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California Decides the Future for Solar Is Net Metering

New state regulations attempt to strike a balance between rooftop solar owners and utilities in the nation’s largest solar market.
January 28, 2016

In a victory for the solar power industry, California’s Public Utility Commission voted Thursday to approve new regulations for net metering—the compensation to residential solar power owners for excess electricity that they return to the grid. The regulations will help set a course for distributed renewable energy in the largest solar market in the United States.

Net metering rules in California compensate solar generators for excess power at the full retail rate for the electricity (generally around 17 to 20 cents per kilowatt-hour). Utilities argue that those fees are overly generous, and that solar owners are piggybacking on the electrical grid without paying a fair share of its costs.

The California debate marks the latest in a series of battles between utilities and the solar industry over net metering. Last month the Nevada PUC imposed a utility-friendly system on solar owners in that state that dramatically reduces net metering fees and increases the fixed charges that solar owners must pay for their grid service, including those who purchased or leased solar systems under the prior rules. This week NV Energy, the state’s major utility, offered to grandfather existing solar owners under the previous rules for 20 years (see “Battles Over Net Metering Cloud the Future of Rooftop Solar”).

Today 45 states have some form of net metering, and the fees paid to solar owners have helped fuel the explosive growth of residential solar. California has about 450,000 rooftop solar arrays, representing nearly half of the solar capacity in the U.S. The commission’s plan maintains net metering fees at the full retail rate but also offers concessions to utilities, including additional minimum charges for solar customers and the establishment of time-of-use rates that raise the price of electricity consumed during hours of peak demand.

The California system will likely influence future net metering battles across the country. It “signals a future approach that can strike a balance between the interests of solar power owners and the legitimate costs to maintain the grid,” says Sachu Constantine, director of policy at the San Diego-based Center for Sustainable Energy.

Not everybody agrees. Caroline Choi, vice president for energy and environmental policy at Southern California Edison, says the commission’s decision “does not adequately address impacts to the vast majority of our customers who do not have solar, nor does it transition toward a future with fewer subsidies paid by non-[net metering] customers.”

The utilities’ objections do not account for the broader benefits that the spread of distributed solar provides, such as reducing the need to build expensive new power plants, making the grid more reliable and flexible, and limiting carbon dioxide emissions from the production of electricity, according to solar advocates. Utility resistance is delaying the transition to a cleaner and less monolithic energy system, says Constantine: “The nature of this revolution is that it’s inevitable. All we’re doing is arguing over the timing, and who gets to be winners and losers.”

Who wins and who loses has not been finally determined by today’s 3-2 vote. The commission has already said it plans to revisit the issue of net metering in 2019 to craft a more comprehensive system that accounts for the benefits and the costs of distributed solar power.

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