CPUC NEM 3.0 discussion

[BGbreeder]

What is the cost of capital you are using? The money you are spending on the solar+ESS could be earning money in a money market account, or investment in the stock market. So there is an opportunity cost that has to be considered in the calcs - a lot of people use 7% for these sorts of calcs, but with interest rates going up that may be on the low side.

While I think that it is never easy to forecast a future cost of capital, in today's markets, and geopolitics, I think trying to define a future cost of capital is unclear to put it mildly. As a proxy, I would suggest at least using someone's own existing rate of return, post taxes, on their own capital. Forecasting what sort of costs your local utility might impose is, in my opinion, a fools errand.

I also think that pricing other aspects of solar/PV/generators in terms of resiliency, the value of being able to do "X", or "Y", the ability to stay in one's house, or supporting medical needs are much harder to price.

I have neighbors who had to move to hotels on short notice whenever we had power issues. A generator was an easy investment for them.

Just my $0.02...

BG

 

[sorka]

To add some fun to this, try adding what happens next year when most of us have a new $128 fixed monthly charge with a reduced utility rate which will further lower the export rate. That plus NEM 3.0 even with storage is doesn't have any sort of reasonable ROI so I wouldn't even get solar in that case. The only exception is if you have the guts to grid defect and terminate your connection entirely to PG&E or SCE.

 

[jjrandorin]

I don't know which existing thread this could be in

The one that I think it goes in, is the stickied NEM 3.0 discussion thread. Pricing is a part of that discussion, and its specifically about NEM 3.0 and energy products.

CPUC NEM 3.0 discussion

Are there non bypassable charges with NEM 3.0? Of course.

teslamotorsclub.com

 

[Redhill_qik]

What is the cost of capital you are using? The money you are spending on the solar+ESS could be earning money in a money market account, or investment in the stock market. So there is an opportunity cost that has to be considered in the calcs - a lot of people use 7% for these sorts of calcs, but with interest rates going up that may be on the low side.

The trade-off between investing funds versus buying solar or solar+ESS has come up multiple times. It is a valid topic, but it is very complicated and you need to consider a lot of different scenarios including cash vs loan, safe vs risky investment returns, inflation rates and utility rate increases. I ran a scenario using my NEM 3 modeling data with 15 year fixed loan at 6% and utility rate increases of 10% year. The PV Only case with the 30% Tax Credit is a net positive in Year 1, others are net positive in Year 5. In Year 16 the return is about $6,000 with 5 years of expected life left.

	PV+ESS	PV+ESS with 30% Tax Credit	PV Only	PV Only with 30% Tax Credit
Principal	$32,500	$22,750	$17,800	$12,460
Interest	6.000%	6.000%	6.000%	6.000%
Term	180	180	180	180
Monthly Payment	$274.25	$191.98	$150.21	$105.14
Annual Payment	$3,291	$2,304	$1,802	$1,262
Year 1
Pre-solar E-TOU-C	$2,316	$2,316	$2,316	$2,316
NEM3 @ $0.05	$652	$652	$933	$933
NEM Net Savings	$1,664	$1,664	$1,383	$1,383
Net - Loan Payment	-$1,627	-$640	-$419	$121
Year 5
Pre-solar E-TOU-C	$3,391	$3,391	$3,391	$3,391
NEM3 @ $0.05	$955	$955	$1,366	$1,366
NEM Net Savings	$2,436	$2,436	$2,025	$2,025
Net - Loan Payment	-$855	$133	$222	$763
Year 10
Pre-solar E-TOU-C	$5,461	$5,461	$5,461	$5,461
NEM3 @ $0.05	$1,537	$1,537	$2,200	$2,200
NEM Net Savings	$3,924	$3,924	$3,261	$3,261
Net - Loan Payment	$633	$1,620	$1,459	$1,999
Year 15
Pre-solar E-TOU-C	$8,795	$8,795	$8,795	$8,795
NEM3 @ $0.05	$2,476	$2,476	$3,543	$3,543
NEM Net Savings	$6,319	$6,319	$5,252	$5,252
Net - Loan Payment	$3,028	$4,016	$3,450	$3,990
Year 16 - No Loan Payment
Pre-solar E-TOU-C	$9,675	$9,675	$9,675	$9,675
NEM3 @ $0.05	$2,724	$2,724	$3,898	$3,898
NEM Net Savings	$6,951	$6,951	$5,777	$5,777
Net - Loan Payment	$6,951	$6,951	$5,777	$5,777

 

[holeydonut]

The one that I think it goes in, is the stickied NEM 3.0 discussion thread. Pricing is a part of that discussion, and its specifically about NEM 3.0 and energy products.

CPUC NEM 3.0 discussion

Are there non bypassable charges with NEM 3.0? Of course.

teslamotorsclub.com

Yeah that NEM 3.0 thread is 166 pages and a energy-policy-fever-nightmare gone wrong haha.

I'm trying to figure out how to help someone calculate potential savings under the new rules so this thread is a math exercise gone wrong heh.

I feel like NEM 3.0 is creating an unfortunate reality that residential solar is just a bad idea. But there are so many people still excited for the prospect of solar as a means to save money because that's how the value proposition has worked over the last two decades. I think there are going to be a lot of disappointed folks in the next few years; especially if solar installers continue to mislead prospective clients around their savings under NEM 3.0.

With the increased costs of PV + ESS (@Redhill_qik got 8 kWp-DC solar and 26 kWh ESS for only $36k gross before ITC?!), the ROIs are nowhere close today to what we would have been able to estimate a year ago.

For example, let's take his column labeled "PV+ESS with 30% Tax Credit" and create a sensitivity table around the investment costs. This is a wacky way to estimate payback/ROI assuming the same system & home's energy economics and interest rates; just varying up front costs.

Since my neighbor's quote is $51.5k gross / $36k net of the ITC; that marginal $13k of after-tax-investment-cost wipes out the ROI. The payback would be around year 30 lol.

 

[jjrandorin]

Im still not seeing any distinguishable difference pointing to why this conversation doesnt go in the stickied thread, other than "the other one is too big and I want people to see this one'. With that being said, I thought that when I first saw it (which was shortly after it was posted), as well and it still a separate thread, at least right now.

To be transparent about the reason I didnt merge it then, and its still here now, is because this subforum is still a smaller "niche" one with a number of regular members. It also doesnt tend to have the vitriol of some of the other subforums (and I actually work fairly hard to keep it this way). Since this was a discussion started by one of our niche subforum regular members, I decided to leave it here even though I thought it went in the other thread, in the hopes that the discussion would be clinical and not "NEM 3.0 policy" focused.

 

[Redhill_qik]

With the increased costs of PV + ESS (@Redhill_qik got 8 kWp-DC solar and 26 kWh ESS for only $36k gross before ITC?!), the ROIs are nowhere close today to what we would have been able to estimate a year ago.

Checking the Tesla solar pricing today, a similar (8.5kW vs 8.16kW) PV+ESS would be $44,255 versus my original $32,540 (after tax credit $30,621 vs $22,788 ) which is 36% pre-credit or 34% post-credit increase. The PV only (if they offered it) would be $25,885 versus $17,800 which is a 45% increase.

Using this current pricing, it would look like this, assuming the same 10% increase in kWh costs. Actually it would be a bit better as the system would be producing a bit more.

 

[holeydonut]

Checking the Tesla solar pricing today, a similar (8.5kW vs 8.16kW) PV+ESS would be $44,255 versus my original $32,540 (after tax credit $30,621 vs $22,788 ) which is 36% pre-credit or 34% post-credit increase. The PV only (if they offered it) would be $25,885 versus $17,800 which is a 45% increase.

Using this current pricing, it would look like this, assuming the same 10% increase in kWh costs. Actually it would be a bit better as the system would be producing a bit more.

View attachment 965522

So what's your PV + PW w/tax credit break even with the latest pricing from Tesla?

PS, Tesla won't install on the homes in this subdivision due to the tile roof type. So myself, my neighbor across the street and the the neighbor getting the quote to kick-off this thread cannot go with Tesla Energy. Tesla Energy rejected my home in 2019, and the guy across the street just had Tesla do a site survey last month and he got rejected in 2023. I feel like Tesla could save some money by blacklisting our subdivision from ordering PV + ESS heh.

 

[Redhill_qik]

So what's your PV + PW w/tax credit break even with the latest pricing from Tesla?

With all of the caveats, assumptions and conditions from my prior post for my pre-solar usage I would be losing money until year 13 with a PV+ESS system and until year 7 with a PV only system based.

One key assumption is that electricity rates will go up at 10% a year, this turns my original $2,316/year cost into $9,675 in year 16 which seems utterly insane to think about. Lowering that to 5% changes to breakeven for PV+PS to year ~18 and PV only to year 12.

 

[cali8484]

I feel like NEM 3.0 is creating an unfortunate reality that residential solar is just a bad idea. But there are so many people still excited for the prospect of solar as a means to save money because that's how the value proposition has worked over the last two decades. I think there are going to be a lot of disappointed folks in the next few years; especially if solar installers continue to mislead prospective clients around their savings under NEM 3.0.

Folks are smarter than you think. Installers can say whatever they want but it's going to be a hard sell as the history of killing NEM in Hawaii and Nevada clearly show a 25-40% demand drop.

 

[holeydonut]

With all of the caveats, assumptions and conditions from my prior post for my pre-solar usage I would be losing money until year 13 with a PV+ESS system and until year 7 with a PV only system based.

View attachment 965571
One key assumption is that electricity rates will go up at 10% a year, this turns my original $2,316/year cost into $9,675 in year 16 which seems utterly insane to think about. Lowering that to 5% changes to breakeven for PV+PS to year ~18 and PV only to year 12.

View attachment 965578

Yeah trying to predict what the CPUC is going to authorize PG&E to be able to charge is probably a bigger factor than the actual NEM 3.0 policy hah.

I do think the CAGR energy cost increases over the next 25 years will probably be closer to 10% than 5% though. Because PG&E loves to spend that money; and the CAISO members love to spend that money.

Anyway, the only real takeaway I have with all these tables is that my neighbor who is spending $52k gross is probably looking at a B/E around year 15... and their likely experience is going to be way different than what the installer is asserting.

It kind of hurts to think about... but I'm going to at least try to get him to do something other than adding PV + ESS. Since he is all about seeking savings, it seems like he should spend that money on something else.

Like maybe a bathroom remodel or the kids' college funds. I tried to get him into a discount lease on a Mercedes EQS or BMW iX, but his wife shot down that idea hehehe.

 

[Redhill_qik]

I do think the CAGR energy cost increases over the next 25 years will probably be closer to 10% than 5% though. Because PG&E loves to spend that money; and the CAISO members love to spend that money.

The biggest unknown I think is the movement to an income based monthly access charge. The access charge is supposed to reduce the kWh rates, so if it does then that will really change the cost/benefit analysis. This change would likely a bigger impact to solar adoption than the NEM 3.0 rules.

Anyway, the only real takeaway I have with all these tables is that my neighbor who is spending $52k gross is probably looking at a B/E around year 15... and their likely experience is going to be way different than what the installer is asserting.

Keep in mind that the tables that I posted are based on my usage and system and I don't use as much as others do. If you can get a year's worth of hourly data and give me some details on the PV configuration I will run those numbers.

 

[BGbreeder]

The biggest unknown I think is the movement to an income based monthly access charge. The access charge is supposed to reduce the kWh rates, so if it does then that will really change the cost/benefit analysis. This change would likely a bigger impact to solar adoption than the NEM 3.0 rules.


Keep in mind that the tables that I posted are based on my usage and system and I don't use as much as others do. If you can get a year's worth of hourly data and give me some details on the PV configuration I will run those numbers.

I couldn't agree more. As the proposals are proposing meter plus lower per kWh costs, I think it offers some perverse incentives to most consumers not to conserve.

I'm with @holeydonut that given past performance and the current set up of the CPUC, I think a CAGR in power costs of 10% seems more likely than 5%. But that's just me. I don't have a crystal ball.

All the best,

BG

 

[holeydonut]

Keep in mind that the tables that I posted are based on my usage and system and I don't use as much as others do. If you can get a year's worth of hourly data and give me some details on the PV configuration I will run those numbers.

Yeah, I know everyone's system is different but I think you (even with your well lit hallway) are a reasonable analog for someone in Zone X installing a solar and battery system of approximately this size.

Installers only ask for the last 12 month of PG&E bills; because anything more complicated than that is usually too difficult for a normal homeowner to digest.

Historically an important draw for prospective homeowners to install solar is for cost savings. Unfortunately I feel like some of these installers are simply telling prospective people what they want to hear (5 to 6 year break-evens), and those homeowners could be surprised (in a bad way) if the savings don't materialize.

Here's a chart from another vendor's pitch (same PV energy offset and about the same battery size). They think the NEM 3.0 savings with PV+ESS are even greater than what I posted before. Even though this quote is 15% more expensive up front, it is offset by pie-in-the-sky expected savings. I know TMC users in California won't fall for this type of hype, but it is kind of disheartening to think some people are carefully planning their household budgets/finances under the guise of this type of thing under NEM 3.0.

 

[holeydonut]

I couldn't agree more. As the proposals are proposing meter plus lower per kWh costs, I think it offers some perverse incentives to most consumers not to conserve.

Keep in mind that the tables that I posted are based on my usage and system and I don't use as much as others do. If you can get a year's worth of hourly data and give me some details on the PV configuration I will run those numbers.

I broke my reply to your post up into two replies...

I think all homeowners that aren't on CARE/FERA would be whacked by the income based "grid access tax". While yes a solar ROI would be impacted, I feel like it isn't realistic to expect a solar installer to discuss a possible income tax with a homeowner in a PV+ESS proposal. However, focusing on what we do know about NEM 3.0 and existing policy... I feel like the installer proposals are mega hyping the savings potential in an unrealistic way.

It's unfortunate the installers need to keep this hype going in their pitches, or else they'd lose a lot of customers in the sales funnel.

I mean, imagine if you're a legit installer and unwilling to bend the savings-reality too far. You'd lose a bunch of sales to companies who seem more than happy to extol savings that have no way to really materialize under NEM 3.0. This seems to be unhealthy for the residential solar industry in general.

 

[BGbreeder]

I broke my reply to your post up into two replies...

I think all homeowners that aren't on CARE/FERA would be whacked by the income based "grid access tax". While yes a solar ROI would be impacted, I feel like it isn't realistic to expect a solar installer to discuss a possible income tax with a homeowner in a PV+ESS proposal. However, focusing on what we do know about NEM 3.0 and existing policy... I feel like the installer proposals are mega hyping the savings potential in an unrealistic way.

It's unfortunate the installers need to keep this hype going in their pitches, or else they'd lose a lot of customers in the sales funnel.

I mean, imagine if you're a legit installer and unwilling to bend the savings-reality too far. You'd lose a bunch of sales to companies who seem more than happy to extol savings that have no way to really materialize under NEM 3.0. This seems to be unhealthy for the residential solar industry in general.

I can't speak for others, but I know that when we were soliciting quotes for solar, every single one had "when pigs fly" and "unicorns with pixie dust" assumptions built into the ROI projections. They are selling, you (your neighbors) are buying, and I think it behooves buyers to run their own numbers, or hire someone who isn't drinking the Kool-Aid.

All the best,

BG

 

[getakey]

I can't speak for others, but I know that when we were soliciting quotes for solar, every single one had "when pigs fly" and "unicorns with pixie dust" assumptions built into the ROI projections. They are selling, you (your neighbors) are buying, and I think it behooves buyers to run their own numbers, or hire someone who isn't drinking the Kool-Aid.

All the best,

BG

I actually had a great experience with my installer. We had just moved into the house so we had no utility bills for history. Well, we had one month which was June. I worked with the sales guy who was pretty technical (and I have an engineering background). We calculated what we thought the house would need. I tracked my actual production against what their simulator predicted for the first year. My production on a monthly basis was within 5% of their predictions and most of the time actual was higher not lower. Further my first true-up was ~$150. This was before I got PWs so it was PV only. I later replaced an old AC/NG furnace with a heat pump and added solar to cover the increasee. Again, we estimated the usage and were very close. About the same time I added PWs so I can manage their use to get zero true-up.

 

[holeydonut]

I can't speak for others, but I know that when we were soliciting quotes for solar, every single one had "when pigs fly" and "unicorns with pixie dust" assumptions built into the ROI projections. They are selling, you (your neighbors) are buying, and I think it behooves buyers to run their own numbers, or hire someone who isn't drinking the Kool-Aid.

All the best,

BG

Aren't you seeing your expected ROI under NEM 2.0? I don't about @h2ofun since he built his own utility scale solar array... But for our household, the annual electricity bill is now just the NBCs which were like $140. Compare that with the $4,500 in electricity spent in the first calendar year we were in this house. You don't know PG&E-pain unless you were ever on the tiered plan and hit Tier "!". Yikes.

And the gravy on top is that I no longer get those stupid nasty-grams from PG&E telling me I am a horrible energy waster and threatening to put those black boxes on my AC condensers. Plus we're charging EVs for peanuts. AAANNNNDDDD I can use whatever energy I want from 3pm to midnight because screw the TOU rates.

Ultra simple ROI (ignoring the energy cost increases that PG&E is requesting from the CPUC)... about 7 year break-even on this NEM 2.0 system. I don't think installers were padding much on their NEM 2.0 sales pitches at all. Edit on owned systems… some solar leases were whack.

The only thing I regret is not getting heat pumps and instead we retained our natural gas heating. Dumb dumb dumb dumb dumb dumb

 

[mikesm]

Aren't you seeing your expected ROI under NEM 2.0? I don't about @h2ofun since he built his own utility scale solar array... But for our household, the annual electricity bill is now just the NBCs which were like $140. Compare that with the $4,500 in electricity spent in the first calendar year we were in this house. You don't know PG&E-pain unless you were ever on the tiered plan and hit Tier "!". Yikes.

And the gravy on top is that I no longer get those stupid nasty-grams from PG&E telling me I am a horrible energy waster and threatening to put those black boxes on my AC condensers. Plus we're charging EVs for peanuts. AAANNNNDDDD I can use whatever energy I want from 3pm to midnight because screw the TOU rates.

Ultra simple ROI (ignoring the energy cost increases that PG&E is requesting from the CPUC)... about 7 year break-even on this NEM 2.0 system. I don't think installers were padding much on their NEM 2.0 sales pitches at all.

The only thing I regret is not getting heat pumps and instead we retained our natural gas heating. Dumb dumb dumb dumb dumb dumb

That sounds about right for NEM 2.0. What would happen if you plugged in the NEM 3.0 rates into your model and actual experience in terms of ROI?

 

[holeydonut]

That sounds about right for NEM 2.0. What would happen if you plugged in the NEM 3.0 rates into your model and actual experience in terms of ROI?

My NEM 3.0 model sucks, but using general assumptions around generation/usage my break-even was around 12 years under NEM 3.0 assuming the glide path on the ACC-export-value of the energy that went back to PG&E. I'm ignoring the income-based-fixed-cost-BS and ignoring any VPP participation or other possible oddball value-sources since those aren't predictable.

Without the (edit: added this link) 9-year ACC-glide-path thing (assuming the value of solar export is simply the ACC 2030 estimates without any other subsidy), my break-even was around year 18; which I guess puts me similar to what @Redhill_qik came up with above. Although I don't know how he factored in the ACC glide path, so maybe his 18 years was actually WITH the glide path; and his "no glide path" break even would be like 24 years.

Anyway, NEM 3.0 isn't looking very good from a homeowner's perspective; and I cannot reasonably defend possible savings anywhere near what I'm seeing in these quotes from vendors. Which kind of sucks, because homeowners want to believe in the savings, and the installers are telling folks there will be savings.

I spent the last 3 years telling my neighbors about how great solar energy was + how great on-prem batteries where. If I retract those positions because "well it's only good under NEM 2.0 sorry bro" it just sounds kinda whack since the installers say NEM 3.0 hasn't hurt savings/economics at all.

Question for y'all... don't you have neighbors ask you about your PV+ESS? What would you tell them now? "you're too late sorry?"