Will California NEM 3.0 increase home energy storage installations?

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By Charles W. Thurston December 27, 2022

Utilities have been large winners within the California solar + storage market in mid-December, convincing the California Public Utilities Commission (CPUC) to slash the worth of solar energy returned to the grid by 75 %, or as little as a nickel/kWh, efficient mid-April 2023. This ruling — Net Energy Metering (NEM) 3.0 — below contentious research for 2 years, will drag out the amortization timetable for each solar and storage system adoption for residential and industrial clients alike.

The measure was nominally aimed toward encouraging residential storage adoption for solar properties, however does so by lessening the worth of solar programs by increased Time of Use fee modifications. Thus, the inducement for brand new storage is primarily price avoidance.

“Many of the updates we see in NEM 3 are designed to prioritize the adoption of energy storage with solar by making them clearly more profitable for solar consumers who can generate energy, store it, and sell back excess energy to the grid at peak times when time-of-use prices are at their highest,” acknowledged Aurora Solar, CEO Chris Hopper and CRO Sam Adeyemo. “NEM 3 is trying to accelerate homeowner energy storage adoption to make up for the lack of grid storage capabilities.”

The California solar + storage market is big and its affect on the grid is simply as large. California now has some 12 GW of distributed solar technology put in, equal to almost 25% of peak demand within the state. Furthermore, California has greater than 80,000 customer-hosted batteries linked to the grid, with a 900 MW potential, based on a September research by CALSSA.

“It is important that everyone understands that with this (change), a battery system is still more expensive under NEM 3 than NEM 2. So, all the hullabaloo about this decision being about storage is half spin. Yes, we’ll build more storage under the decision because it essentially punishes stand-alone solar systems, but it doesn’t exactly move us forward on storage,” surmises Bernadette Del Chiaro, the chief director of state commerce group California Solar & Storage Association (CALSSA).

As a results of the brand new NEM 3.0 guidelines, the California solar + storage market could enter a boom-bust cycle.

“Enphase Energy states, ‘Based on data from other states, cutting (the) solar value proposition by more than half — four months from now — will lead to a deluge of installation requests in the first quarter of 2023, followed by a precipitous curtailment. This will not only fail to sustainably grow the solar market, but it also risks debilitating it, exacerbating supply chain issues, disrupting small business cashflows, and jeopardizing roughly 65,000 California solar jobs.’”

“More solar installers are going to need to start offering energy storage as part of their offerings in order to offer systems that provide the best ROI possible,” Hopper and Adeyemo say. “The average price of installations sold is likely to go up because of this as well.”

Distributed storage vs. Traditional utility spending

The backside line message of the opposition to the NEM 3.0 phrases could also be that California solar + storage capability motion merely has develop into larger than the curiosity of anyone utility.

“The biggest battery in the world is located in garages around California, and they are helping keep the lights on for everyone,” stated Del Chiaro in early September, when the state suffered a warmth wave.

“CALSSA estimates that California utilities, purchasing electricity on the spot market on Tuesday (Sept. 6), spent an extra $450 million compared to a ‘normal’ hot day the previous week. $450 million spent on consumer batteries instead would be an investment in a resource that lasts 10-15 years, as opposed to one day,” Del Chiaro identified.

Supporters of the brand new ruling do exist although, they usually see a means for the bittersweet phrases of NEM 3.0 to encourage extra storage adoption to save lots of the solar day in California.

The resolution supplies small further electrical energy invoice credit to residential clients who undertake solar or solar paired with battery storage within the subsequent 5 years. The credit are set by a mechanism known as the Avoided Cost Calculator (ACC) that’s used to calculate the price a utility avoids for every kilowatt-hour of electrical energy it doesn’t have to purchase from the wholesale market when rooftop solar panels present the energy as an alternative. Customers are assured these further invoice credit for 9 years.

Under the brand new tariff, common residential clients who set up solar are anticipated to save lots of $100 a month on their electrical energy invoice, and common residential clients who set up solar paired with battery storage are anticipated to save lots of no less than $136 a month, the CPUC reckons. With these financial savings on their electrical energy payments, new solar and solar + battery storage clients ought to totally repay their programs in 9 years or much less, on common, the CPUC calculates.

To deal with energy justice, there is also an extra $630 million in state funding put aside by the California legislature for residential low-income solar + battery storage adopters.

“In the short run, NEM 3.0 will make solar energy less lucrative to California residents and it will give the appearance that state utilities are not environmentally friendly,” warns Elad Goldberg, VP of initiatives and engineering at Kuubix Construction Group. “But in the long run, if NEM is done correctly in the future, privately placed home storage batteries will make consumers more aware of their energy needs and consumption patterns, educating them to conserve energy, use it wisely, and reduce their overall energy footprint.”

By encouraging extra storage, “NEM has the potential to almost completely liberate Californians from the centralized electrical grid, zeroing their electrical bills while increasing their power resiliency during periods of blackouts and fires,” Goldberg argues.

Proponents of this drastic change level, long-term, to how Hawaii modified its export incentives to encourage battery adoption and self-consumption.

Point-By-Point points raised

Regardless of the how efficient the rule could also be at netting extra battery storage on the grid, was it logical to take action largely on the expense of solar itself?

“The change in pricing structures is going to have a much larger impact on low-income households that were interested in solar adoption but no longer will see the returns needed to make it a viable option, nor have the financial flexibility to also invest in storage solutions,” posit Hopper and Adeyemo.

Analysts proceed to level out the flawed logic underpinning the premise for the speed modifications in NEM 3.0. Here’s a abstract of the important thing factors in competition filed within the CPUC hearings on Dec. 5 by the Clean Coalition’s Policy Manager Ben Schwartz:

  • The Proposed Decision (PD) underestimates the advantages of NEM and overestimates the prices.
  • The PD ought to mandate annual assortment of NEM statistics and permit for swift reform, if mandatory.
  • The PD doesn’t go far sufficient to incentivize deployments for renters.
  • Environmental Working Group (EWG) raises an essential level about aggregated distributed technology offering worth that’s on par with utility-scale technology.
  • The oversizing allowance for NEM programs needs to be 75% not 50%.
  • The payback interval for non-export programs needs to be used as a litmus check to judge the Net Billing Tariff.
  • The fee ought to wait to go a Successor Tariff till a full up-to-date evaluation is accomplished.

“The Proposed (now final) Decision relies entirely on cost-effectiveness and cost-shift metrics to justify the value of transitioning from NEM 2.0 to the Net Billing Tariff, a frame of reference that does not consider any empirical analysis on the impact that the PD will have on market growth,” wrote Schwartz.

While NEM 3.0 could settle one short-term fee concern within the relationship between investor-owned utilities in California and their clients, many different urgent fee points stay.

“Given the commission’s focus on affordable rates and preventing cost-shifts, we hope to see swift action on the real drivers of electric rates: transmission spending, wildfire mitigation costs, insurance costs, and victim funds California ratepayers are footing the bill for (despite legal rulings finding the utilities at fault),” Schwartz writes. “Up to this point, the sole focus on NEM appears to be scapegoating distributed generation as the cause of high electric rates, when all the data says otherwise.”

Opponents to the brand new ruling counsel that the CPUC was sporting blinders to the present price construction within the energy market.

“Utilities claim solar makes the energy bills of non-solar customers more expensive. But in reality, utility profits, infrastructure investment, transmission lines, and paying for their bad planning and the fires they cause are what drives energy rates up. Californians are not fooled, and real equity champions know energy fairness is about making rooftop solar panels and batteries more — not less — affordable for working families and lower-income Californians,” laments Del Chiaro.

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Tags: CALSSA, Clean Coalition, NEM 3.0, web metering

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