant structures, both commercial and residential, may not be able to implement solar or other renewable resources due to the fact that lessees are not the owners of the shared space where renewables could be sited.  The problem of split-incentives between landlords and tenants has long been recognized, and has been the focus of energy efficiency programs.

As a corollary, the Commission should provide individual developers and property owners the opportunity to integrate energy efficiency and DG measures to achieve the best mix for meeting environmental and economic goals. Each project is unique so that a “one size fits all” approach that requires sale of all output into the wholesale market with buyback from customers who may have no connection with the project will only discourage enhanced development.

For distributed generation to expand in California there must be a cost-effective path for residential and commercial tenants, as well as not-well-situated buildings, to install solar and other renewables and share the costs among other customers. The focus to date has been on either utility-scale or single-building scale projects, but the most promise may be in mid-scale projects that can serve a community or a neighborhood cost-effectively through a combination of scale economies and avoided transmission and distribution investment.  But to achieve this objective requires changes from current utility practices.

An update: Here’s the link to the decision on this CPUC case issued in January. And here’s the link to scoping memo for the phase of this proceeding.