Thoughts on Solar

As a solar installer working in SCE’s territory, we get messages from them on a regular basis, including those regarding the upcoming transition to NEM 2.0.  But the email we received today (actually two copies of it!) was a bit, how shall we say, high-strung?  Here’s our take.

NEM 2.0 will occur when the first of two events occurs: SCE interconnects enough residential and commercial solar projects to reach 5.0% of its total aggregate power demand, or July 1.  We have written before that SCE will never get to the 5% beforehand, so the deadline is 23:59:59 on June 30. 

So we were a tad perplexed to see this email today - here’s a sample:

417 MWs Remaining in NEM 1.0

As SCE gets closer to its Net Energy Metering (NEM) 1.0 Cap, we want to remind everyone of the importance of submitting complete and accurate interconnection request(s) (IRs). You should be receiving similar notifications within the online application system (i.e., PowerClerk).

Why is the 417 MWs remaining important?

For those applicants and customers with an existing IR moving through the interconnection process, we are sharing this information so that you may plan accordingly as SCE approaches its NEM 1.0 Cap. Once the cap is reached, the existing NEM tariff will close to new customers and the NEM 2.0 (NEM Successor) tariff will become available. With approximately 417 MWs remaining in the NEM 1.0 cap, this is a friendly reminder to please submit all documentation necessary for receiving service under NEM 1.0 and do so as soon as possible.

(Emphasis in the original.)

Wow - you would think that this might happen any day now, based on that language.  Except that it won’t - not even close.

Here are the underlying numbers:  SCE’s total cap is 2,240 MWs - a target it has been building toward since 2007!  As of today, in SCE’s territory, 1,823 MWs has been installed.  That means it has taken roughly  3,595 days to install that capacity, which works out to roughly half a Megawatt per day.  With 417 MWs left under the cap, and just under 58 days before July 1, we would have to be installing at the rate of 7.2 MWs/day!  Uh, no.  Just Not Going To Happen!

(If you would like to see exactly how much time we have before we hit the actual deadline, check out the Doomsday Clock on our Residential Solar page.)

However, the reality of that deadline does have consequences.  For potential commercial clients, sorry, but you are out of luck - there is just not enough time to get a new commercial project designed, permitted, constructed, and approved before July 1.

Potential residential clients are in a slightly better position, but only slightly as your window of opportunity is rapidly closing.  For example, we are already booked solid for the entire month of May with just SCE projects (we have pushed everyone else back to try and help as many as possible in SCE territory meet the deadline), and we can only guarantee an approved interconnection for NEM 1.0 by mid-June.  If you’ve been thinking about solar in SCE-land, please don’t wait, call or email us today!

We have written at some length about how Net Energy Metering (NEM) works, and about the changes to NEM that are coming, aka Net Energy Metering 2.0.  While both PG&E and SDG&E have already switched to the 2.0 version, SCE customers are still able to go solar under the existing, more favorable, rules, but not for long!  (NB: PWP & LADWP customers are unaffected by this change, the following is only relevant to SCE customers.)

Here is our update as we dive headlong into the brave new world of NEM 2.0.

Timing of the change

Under the rules adopted by the California Public Utilities Commission (CPUC), SCE must continue to allow new customers to operate under the current NEM 1.0 rules, until either of the following events occur:

1. SCE reaches its NEM 1.0 cap of 5% of net aggregate demand, or
2. We reach the deadline date of July 1, 2017.

As of this writing, SCE is still a full percentage point below its cap, with 480 MW worth of solar to install before the cap is reached.  Quite simply, that will not happen between now and the end of June, so the deadline to get in on the current rules is 11:59 p.m. on June 30, 2017.

But here is the rub—to qualify, not only must the project have been completed, but a final, signed-off inspection card must also be submitted to SCE prior to the deadline.  This is going to make June a difficult month as installers struggle to get projects completed and approved in time.  Since approvals are at the whim of individual inspectors, many of whom are idiosyncratic (to be kind) in their understanding of what the code requires, it is difficult to guarantee that a project will be approved on first inspection. 
Prudent consumers will want to make sure that first inspection occurs on or before June 15^th.

Key differences

Although NEM 2.0 is not the crushing blow to solar that some feared it might become, it still has a number of aspects that make it less appealing to the solar system owner.  Here are the major differences:

1. New Interconnection Fee—Presently, it doesn’t cost anything to connect to SCE’s grid.  NEM 2.0 changes that, and imposes a one-time charge of $75.
2. Imposition of Nonbypassable Charges (NBCs)—under existing rules, if the credits generated by exporting power to the grid equal or exceed the charges incurred for energy imported, the energy charges are zeroed out (or even a credit is carried forward, if exports exceeded imports).  Under NEM 2.0, for every kWh imported from the grid, whether it can be netted out or not, there are NBCs charged for that energy.  The good news is that this is just about 2.2¢/kWh, and it does not apply to solar energy consumed locally, but it does still decrease the savings from solar.
3. Mandatory Time-of-Use (TOU) Rates—Presently, residential customers who are on an SCE tiered rate before adding solar remain on that rate after interconnection.  NEM 2.0 changes that as well, and forces new solar customers to shift to a TOU rate.  SCE’s TOU rate charges the most for energy consumed from 2:00 to 8:00 p.m., meaning that energy exported to the grid  before 2:00 (as many solar systems do) is less valuable to the consumer than the energy they have to import from the grid in the evening after the solar system is no longer producing.

(Unintended?) Consequences of NEM 2.0

The coming of NEM 2.0 has some obvious consequences—there will be a crush this spring to get projects approved before the new rules take effect (so don’t wait!), and the overall savings from going solar will be reduced, although not dramatically so.

But there are some unintended consequences as well.  For one, these new rules will be a boon for intelligent storage systems, both to help reduce NBCs and to shift that otherwise exported energy to peak TOU periods.  Storage systems with the “smarts” to do all that will suddenly make economic sense.  (More on that in the near future, but for now just three little words: Enphase AC Battery!)

Another unintended consequence is the significantly increased difficulty in properly modeling the savings to be derived from adding solar.  While some installation companies use sophisticated software like EnergyToolbase (as Run on Sun does), or build out sufficiently detailed spreadsheet models (as Run on Sun also does), for many, that level of complexity is simply overwhelming.  So what will they do?  More than likely, just create a number that is little more than a WAG (and no, not a SWAG).

The result is that potential solar clients need to push on companies providing them with solar quotes to justify their savings numbers.  If they used something like EnergyToolbase they should be happy to point that out (although there is still the risk that they used it incorrectly…).  If they used their own proprietary model, they should be able to explain how it works.  But be wary of numbers, especially outliers that claim greater savings without sufficient documentation.