California Revises Rooftop Solar Subsidy to Promote Battery Storage
The California Public Utilities Commission (CPUC) voted to approve a proposal to modernize the Net Energy Metering (NEM) subsidy for rooftop solar panels to provide greater incentives to install batteries along with solar systems. The proposal takes effect on April 15, 2023.
The new plan reduces by 75% how much credit solar customers receive when exporting their excess power to the grid. It also changes the electricity rate structure to encourage people to store their solar energy during the day and export it or use it in the evening. Critics say the proposal could slow rooftop solar installations.
The NEM subsidy was implemented in 1997 and has helped rooftop solar growth in recent years. Utilities, however, argue that the amount solar customers pay does not cover their share of grid maintenance costs and this increases costs for non-solar customers. In December 2021, CPUC released a proposal that would have required monthly grid connection fees for new solar customers. The plan was rejected of public backlash. The new plan does not include the grid connection charges.
Proposal
The proposal provides extra credits to residential customer bills who adopt solar over the next five years. The proposed:
Rate structure: Applies new residential rates to incentivize electricity use when it is most beneficial for grid reliability. These rates have significant differences between peak and off-peak prices to incent battery storage and load shifting from evening hours to overnight or midday hours. The rates promote technologies such as battery storage, electric vehicles, and heat pump water heaters, which are important for achieving carbon neutrality.
Solar tariff: Credits solar and solar plus battery storage customers for the electricity they export to the grid based on its value, as determined by the avoided cost to their utility of buying clean electricity elsewhere. This will incentivize solar exports during the late afternoon and early evening hours, particularly in the summer, when the grid is the most stressed.
Solar credits: Provides extra electricity bill credits to residential customers who adopt solar or solar paired with battery storage in the next five years, which are paid on top of the avoided cost bill credits. Customers lock in these extra bill credits for nine years.
Additional low-income credits: Provides low-income customers more access to solar 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 (nine years or less).
Greater solar coverage: Allows solar systems to cover 150 percent of a customer’s electricity usage to accommodate future electrification of appliances and vehicles.
A.B. 327 (2013) requires the CPUC to reform the NEM program, as well as conduct rate reform and distribution planning activities.