Thoughts on Solar

On the heels of the sad announcement of the bankruptcy filing of SunPower - a 39-year-old stalwart of the solar industry - and the loss of 290 jobs in California alone, the California Public Utilities Commission (CPUC) just announced that it will decrease the amount of compensation paid by solar system owners for energy sent back onto the grid!

The CPUC had already slashed the so-called net metering rates with a ruling that took effect a year ago April.  As a result, the payback period for solar installations nearly doubled.  Combined with stubbornly high interest rates and the impact was devastating.  Scores of companies - including a giant like SunPower - closed their doors resulting in thousands of lost jobs.  And for what?  To pad the pockets of the investor-owned utilities like SCE? Outrageous.

But the CPUC isn’t done doing the utilities’ dirty work.  They just finalized a rule change that will slash compensation rates even further!  Starting next year, SCE export compensation will be as low as 3.5¢/kWh!

The only good news - and I’m reaching here because the news is catastrophic - is that for projects that submit interconnection agreements this year, they are insulated from these more draconian compensation rates for nine years.  That means consumers have less than four months to lock in these rates.

Bottom line: if you live in SCE territory and you have been thinking about solar, you owe it to yourself to act now! Give us a call at 626-793-6025, or email us at info@runonsun.solar.

It is sometimes said that deadlines focus the mind.  Well, if you are in SCE territory, there is a deadline looming that you need to keep in mind if you are thinking of going solar in the next three years!

The deadline imposed by the CPUC upon SCE customers to get into solar under the existing, far more lucrative NEM 2.0 rules is coming fast.  Here are the key takeaways:

• You must have a complete application in to SCE - and accepted by them - before April 15th!
• SCE loves to reject applications at least once - if that happens to you, so that it isn’t approved before the 15th, you are out of luck!
• YOU DO NOT NEED TO COMPLETE THE PROJECT BY THE DEADLINE!!!  YOU ONLY NEED TO HAVE A COMPLETE APPLICATION BY THEN.
• Projects can be completed anytime within three years of submission!

I know people don’t think this way, but if adding solar is on your “to-do” list but realistically not for a year or two, YOU NEED TO GET YOUR APPLICATION ON FILE NOW!  It’s crazy, and it isn’t how we want to do business, but these are the cards we’ve been dealt.

One last point - this only applies to SCE, PG&E, and SDG&E customers.  If your utility isn’t one of those three, your fine, this does not affect you at all.

TL;DR: NEM 3.0 will drastically lower payback rates in SCE territory
Act before April 14th to lock-in the better rates of the current rules!

(NB: If you are NOT an SCE customer, you can ignore this entirely as it won’t affect you at all!)

In December, the California Public Utilities Commission (CPUC) unanimously approved the Net Energy Metering (NEM) 3.0 proposed decision, making it the law in the territories serviced by the three Investor-Owned Utilities (IOUs) - PG&E, SDG&E, and SCE.  While the final rules aren’t as bad as they started out to be (more on that below), they are still a disaster for the industry.  Here’s our take…

NEM Today…

NEM is the policy that allows solar power system owners to be compensated for the energy that they export to the grid.  Typically, because energy use at home is lower during the day, while your solar system is producing its greatest amount of energy, that energy goes back onto the grid, where the utility then sells it to your neighbor, just as if they had generated it themselves.  But the utility didn’t need to incur any cost to generate that energy, so it is only fair and right that the customer who had invested in that solar power system should be compensated for the excess they provide to the grid.

NEM has had two distinct iterations in IOU territory.  The original form of NEM was full retail compensation - that is, the utility customer was credited one-for-one for the energy that they export.  Since that is the same amount that the utility gets to charge the neighbor receiving that energy, the transaction is essentially a push for the utility.  While that is still the case with the municipal utilities like PWP and LADWP, it is no longer the case with the IOUs in general and SCE in particular.

Back in 2017, the CPUC rolled out NEM 2.0 - and while it was a disappointing departure from full-retail NEM, it wasn’t as bad as the IOUs wanted.  Instead, the changes added a one-time interconnection fee ($75 in SCE territory), required solar customers to be placed on Time-of-Use rates (as opposed to the more economically beneficial tiered rates), and introduced the concept of Non-Bypassable Charges which reduced the value of exported energy by a little over two cents per kWh.  (You can read my post explaining NEM 2.0 here.)  Existing NEM customers were “grandfathered” in for twenty years, thereby guaranteeing that they would retain the value of their investment.

However, that wasn’t the end of the IOU’s war against rooftop solar.  It was understood that there would be a subsequent rulemaking - NEM 3.0 - and the IOUs vowed to bring solar to heel when that rulemaking rolled around.  Indeed, solar managed to thrive in the years since NEM 2.0 went into effect, with California installing more than 1.5 million solar systems by last September.  

I have written at length about the NEM 3.0 Proposed Decision that was released in December 2021, and the solar industry’s efforts to fight it off (as in here, here, here, here, here, here, and here)!  There was good reason for our sense of urgency and our advocacy: the PD was a disaster!  It would have threatened the grandfathering of existing NEM customers, it would have imposed an outrageous tax on new solar systems, and it would have drastically cut the compensation rate for energy exported back to the grid.  If approved as proposed, it would have decimated the solar industry in IOU territories.  Fighting back was our only option.

First - the Good News…

Our unprecedented advocacy had positive results.  The initial PD was withdrawn, and we bought 11 months of delay allowing thousands of additional solar systems to be installed under NEM 2.0.  The rules as adopted leave alone the grandfathering for NEM 1.0 and 2.0 systems which will remain under their rules for 20 years.  Most importantly, we killed the solar tax that would have added a monthly charge of $6/kW on all new systems!

We made a lot of noise and we defeated some of the worst provisions of the original PD - kudos to all who wrote, and spoke, and marched, and called - it made a difference.

And Now, the Bad News…

But as important as those results are, we took a major hit when it comes to the export value of solar energy sent back to the grid - on average, roughly a 75% haircut - and the change happens overnight!  Instead of providing a “glide slope” of reduced export rates over, say, a five-year phase-in period, the drastically reduced export rates land as of April 14.  This will create a “gold rush” to get applications in before the rules change - more on that below.

Not only did the CPUC drastically lower the export rate, they made the means of calculating it completely Byzantine in its complexity, making modeling of export savings more complicated by orders of magnitude.  Under existing NEM 2.0 rules, your compensation was tied to when the energy was exported (since all solar customers were put on a Time-of-Use rate).  That meant you could be getting compensated under one of six export values: essentially high, medium, and low periods for both Summer and Winter seasons. 

By contrast, the new system uses one value for every hour of the year - 8,760 discrete values!  Seriously?

In an effort to provide some clarity out of that chaos, our friends at CALSSA boiled that down into this heatmap that averages those values down to “just” 576 values (12 months times 24 hours, times two categories - weekday and weekend).  Here’s the weekday version (click for larger):

The color coding here is a simple gradient going from red for the lowest values to green for the highest.  There is one thing here that is really curious - see those two green numbers?  If you are exporting energy to the grid between six and seven p.m. during September, SCE is going to pay you nearly $3 for that energy!  Of course, there is very little solar output at those hours, but a properly programmed storage system can time its release of energy to coincide with those peak hours.

Clearly, solar power systems that also include storage will fair better under the NEM 3.0 rules than will solar only systems.  Which is great for those who can afford the extra expense of adding storage, but is awful for everyone else.

In addition to the vastly lowered export rates, all solar customers will be forced onto the TOU-D-Prime rate.  That rate structure imposes a monthly fixed charge of $14.  (Compare that to the 3.1¢/day rate imposed on the tiered, Domestic rate that SCE customers were historically paying.)

The On-Peak rates are eye-popping!  If you are using energy during that 4-9 p.m. window in the summer you will be paying 54¢/kWh!  While that peak is crazy high, the  differential between On-Peak and Off-Peak is enormous: 30.7¢/kWh.  Again, if you have storage and can shift energy from mid-day production peaks for use after 4 p.m., you can leverage that difference.

Of course this reliance on storage to make NEM 3.0 less painful is in discord to the IOU’s professed concern for the inequities of solar - i.e., that it is only for the rich. Making the payback period for solar longer for everyone simply makes it less affordable by working-class people.  Needing to add storage on top of that, really pushes these systems toward the rich, and away from the middle class.  But then, this was never about concerns over lower income customers, this was always about protecting SCE’s profits.

Going Forward

Ok, so we are stuck with a bad decision that goes into effect April 14.  In order to qualify for NEM 2.0, the interconnection agreement must be submitted no later than April 13, and must be “free of major deficiencies and includes a complete application, a signed contract, a single-line diagram, a complete California Contractors State License Board Solar Energy System Disclosure Document, a signed California Solar Consumer Protection Guide, and an oversizing attestation (if applicable).“  The ruling doesn’t define what a “major deficiency” is, and up until now, it has been SCE’s sole discretion as to whether an application was complete and valid.  We have seen applications kicked for the most minor of issues, and if you submit near the deadline, and SCE kicks the application and you now miss the deadline, the value of your project will have changed drastically for the worst.

I’m not sure what other companies will do, but this is our intention: WE WILL NOT GUARANTEE SYSTEM SAVINGS FOR ANY APPLICATION SIGNED AFTER MARCH 31!

We can be certain that there will be problems as we get closer to the deadline, so the above rule will be hard and fast, and our contracts will reflect that reality.  So, a word to the wise: if you are thinking about going solar in SCE territory this year - act NOW!  You do not need to complete the project this year to qualify - you just need the application in and complete.  You have up to three years to actually complete the project!

It’s gonna be a crazy first quarter - the joys of riding on the solar coaster!  Get in touch now so that we can get the process completed in a timely manner.

tl;dr - Come Rally with us on June 2, at 10:30 a.m. in Grand Park, DTLA!

As readers of this blog know only too well, the California Public Utilities Commission (CPUC) had proposed - at the urging of the investor-owned utilities (IOUs), that is SCE, PG&E, and SDG&E - a new set of rules for how solar system owners would be compensated for the energy they put back onto the grid.  In a nutshell, that proposal would have pushed the payback period for solar systems to twenty years or more!  In an epic bit of organizing, our trade association - the California Solar and Storage Association (CALSSA) - kicked up a ruckus that was clearly heard in Sacramento, by getting folks to sign petitions, issue public comments, testify to the CPUC for six hours straight, and two very loud, very colorful rallies in San Francisco and here in LA.  (If you missed that, you can read about the LA rally here.)

Thanks to those efforts, the original proposal was pulled back.  But that didn’t win the fight, as the CPUC is still talking about a Solar Tax that would destroy the value of rooftop solar for most Californians.

That’s why it’s time to lace up your protest shoes and attend the…

We need to more than double our impressive turnout from the last two rallies.  That means we need you!  And your kids.  And your friends.  And your kids friends - get the picture?

In case you need more detail - really, this is only about saving rooftop solar in California, so I wouldn’t think too many more details would be required but - let CALSSA’s Executive Director, Bernadette Del Chiaro, give you the Word:

On May 9, the CPUC took an unprecedented step of effectively issuing a new decision in the form of 14 questions. Those questions broke five months of silence, pulled back the curtain, and revealed what the CPUC is still thinking: tax solar and send the value of exports over a cliff. The CPUC has essentially floated a trial balloon to see how much push back they will get for proposing a solar tax (by a different name) and repackaging the solar cliff to make it sound nicer (ACC “plus”). Our job is to push back. Hard. Loud. Once and for all: No solar tax. No solar cliff. Not in California. Not now.

We need thousands of you. RSVP here.

Why June 2? For starters, because silence is acquiesce. Think about it. The State of California just floated a proposal to tax the behind-the-meter use of solar energy, again. Every day that goes by in which people aren’t reacting appropriately (i.e., freaking out), is a day in which the message back to our government is one of acceptance. That is certainly not our reality. If we could have, we would have rallied on May 10!
 
Another reason to rally on June 2 is because the CPUC has literally asked for our reaction to their “new” ideas: tax behind-the-meter solar consumption to the tune of $600 per year for the average customer (NOTE: the tax is not limited to the residential market – commercial market you could be caught up in this tragedy, too) and tie export values for everyone to the Avoided Cost Calculator which they have refused to adjust for the rising costs of natural gas, the crisis in the utility-scale market, and the demands of electrification. The CPUC has asked for our reaction by June 10. June 2 is simply the closest date to June 10 at which the CPUC is holding a meeting. The next meeting of the Commission is June 24 which would be too late.
 
Finally, there is never a good time to leave the office and come down off the roof. Collectively, we build more than 400 solar systems a day in California. That’s a lot of activity. And, with all the disruptions to supply chains along with the increased urgency due to this very campaign (ironically driving more people to solar than if they had promised to make gentle and gradual changes from the get-go), our days are busier and more complicated than ever. I get it. But what’s far more inconvenient and costly than shutting down your office for one day is closing your business or laying off half your staff in 2023 because the CPUC got NEM 3.0 horribly wrong. A stitch in time saves nine. Let’s save our market. RSPV now.
 
Finally, you might also be wondering why we should rally. Aren’t there other ways to make our voices heard? Of course the answer to that is, yes, there are many ways to make our voices heard. We are and should continue to speak out through petitions, letters to the governor, testimony that is being written by Brad now (to be submitted June 10), through media (like this question to Governor Newsom by Politico reporter last week), social media, and so much more. But to really be heard, we need to generate media attention too. We need to get on the nightly news and on the pages of the newspapers. Because when we do that, millions of voters hear our cry and we already know those millions are with us on the issue. 
 
It comes down to you reading this message and deciding to join the fray, the fun, the action. So, please join us in either Los Angeles or San Francisco on June 2. It will be worth your time. It will be fun. You’ll be glad you did it.
 
As always, email me with questions or comments.

p.s. Many people like to theorize about the likelihood of a Democratic governor in a pro-environment state harming the darling of the clean energy economy: solar. Putting aside the lack of understanding of how politics really works up here in Sacramento (hint: follow the money toward the path of least resistance), my ask to you is this: don’t leave this critical decision to political theory. Your active involvement in this campaign – most importantly joining us June 2 – will help make sure we win in reality, not just in theory. Let’s not leave anything this important to chance. Join us. 

This is up to us.  This is our fight.  Get in the game, people!  See you on June 2nd!

New solar clients in Southern California Edison territory (along with their counterparts in PG&E or SDG&E territories) will soon find themselves operating under the not yet known, but certainly less advantageous NEM 3.0 rules that has the potential to significantly affect their return on investment.  While NEM 3.0 won’t go into effect for some time, we already have an idea of what clients need to do to secure the benefits of the present NEM rules.  Here’s what we know so far…

NEM 2.0 - the Present State of Play

SCE customer presently operate under NEM 2.0 rules established a number of years ago.  (Municipal utility customers, such as those in PWP or LADWP, are unaffected by any of this, fortunately.)  We wrote extensively about the impact of the NEM 2.0 transition at the time, as this article from 2017 explained: NEM 2.0 is Here - Now What? 

Essentially the NEM 2.0 rules made several changes: they introduced a one-time application fee of $75, they forced solar customers onto a Time-of-Use rate structure (instead of the more solar-friendly tiered rates), and they introduced the concept of non-bypassable charges - components of the rate structure that have to be paid on every kWh imported from the grid, even if it would otherwise be “netted out” thanks to energy exported.

Those changes, while concerning as they marked the first successful effort to chip away at the benefits of net metering, turned out to be relatively mild and the industry surged forward despite them.

NEM 3.0 - Dark Days Ahead?

Now we are in the middle of the process of bringing about NEM 3.0, and it looks far scarier than what we faced in 2017.  For example, one proposal calls for monthly fees on the order of $75 for every residential solar customer (commercial customers would pay far more).  The value of exported energy might drop by as much as 80%!  Payback periods could balloon to as much as 20 years!

(Take a moment to sign the petition to make the new NEM 3.0 rules more favorable to solar system owners!)

However that process turns out, if it is possible to get in under the current rules you will save a lot of money!  Here’s what we know about how the transition period will be handled:

• If you sign a contract and submit your complete interconnection application to SCE by mid-January you are guaranteed of 20 years under the more favorable NEM 2.0 rules!
  
  
• If you submit between mid-January and April, you will start under NEM 2.0, but the 20-year term is not guaranteed.
  
  
• If you submit after April but before NEM 3.0 is fully up and running, you will start on NEM 2.0 for a set term of years, but you may be forced onto a rate that includes a monthly fee.
  
  
• Applications submitted after August, will likely be completely under NEM 3.0

The uncertainty around all of this is distressing but is out of our hands.

What we can do is to urge folks on the fence about going solar to act before mid-January.  Bear in mind that the project does not need to be completed by mid-January, you simply have to have your completed application submitted by then.  We anticipate quite the rush to get applications in by then, and there is always the concern that a reviewer at SCE might kick back an application and deem it incomplete.  The best way to be safe is to get the application in as soon as possible, thereby avoiding the crunch.

So right now really is the best time for anyone in SCE’s service area to go solar!  Give us a call and let’s get the process started!