Extended Net Metering is Great News for California Solar. Home Batteries Make it Even Better

by Andrew Meyer
December 15, 2015
Home Battery

Some big news hit the solar industry this week.

In Washington D.C., there’s legislation on the table that would extend the Solar Investment Tax Credit for at least five more years. Meanwhile, in California, the Public Utilities Commission has proposed an extension to California’s Net Metering program, which gives grid-connected solar customers financial credit for the energy they feed back into the grid.

Let’s dig into the latter of these two proposals, and talk about what it means for the future of solar, as well as home batteries.

What is Net Metering, Exactly?

To understand the significance of California’s latest decision, it’s helpful to have a good grasp on what net metering actually is, and what it means for customers who generate solar power, but are also connected to the traditional power grid.

In short, net metering is a billing system that allows grid-connected electric customers to sell to the power company any excess electricity they generate with their own solar panels, that they don’t need to use right away. Many households with solar panels generate a good deal of electricity during the day when the sun is at its peak, but don’t actually need to use the electricity very much in the middle of the day. Often, they’re out of the house entirely, and don’t really need to run the washing machine or flip the light switches on until later in the evening. So rather than let that generated electricity go to waste, it gets transferred back into the traditional power grid, and used somewhere else. Net metering programs offer payment for this provided electricity, often in the form of credits that deduct from the customer’s power bill.

As you can imagine, net metering is a pretty big deal for customers who own solar panels. They’re basically being paid to own their photovoltaic panels. Net metering programs have been credited for the major rise in solar system installations in states like Hawaii and California, as they help to offset the initial investment of the solar panel systems themselves. Without energy storage, like home batteries, so much of the generated electricity is without value to solar panel customers, unless a net metering program exists. For this reason, when California announced that they were reevaluating their net metering policy in November, they got a huge response from the public. Many thought that reducing payments to solar customers could seriously damage the solar industry. It looks like the California Public Utility Commission was listening.

California’s Proposed Decision

This week, the California Public Utilities Commission (CPUC) finally issued a proposal after a long debate over the future of solar in the state. Good news for the solar industry: net metering is here to stay… for now. But there are going to be some changes.

The existing net metering program pays solar-generating customers a retail rate for the electricity they feed back into the grid. Solar advocates, and of course, the customers themselves, think that the CPUC shouldn’t mess with this simple and fair compensation plan. Utility companies, however, disagree. Electric companies like Southern California Edison and PAcific Gas & Electric have petitioned the CPUC for substantial cuts in payment, hoping to pay customers less than half the retail rate. At this point, it looks like the CPUC is taking the side of solar advocates and customers, maintaining the retail rate of compensation, and declining any additional charges and fees at this time. Insert solar advocate fist pump here.

Utility companies, however, are not so excited, and are going to get in all the comments they can before a full commission vote in January. What are they worried about? These perks for solar customers put additional cost on power companies, as well as electricity consumers who don’t have solar panels. Electricity bills for non-solar customers could go up by about $45 in the next ten years if net metering incentives stick around. Solar industry groups say that’s fine. What the CPUC is effectively doing is standing up for clean energy, and encouraging solar at the cost of traditional power generation. This decision, solar advocates say, jives well with California’s goal to greatly decrease their dependence on fossil fuels, and up their clean energy usage in a huge way.

The New Cost of Net Metering

Though the proposal on a whole is a major win for solar panel customers, they will be facing a few new charges going forward. They’ll sound familiar -- they are the same charges traditional grid-connected customers pay.

First, net metering customers will have to pay a one-time interconnection fee, which will probably amount to between $75 - $150. In the past, all utility customers have been asked to pay this charge, but for net metering customers, the fee will represent the cost of reviewing the solar panel system, and making sure that it’s safely connected to the grid. Net metering customers will also be required to pay the other non-bypassable charges that other utility customers have to pay. The funding gleaned from these charges goes toward low-income and efficiency programs, and are required fees for all customers. This doesn’t seem like news, but in the past, net metering customers have only paid these charges if they consumed more grid electricity than electricity generated from their own panels. The new proposal would ask that net metering customers pay these charges just for being grid-connected customers, no matter how much electricity they end up using.

Many solar advocates, as well as solar industry groups, are trying to get rid of these charges all together in order to further encourage customers to go solar. Groups like the Solar Energy Industries Association and The Alliance for Solar Choice are opposed to any additional fees for solar customers, but the CPUC has decided that they are a reasonable way to make sure the cost of maintaining the power utility is shared between net metered customers and traditional grid-connected customers without solar installations. In an interview on Tuesday, Shannon O’Rourke, an analyst for the customer generation program at the CPUC stated that the proposed decision represented “a balancing of the requirements to ensure sustainable growth with ensuring that customers pay their appropriate share of costs.”

The cost of the non-bypassable charges would add up to approximately 2 to 3 cents per kilowatt hour of net metered solar. It doesn’t sound like a lot, but it will have a direct impact on how long it takes rooftop solar owners to receive payback on their initial investment. Any electricity that is actually provided by solar panels and used by the solar customers themselves, however, will not incur any charges. This detail may encourage many solar customers to invest in energy storage options like home batteries. We’ll get to that in a minute.

Two additional stipulations to net metering program participants will have an impact on the economic return on their solar panels: minimum monthly bills, and time-of-use rates. Earlier this year, the CPUC stated that solar users were required a minimum monthly bill, preventing them from being able to get reimbursed more than they were paying for electricity from the grid. This puts a cap on the amount of electricity that solar panel owners can sell back to the grid. Secondly, time-of-use rates are going to be in full force for net metered customers in 2018. This means that electricity used in the early evenings and sweltering hot afternoons, when most people will be demanding electricity, will be provided at a greater cost than power during lower-demand hours. Unfortunately for solar panel owners, the peak demand hours in the evening are when they need to use electricity from the grid as well, since the sun is going down, and their solar photovoltaics are cooling off. Time-of-use charges are likely to hit net metered solar customers pretty hard. With energy storage, like home batteries, however, they don’t have to.

How Home Batteries Make this Even Better

Home batteries change the California residential solar scene in a big way. The CPUC’s proposal to extend net metering is already a huge victory for solar customers, but energy storage, like home batteries, make this news even better. Two of the downsides to the proposed decision, namely time-of-use charges and non-bypassable charges, can be completely avoided by customers who install a home battery, and store the electricity generated by their solar panels.

Here’s how this works: According to the CPUC’s proposed decision, any electricity that is generated by solar panels and used by the owner’s household (ie, not sold back to the grid) will not incur the 2 to 3 cent per kilowatt hour non-bypassable charge. This means, if solar customers choose to store their own electricity instead of selling it back to the grid, their electricity won’t incur any charges at all. That’s zero cents per kilowatt hour. These savings add up quickly, and contribute to a much faster payback time for households who invest in solar panel systems. Non-bypassable charges? Bypassed.

Second, time-of-use charges can be completely eliminated by time-of-use shifting, a method of electricity storage and use that is done simply and seamlessly by home batteries. With a home battery, solar panel customers can store the energy they are generating during the day, and use it in the evening hours of peak demand, instead of getting more expensive electricity from the grid. This prevents solar generated electricity from losing it’s value by being sold to the power company for a lower-demand price, only to be bought back at a higher rate during higher-demand hours. Keep and store your own electricity during the day, snub the grid at night.

With home batteries, the CPUC’s net metering proposal is a victory any way you look at it.