If you're California, the economics in favor of a solar solution will likely get worse soon

[holeydonut]

This topic was kind of buried in a recent thread about the Federal Investment Tax Credit (ITC)... so I'm forking it here.

It's fairly well publicized that the ITC is decreasing over the next few years. What's less well known is that the California Public Utilities Commission (CPUC) is making progress around the rules for how California utilities can set energy rates that Solar customers have to pay under Net Energy Metering 3.0 (NEM 3.0).

NEM 3.0 is expected to come into effect for new California PV installs in early 2021. This change to California retail energy rate policy plus the reduction to the investment tax credit makes Solar much less attractive in the coming months versus today.

NEM 3.0 is a bit of a misnomer; for retail customers it is not a forward progression compared to NEM 2.0. NEM 3.0 as it currently exists removes many of the previous protections that prevented a California Utility from significantly arbitraging the difference between daytime production versus high demand time when the sun has set.

Under NEM 2.0 we saw peak rates starting in the afternoon when the sunlight would be available. Under NEM 3.0, it's completely within the Utility's right to decrease the NEM rate during the afternoon and dramatically increase the NEM rate at dusk. This lowers the value of the energy generated by solar, and increases the cost of energy used during peak times after sunset.

This means future solar-only customers will experience much worse net-rates than what previous and current new solar installations have seen over the last few years. This would basically necessitate the installation of batteries to allow a homeowner to individually distribute their own clean energy storage and use during a day/night cycle.

The general root cause of this that I understand is that California has a glut of solar energy production capacity. So adding more rooftop residential solar isn't helping the utilities to manage their bottom lines. As a result, the utilities and policy makers want rooftop solar customers to pay what they feel is a "fair share" while preserving the interests large-scale solar infrastructure creation. All the California IOUs, energy contractors, large-scale realty, and corporate constituents have the laywers and purchasing power to move the NEM 3.0 policies to be more favorable for them. Retail consumers and small business solar do not have much advocacy since there are more important things for California to focus its public resources.

Under NEM 3.0, we should expect to see a negative impact to the residential solar installation market in the California. Installers are already challenged to dramatically reduce their prices to offset the out-going federal investment tax credit. Adding on further impact for worsening per-kWh savings could force many smaller companies out of business as they have to drop their pricing to give residential homeowners a reasonable ROI.

A couple of interesting reads for those with some time:

1) Blog post detailing what is happening and why the utilities are pushing to update the NEM rates:
https://sustainableenergygroup.com/solar/the-future-of-solar-is-at-risk-california-nem-3/

2) Public Database for R1407002 under which all of this is happening with the CPUC:
Proceeding Details

You can also leave a public comment on that second link.

TL;DR: If you're in California and are on the fence about solar and battery backup... you should expect to see worsening energy rates under NEM 3.0 and worsening incentives as the federal investment rebate continues to decrease.

 

[zanary]

Nice writeup. Even before this new NEM 3.0, we're already seen a move to promote self storage with the EV-2A plan, or that's how I've been seeing it as they shift peak rates to later on in the evening. The grid operators would love for you to self generate, self store, and self consume. There are indeed problems when there is a lack of proper sunlight in the winter seasons or when consumption is greater than the amount stored.

I think ultimately PV without storage won't make any sense, so all PV installations should include some level of storage.

The days when you can NEM back to PG&E are limited. We all need to be prepared for that reality as it's coming soon.

Maybe neighborhood Microgrids owned by HOAs could be a solution in the distant future once cost goes down...

 

[SoCal Dave]

I probably have a minority position, but I think if our current policies are producing too much daytime power and too little evening power we should not be encouraging even more daytime production. It makes sense to encourage reduced usage/generation during peak periods.

 

[gpez]

Really interesting stuff, thanks for sharing @holeydonut.

Under NEM 3.0, we should expect to see a negative impact to the residential solar installation market in the California. Installers are already challenged to dramatically reduce their prices to offset the out-going federal investment tax credit. Adding on further impact for worsening per-kWh savings could force many smaller companies out of business as they have to drop their pricing to give residential homeowners a reasonable ROI.

This is one of the things I wish people understood better about ubiquitous demand side incentives: it doesn't make things "cheaper" for buyers but rather is an indirect subsidy for sellers. This allows sellers that would otherwise not be profitable to operate and thus when the subsidy goes away so does their ability to stay solvent.

I probably have a minority position, but I think if our current policies are producing too much daytime power and too little evening power we should not be encouraging even more daytime production. It makes sense to encourage reduced usage/generation during peak periods.

Absent market manipulation by those larger players this is exactly the right take.

 

[Dukeybootie]

I probably have a minority position, but I think if our current policies are producing too much daytime power and too little evening power we should not be encouraging even more daytime production. It makes sense to encourage reduced usage/generation during peak periods.

Also agree with you. Previous incentives, rate plans, and policies were nice for many of us here but clearly not sustainable forever. If nothing else, NEM 3.0 is just a clear signal that battery storage should be strongly considered alongside solar to future-proof against any other unfavorable pricing changes.

 

[holeydonut]

I probably have a minority position, but I think if our current policies are producing too much daytime power and too little evening power we should not be encouraging even more daytime production. It makes sense to encourage reduced usage/generation during peak periods.

I agree with you that the way California is currently set up, there is an imbalance of solar. But I also think the existing electricity monopolies (I know they branded themselves as IOUs, but I'm not falling for that marketing BS) have mismanaged their situation, and have shifted a lot of their poor decisions as a huge burden for California retail energy customers to pay.

Yes, the utilities provide a great and necessary service, but it's done at a severely high cost resulting in the highest energy rates in the continental USA. As we've seen in recent months, the issue is further worsened since the grid is not resilient; does not have adequate capacity, and is at the forefront of safety conversations (in a bad way).

We know the utilities don't want more rooftop solar, but at least in the past there was a way for a homeowner to do what was in their own best interest instead of falling prey to the Monopoly. As is usually the case, what's good for the many is usually not very good for the individual. So over the last decade, resource-rich homeowners could slide into solar under NEM 1.0 and NEM 2.0. And these homeowners made costs go higher and higher for anyone that couldn't get solar.

But knowing there's been this snowplow effect of pushing a burden into the future, now the CPUC is basically setting up new rules to stick it to the younger, future homeowner who is struggling to make it in California. These new installs have no way "out" without having a huge investment in batteries. Plus the residential solar market is going to take a big hit as well; something I don't think business owners were anticipating.

I completely agree on the batteries. If the NEM 3.0 had incentives for storage, I think I'd agree with you that the spirit of NEM 3.0 was in the right place. But for now, all NEM 3.0 is doing is making sure the utilities get their "fair share" from retail future PV installs. And by "fair share" they mean something closer to those crazy high kWh rates that PG&E gets to charge today. It'll be amazingly difficult for a future homeowner under NEM 3.0 to reasonably get that per-kWh owed to PG&E down to a net-zero.

 

[bayareaever]

I agree with you that the way California is currently set up, there is an imbalance of solar. But I also think the existing electricity monopolies (I know they branded themselves as IOUs, but I'm not falling for that marketing BS) have mismanaged their situation, and have shifted a lot of their poor decisions as a huge burden for California retail energy customers to pay.

Yes, the utilities provide a great and necessary service, but it's done at a severely high cost resulting in the highest energy rates in the continental USA. As we've seen in recent months, the issue is further worsened since the grid is not resilient; does not have adequate capacity, and is at the forefront of safety conversations (in a bad way).

We know the utilities don't want more rooftop solar, but at least in the past there was a way for a homeowner to do what was in their own best interest instead of falling prey to the Monopoly. As is usually the case, what's good for the many is usually not very good for the individual. So over the last decade, resource-rich homeowners could slide into solar under NEM 1.0 and NEM 2.0. And these homeowners made costs go higher and higher for anyone that couldn't get solar.

But knowing there's been this snowplow effect of pushing a burden into the future, now the CPUC is basically setting up new rules to stick it to the younger, future homeowner who is struggling to make it in California. These new installs have no way "out" without having a huge investment in batteries. Plus the residential solar market is going to take a big hit as well; something I don't think business owners were anticipating.

I completely agree on the batteries. If the NEM 3.0 had incentives for storage, I think I'd agree with you that the spirit of NEM 3.0 was in the right place. But for now, all NEM 3.0 is doing is making sure the utilities get their "fair share" from retail future PV installs. And by "fair share" they mean something closer to those crazy high kWh rates that PG&E gets to charge today. It'll be amazingly difficult for a future homeowner under NEM 3.0 to reasonably get that per-kWh owed to PG&E down to a net-zero.

Will all the nem 2.0 customers be automatically switched to 3.0 or get grandfathered in?

 

[wjgjr]

This sounds a lot like what Hawaii seemed to go through based on what others posted. It does seem like an issue that needs to be confronted as part of the transition to renewables as the primary source of power. However, it seems short-sighted not to continue encouraging, at least in some way, rooftop solar since it is taking advantage of space that is already developed (though I understand pushing batteries to time-shift production.)

 

[jboy210]

I probably have a minority position, but I think if our current policies are producing too much daytime power and too little evening power we should not be encouraging even more daytime production. It makes sense to encourage reduced usage/generation during peak periods.

Or utilities should invest in storage solutions like Tesla Powerpacks.

And as a Tesla shareholder, I encourage this thinking.

 

[holeydonut]

Will all the nem 2.0 customers be automatically switched to 3.0 or get grandfathered in?

NEM 1.0 users were grandfathered for 20 years when NEM 2.0 kicked in (which should continue the original 20 year clock under NEM 3.0).

If you're an optimist; you'll presume that you'll see another 20 years grandfathering for completed NEM 2.0 installs once NEM 3.0 kicks in. But I don't think that language is set in stone yet yet.

If you're a pessimist; you'll assume that NEM 2.0 will continue to be better than NEM 3.0. But it's likely the utilities will find loopholes to still make sure they get their "fair share" from NEM 2.0 PV-only customers over time. As zanary mentioned as an example, PG&E was able to move time of use (TOU) customers to the EV-2A pricing model as a small end-around to the NEM energy costs rates. Since EV rules are different than the standard household NEM energy rules.

Personally, I expect PG&E and their large contingent of lawyers to find many clever ways to mess with rates on NEM 2.0 customers over the coming years as PG&E does it's magic of peak/off-peak management over time.

 

[IamMark]

Ugh. This is the exact thing that is making me question whether to pursue installing solar only. I ordered my system, and Tesla finished the design, but I have yet to sign off on the agreement. This is partially because I'm trying to get my roof replaced before they install the panels but also because I'm questing if solar is really the way to go. I can't afford to install a PowerWall nor did I really want to add in the complexity. But going solar only seems less and less ideal, and its making me wonder if I'm going to actually save any money.

If I get the system installed before the end of the year, should I still be grandfathered into NEM 2.0?

 

[holeydonut]

Ugh. This is the exact thing that is making me question whether to pursue installing solar only. I ordered my system, and Tesla finished the design, but I have yet to sign off on the agreement. This is partially because I'm trying to get my roof replaced before they install the panels but also because I'm questing if solar is really the way to go. I can't afford to install a PowerWall nor did I really want to add in the complexity. But going solar only seems less and less ideal, and its making me wonder if I'm going to actually save any money.

If I get the system installed before the end of the year, should I still be grandfathered into NEM 2.0?

I don't think the grandfather clause has been written yet for NEM 3.0. But we should expect some form of grandfathering or else a lot of those solar systems that were sold in the last few years will suddenly become less beneficial to those homeowner resulting in lawsuits. It's hard assume the grandfather duration will be 20 years like the NEM 1.0 users under NEM 2.0 though.

But yes, if you can lock in under NEM 2.0 as PV-only that should be economically better than doing PV-only under 3.0.

 

[bkp_duke]

And this is EXACTLY why I got enough solar and powerwalls to be over 98% self sufficient.

The utilities and gov will always game the system to benefit them. They only way to avoid this is to do as much as possible to remove yourself from the grid.

 

[SMAlset]

Or utilities should invest in storage solutions like Tesla Powerpacks.

And as a Tesla shareholder, I encourage this thinking.

Completely agree on this. Solar farms should have Megapacks like in Australia as part of their system.

Let’s not write-off advancements in power consumption. We eliminated almost all of our incandescent lighting for LEDs and many of those on dimmers. TVs and computers are much more efficient than they were years ago (Heck our TV viewing is from our iPad mostly, when before we always had the TV on). Same goes for A/C units; refrigerator/freezers. That will be our next purchase (2004 unit in now, 10 SEER). Car batteries will improve.

 

[aesculus]

Anything in the NEM 3.0 standard that would allow us to return our solar energy back anytime during the 24 hour day vs the exact moment we produce it?

I would be more than happy to give more energy back during peak, at peak rates, but today I can only use it myself.

 

[jboy210]

Anything in the NEM 3.0 standard that would allow us to return our solar energy back anytime during the 24 hour day vs the exact moment we produce it?

I would be more than happy to give more energy back during peak, at peak rates, but today I can only use it myself.

Pretty sure using your Powerwall for power price arbitrage is expressly forbidden in the US. As I understand it is common practice elsewhere and can pay for the cost of a PowerWall over time.

 

[getakey]

Pretty sure using your Powerwall for power price arbitrage is expressly forbidden in the US, if you have solar. As I understand it is common practice elsewhere and can pay for the cost of a PowerWall over time.

did you mean "unless you have solar"?
We rate arbitrage with solar and PWs

 

[jboy210]

did you mean "unless you have solar"?
We rate arbitrage with solar and PWs

I thought we got the same rate for excess production all the time at true up.

 

[holeydonut]

Pretty sure using your Powerwall for power price arbitrage is expressly forbidden in the US. As I understand it is common practice elsewhere and can pay for the cost of a PowerWall over time.

Yeah the only thing a US consumer can export to the grid is solar energy. It is illegal to export energy from the Powerwalls, generators, etc. And it's illegal to charge Tesla Powerwalls using grid energy (except when evoked by a Stormwatch or PSPS emergency event).

Under NEM 2.0, a PV customer without Powerwalls can reduce their energy use during the daytime peak hours to send as much energy back as possible. But when the sun sets, it's still peak time, so things kind of "net out" in the NEM 2.0 world for this PV only house assuming this homeowner still has to use use peak grid energy to live when sunlight isn't available during dinnertime.

A user under NEM 2.0 with Powerwalls is incentivized to charge their Powerwalls rather than export to the grid. This household will try to bank enough energy during the day during both non-peak and peak daylight time to charge the Powerwalls for later. Then, the homeowner tries to live off of the stored energy during peak and off-peak dark hours. The goal here is prioritized to not touch grid peak energy after sunset since it's so expensive. This is great concept for NEM 2.0; but it seems like this will be an absolute must-have under NEM 3.0.

Under NEM 3.0 expect everything to get hyper-punitive for using energy during peak time after sunset. It would probably be expected that under NEM 3.0, your utility company will add a "super peak" type of tier from 6pm to 9pm where the sun isn't up but houses consume a lot of energy. This means a PV-only customer has to use super-expensive energy at night, but their daytime export to the grid became less valuable in comparison. So it makes 'netting out' much more difficult.

This is why in recent months the only real progress the NEM coalition has made is making sure a calculator is available to help a potential solar customer visualize the differences between their normal tiered rate and what they'd get as a PV customer on a TOU plan. In my opinion, getting a calculator provided by PG&E with bull-crap rate and usage estimates will just trick people. In practice NEM 3.0 is going to make it super hard to get the ROI anywhere near that experienced by NEM 1.0 and 2.0 households.

Completely agree on this. Solar farms should have Megapacks like in Australia as part of their system.

Let’s not write-off advancements in power consumption. We eliminated almost all of our incandescent lighting for LEDs and many of those on dimmers. TVs and computers are much more efficient than they were years ago (Heck our TV viewing is from our iPad mostly, when before we always had the TV on). Same goes for A/C units; refrigerator/freezers. That will be our next purchase (2004 unit in now, 10 SEER). Car batteries will improve.

You must have missed Trump reversing course on the LED light bulb thing. Even bulb makers like GE and Philips were confused why anyone would want incandescent bulbs. But Trump says they make people look kind of Orange.

Trump Administration Reverses Standards For Energy-Efficient Lightbulbs
Trump: I look orange, but so do you

 

[Southpasfan]

It looks to me like the actual cost of power does not vary as much as the time of use rates vary. Obviously the delivery system does not vary (it does not cost any more to deliver the electricity regardless of time of day).

The price differentials seem designed to help dissuade people from using electricity when the only source is gas fired plants.

But the key is the drop in price in battery storage.

I can see the homeowner side argument for 1:1 net metering. The utility has no costs for the free extra electricity it gets when a residential customer puts up panels and exports to the grid. Why shouldn't the same customer get the benefit of netting out?

Well, like many arguments, its not completely self contained. You have to make some assumptions. If the extra cost of "peak" electricity is not because it actually costs more but to dissuade people from using electricity during that time period, giving residential solar producers 1:1 credit for electricity they produce during non peak time (while nice for us) is not in line with the whole point. If the "whole point" is to suppress usage in the early evening excess solar produced in the morning, unless its stored, does nothing to reduce usage later.

I think the utilities are just greedy, because I don't think residential solar is that much of a factor.

But it is an argument for driving down the cost of solar-plus powerwalls. Its only if you have storage that you (in this case, the "you" is us, not the greater population) can use all the energy the panels produce if the system is sized to cover close to or more than 100% of usage.

I just looked at CAISO and its already after 5 p.m. and the cost has not gone up.