California’s Net Metering Decision - Especially Great for Home Battery Owners

by Andrew Meyer
February 1, 2016
Home Battery

Both the solar industry and its loyal customers are celebrating again this week in California.

The Public Utilities Commission voted to maintain retail rates for net-metered customers. The Commission voted to enact a new net metering policy, which includes new time-of-use stipulations for new solar customers, phased in for established net-metered solar users. This is a huge victory for the solar industry, and equally great news for grid-connected solar users. The major stipulation, time-of-use charges, won’t be an issue for customers with home battery energy storage.

Net Metering Recap:

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 solar customers to sell 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 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.

Last Year’s Proposal

At the end of 2015, the California Public Utilities Commission (CPUC) finally issued a proposal after a long debate over the future of solar in the state. The initial proposal was to maintain net metering, with a few additional stipulations.

The previous net metering program paid solar-generating customers a retail rate for the electricity they feed back into the grid. Solar advocates, and of course, the customers themselves, thought that the CPUC shouldn’t mess with this simple and fair compensation plan. Utility companies, however, disagreed. Electric companies like Southern California Edison and Pacific Gas & Electric petitioned the CPUC for substantial cuts in payment, hoping to pay customers less than half the retail rate. The CPUC took the side of solar advocates and customers, maintaining the retail rate of compensation, and declining any additional charges and fees. Insert solar advocate fist pump here.

Utility companies, however, were not excited, and made a lot of petitions and recommendations before the recent vote. What were 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.

Some Last-Minute Changes

The original proposed decision included some added “non-bypassable” charges--charges that all other grid-connected customers were required to pay. The funding gleaned from these charges goes toward low-income and efficiency programs, and are required fees for all customers. 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 initial proposal asked that net metering customers pay these charges just for being grid-connected customers, no matter how much electricity they end up using.

A day before the full commission vote on the decision, the decision was amended, with the non-bypassable charges reduced from around 4 to 5 cents per kWh, to more like 2 to 3 cents. The reduction came in the elimination of the proposed transmission charges, and caused a good deal of controversy on voting day. Commissioners Catherine Sandoval and Mike Florio, who were the two that opposed the decision (while 3, the majority, approved), said that it was the last-minute changes that tipped the scales. Both commissioners felt that the cost of grid electricity costs should be shared more equally between all customers, and not fall more heavily on non-solar customers. Mike Florio said specifically that solar has been on a winning streak lately, with the extension of the Investment Tax Credit, and that the state need not grant solar any additional favors.

But the three “yes” votes, Commissioners Liane Randolph, Carla Peterman, and President Michael Picker, won this round. They felt that the decision reflected California’s overall mission to ditch fossil fuels and focus on renewable energy sources, both on a smaller and larger scale. California’s going to keep an eye on the industry, and reevaluate net metering in 2019.

Time-of-use rates will affect some more than others

One of the big changes included in California’s Net Metering 2.0 policy is the addition of time-of-use rates. Put in simple terms, time-of-use rates include a pricing system that charges customers different rates for electricity used at different times during the day. The purpose of time-of-use rates is to level out the cost of retail power so it better matches the wholesale energy costs of providing power to the people. With time-of-use rates, the cost of electricity will be considerably higher during the hours of peak demand, or, the times when the most people need the most power. This is usually in the early evening hours, around 5:30pm, when many people are returning home from work. The cost of electricity during the lower-demand, daytime hours will be offered at a lower rate. Time-of-use rates will be imposed immediately on all new residential solar customers, and all other residential customers will be phased into the new rates within the decade.

Though solar users can definitely start celebrating their net-metering victory, time-of-use rates are going to hit some customers hard and fast. For new solar customers, the rates will be in effect immediately, and the adjustment may be a little awkward. For customers who were expecting a huge bill decrease because of solar usage, the higher rate of electricity in the evenings, when most solar users have to start using grid-connected power, might put a kink in their plans. It doesn’t have to, however. With a home battery, solar users will see little to no consequence from time-of-use rates. Why? We’ll tell you why.

Solar customers with energy storage in the form of home batteries get to store the energy generated by their solar panels during the day, so they can have it ready and available when they need it the most--at night. And since it’s when most everyone needs it the most, it’s when rates will be at their highest. Home battery owners get to avoid those higher rates altogether, by staying disconnected from grid electricity, and using the power they stored earlier in the day.

In fact, non-solar customers can also take advantage of time-of-use shifting too with grid-connected home batteries. Even if you don’t have solar panels, you can use energy storage in the form of a home battery to store energy when it’s cheap during the daytime hours, and use it later at night when it would otherwise be offered at a much higher rate. Solar panels give you the opportunity to maximize your benefits by generating free energy from the sun, but home batteries are the key to shifting when you use energy from whatever source you store it, even if it’s from the grid.

California is leading the country in renewable energy initiatives, and bringing its residents along for the ride, whether they’re ready or not.

Make sure you’re ready for a bright future, and get a jump on the current rebates offered for new energy storage systems. Wondering if you qualify? Let Swell do the work for you.

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