The California Public Utilities Commission (CPUC) recently issued a proposal to revise the state’s Net Energy Metering (NEM) solar tariff to better reflect the value of solar power generation to the state’s grid.
The proposal would replace NEM payments to utility customers tied to the retail electric rate with payments linked to the avoided cost a utility would pay to buy the electricity elsewhere. The CPUC said the aim is to provide the largest incentives for solar exports during the late afternoon and early evening hours when the grid is the most stressed and prices are highest and minimize incentive payments during times when demand, and prices, are lowest, such as midday during a week day.
The proposed tariff would also provide extra electricity bill credits to residential customers who adopt solar or solar paired with battery storage in the next five years, which would be paid on top of the avoided cost bill credits. Customers would be able to lock in the extra bill credits for nine years.
The proposed tariffs would also provide low-income customers more access to solar power by providing a larger amount of extra bill credits to ensure the solar system payback is just as attractive as the payback for higher-income customers.
The proposal would cover 150 percent of a customer’s electricity usage to accommodate future electrification of appliances and vehicles, the CPUC said.
The proposal would have no impact on existing rooftop solar customers who would maintain current compensation rates.
“NEM has helped California make significant progress toward meeting its climate goals, but now that California has nearly 25 gigawatts (GW) of solar on our grid, needs have shifted,” the CPUC said in a statement. “It is now essential to address grid reliability shortfalls during ‘net peak’ hours in the early evening when the sun is down and we rely on fossil fuels to meet demand.”
In December 2021, the CPUC issued an initial proposal to reform its NEM tariffs and to encourage customers to combine energy storage with their solar systems. The proposal also included a grid participation charge of $8 for every kilowatt hour of rooftop solar power produced. The proposal met with heavy criticism from many stakeholders, and in January the commission postponed a vote on the proposal.
Like the December proposed revisions, the new proposal would use avoided costs to determine incentive levels, but the new proposal does not include the controversial participation charge.
Under the new proposal, the CPUC said “average residential customers of Pacific Gas and Electric, Southern California Edison, or San Diego Gas & Electric installing solar will save $100 a month on their electricity bill, and average residential customers installing solar paired with battery storage will save at least $136 a month.”
While CPUC decisions apply only to investor owned electric and natural gas utilities and not public power utilities, the commission’s effort has a broad impact on the state’s electric grid.
The CPUC said the revised proposal on NEM tariffs will be on its Dec. 15 voting meeting agenda.