California Should Not Be Cutting Into Solar Net Energy Metering Yet

Last month, we published an article from a noteworthy, highly helpful and effective environmental nonprofit that basically argued that it was time to cut into (“reform”) solar net energy metering (NEM) in California. We quickly got some significant backlash. I had seen this argument made earlier in this year and was on the verge of writing this article then, but never got to it. With the reader feedback, it seemed now is the time.

To start, let’s briefly explain what solar net energy metering is. If you have solar panels on your rooftop in California, those solar panels may generate more or less electricity than the home needs. If they generate more electricity than your home uses in a month, then the policy requires that utilities pay you for the extra electricity sent into the grid.

There are a couple of issues that solar power flowing into the grid and net energy metering payments raise. They are the reason NEM 3.0, a “reformed” version of the policy that needs to be finalized this year, is a hot topic of debate. The first concern is that a high influx of electricity in the middle of the day has started going above consumer demand, so 1) utilities have to find a way to store it for later use, and 2) the value of electricity when there is oversupply is lower than the value of electricity when there is undersupply. The second concern is that money doesn’t fall from the sky and any policy that requires utilities to pay more for electricity in order to pay relatively wealthy customers who can afford to install solar power systems on their roofs must be covered by increasing consumer electricity rates — which could be regressive and raise the electricity bills of the less wealthy.

Proposed changes include cutting NEM rates to rooftop solar power owners by up to about 75%. Utilities would like to plop fees on solar panel owners that come to a monthly cost of about $100 on average. The goal is to incentivize people to put solar on their roofs by paying them for it but to discourage people putting solar on their roofs by making them pay for it? Wait, what?…

At the moment, the average California solar homeowner reportedly has a payback time of 6–8 years. That is expected to change to 10–15 years if proposals above go through. No doubt about it, that would slow solar power growth dramatically.

Though, note that California law requires that utilities have policies than ensure rooftop solar power grows “sustainably.” We’re getting into quite a complicated noodle soup now.

 Side note: Before anyone in California who has rooftop solar panels right now or is installing them this year* gets concerned, note that it seems very likely anyone who already has solar panels will be grandfathered in and retain the benefits and policies in place pre-NEM 3.0. (Feel free to use my Tesla referral code for $100 off if you’ve been thinking about going solar and are ready to jump in.)

Naturally, watered down or weakened NEM incentives would not incentivize people to install as much solar power, which would theoretically slow the retirement of fossil fuel plants and make global heating and climate change worse — and in the case of California, that means more destructive fires destroying homes and businesses across the state. Without a doubt, it’ll cost all Californians more if half the state burns to the ground in the next couple of decades. So, what to do?

Also, while people who want to slow rooftop solar power’s growth are focusing on the two concerns I noted above, there are also many benefits that come from rooftop solar power — greater grid security, less pollution (which affects the poor much more than the wealthy), more resilient grids (helpful when, for example, you’re facing a blackout), and less need for transmission infrastructure (which costs a fortune). This is actually a super complex mathematical problem and the calculations can change significantly at different levels of solar power market share, different levels of energy storage capacity, different levels of other renewables on the grid, etc.

It makes no sense to me to handicap the solar power industry at a time when we need to urgently retire fossil fuel power plants. I would like to see independent, high-quality analyses of the costs and benefits of rooftop solar power for people of different classes and geographies. For any added costs utilities face from NEM, it seems sensible to me that it should be funded by the state or a specific pool of money that is raised for that purpose. Perhaps the NEM policy could include a system for investing in community solar power installations (even installed on large rooftops) that allow ratepayers without their own roofs to benefit in the same ways that homeowners can from NEM.

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