Thoughts on Solar

TL;DR - We need your help to preserve net metering - Sign the Petition!

Run on Sun has been installing grid-tied solar power system since 2007, and one constant in all of that time has been the hostility towards such systems evinced by the Investor-Owned Utilities (IOUs): SCE, PG&E and SDG&E. Nowhere is that hostility on clearer display than it has been in their efforts to erode, if not eliminate altogether, net metering.  But now, with the IOUs lobbying for the creation of Net Metering 3.0, the battle for the survival of net metering is about to be joined in earnest.  If your right to put solar on your home or business is to be preserved, we are going to need all of you to join the fight.  Here’s our take…

What is Net Metering?

Net Energy Metering (NEM) or just net metering for short, is the basis by which a solar system provides the owner with a significant portion of their financial benefit.  Solar systems on a clear, sunny day produce energy that follows a normal distribution, with the peak energy production occurring around solar noon, and rolling off in a typical “bell curve” on either side.  That energy saves the system owner money twice: first, by directly offsetting the energy usage of the home or business, but secondly, by allowing the excess energy to be exported back to the grid for retail credit.  That retail credit is then applied against energy imported from the grid to power loads at night or on cloudy days.  At the end of the billing cycle, those two values - the amount of energy imported versus the amount of energy exported - are “netted” out, and if the amount imported is greater than what was exported, the difference is charged to the customer.  Conversely, if more energy is exported than imported, the customer has a credit for that period that can be carried forward.

Of course, the energy exported to the grid for which the net metering customer gets credit doesn’t disappear - the utility sells it to another customer for that full retail value.  Moreover, because that energy did not have to be transported from far-off generation facilities, there is less demand to build expensive infrastructure like high-voltage transmission lines - you know, like the lines that have sparked deadly wildfires in the past few years.

So you might think that net metering would be a win-win for everyone - solar clients get a greater financial incentive to foot the bill for installing energy generation systems and the utility gets additional energy without incurring the costs of building or maintaining them.  But you would be wrong.  You see, IOUs don’t make money selling energy.  They make money building things.  In fact, in a stunningly perverse incentive structure, the IOUs get a guaranteed return on investment of 10% for every dollar they spend building stuff: generation plants, transmission lines, etc.  So they see the growth of solar, particularly rooftop solar, as a threat to their antiquated business model, and the best tool at their disposal is to take as big a bite out of net metering as possible.

Where are We Today and Where are the IOUs Trying to Go?

The version of net metering described above actually no longer exists with the IOUs, instead, they transitioned to NEM 2.0 a few years ago.  (Municipal utilities, like PWP, still offer full net metering.)  Under that scheme, a one-time interconnection charge was created, along with what are known as Nonbypassable Charges, which require their customer to pay a relatively small amount for every kilowatt hour of energy imported, even if that energy is actually offset by exported production.  The real kicker was that all solar customers in IOU territory were switched to Time-of-Use rates that made the value of exported solar lower, and energy imported from 4-9 significantly more expensive.

But now, heading into NEM 3.0, the IOUs are going all in!  A recent report by the consulting firm E3 was released by the CPUC and it highlights some options for changing net metering that would seriously impact the value of solar.  In particular, the report proposes fixed monthly charges of between $50 and $70 for all solar customers, combined with a “grid access charge” each month of between $5-$7/kW installed!  That means that under the best case scenario of their proposals, a residential customer with a 4 kW solar system installed would pay an extra $70 per month, every month, just because they have solar - that they paid for - on their home!  That is an $840/year penalty for going green! 

If that doesn’t make you see red, nothing will!

We’re Not Gonna Take It!

To say that the California solar industry is in the fight of its life is an understatement.  But so are all solar customers, who could see the value of their investment greatly eroded by these misguided policy proposals.  And that is where you come in.  We are fighting back and we need you in the fight!  The California Solar and Storage Association (CALSSA - our trade association) and the Solar Rights Alliance are gearing up to organize against the threat.  The first step is in signing a petition to Governor Newsom - we need him as an ally now.  It is super easy to sign on and we are looking to collect 20,000 signatures before April 1.  As of this writing, we are at 923 supporters, so we have a long way to go - and that starts with you!  (We will have more news on ways to fight back in the coming weeks, so watch this space.) 

Please click the big button below and let’s get this done!

Back in April we wrote about an attempt to eliminate Net Energy Metering - the primary economic benefit for rooftop solar - by way of a misleading petition filed with the Federal Energy Regulatory Commission (FERC). Here’s an update (h/t Utility Dive)…

The petition was filed by an entity called the New England Ratepayers Association (NERA) and if successful, would potentially affect net metering in the 45 states where it presently exists in one form or another.  The FERC regulates interstate electricity markets, and NERA portrayed net metering as a “wholesale sale” of energy, essentially subjecting rooftop solar systems as if they were utility power plants.  From NERA’s FAQ about the petition:

[N]et metering is having an unfair and harmful impact on ratepayers, especially low-and middle-income families. Given this problem, NERA has chosen to challenge net metering at the body which has the proper jurisdiction over wholesale electricity transactions.

Under FERC rules, the public had until June 15 to comment on the petition, and NERA found support from some usual suspects including the Heartland Institute (famous for its climate change denialism), the coal company Murray Energy (hilariously ridiculed by John Oliver a few years ago), the Competitive Enterprise Institute, Americans for Tax Reform (say what?), and Citizens Against Government Waste. 

Curiously, although several utility companies - including PG&E - had suggested that they would comment, none of them did.

In opposition was a very long and bipartisan group of people ranging from solar companies (well duh) and solar trade associations, to local state energy regulators.  For example, the National Association of Regulatory Utilities Commissioners (which includes the California Public Utilities Commission amongst its members) said in its comments:

The [FERC]… has for nearly 20 years acknowledged states’ authority and held that net metering does not involve wholesale sales subject to its jurisdiction… Relying on that settled law, states and utilities have developed and implemented net metering programs, and millions of Americans have made long-term investments in solar panels and other distributed generation for their homes and businesses.

Exactly!

Interestingly, Public Citizen dug up some IRS filings for NERA - which self-describes as "a non-profit organization focused on promoting sound public policy that protects utility customers, both families and businesses, and lowers the cost of regulated services” - that cast doubt on that claim.  According to the IRS filings, NERA consists of 15 members (identities not disclosed), ten of whom pay $20,000 in annual dues and five that pay $5,000.  Not exactly a grassroots organization!

Watch this space!

Those of us involved in solar in sunny Southern California generally think that we have it pretty good.  The climate is just about perfect for solar - and by that I mean the political climate, every bit as much as our abundant sunshine.  From the Governor, to the legislature, to the CPUC and the CEC, generally those forces support the growth of not just solar power in general, but distributed, on your own rooftop solar in particular.  But we become complacent at our peril - both to the jobs of those in the industry as well as the investment value of all of those solar installations out there.

A recent story from Columbia, South Carolina brought this peril to mind.  As portions of the state edged closer to the existing 2% cap on net metering installations, the legislature was working on a compromise to lift the cap,  allowing more residents the opportunity to install solar and take advantage of net metering.  The utilities had other ideas - from the Greenville News:

Deep-pocketed power companies outspent the solar industry nearly $3 to $1 as part of an intensive lobbying effort during an S.C. legislative session that included efforts to curb rooftop solar’s expansion in the state.
Electric utilities spent nearly $523,000 from January through May to hire more than three dozen lobbyists to advocate for them at the State House as lawmakers decided what to do about solar incentives.

Yikes.

The result of all that lobbying?  The effort to lift the net metering cap was defeated - and local solar companies are going to be laying off employees (if not closing altogether) while affected residents will either have to forego solar, or find it far less financially viable.

We delude ourselves if we think that it can’t happen here.  Utility lobbyists are in Sacramento just as they are in Columbia, and the recent forced change to net metering 2.0 in SCE territory is a reminder that our progress is not guaranteed.

Which brings me to the Solar Rights Alliance.  We have written about this important organization before, and will do so in the future.  But I wanted to use this post to show how we are putting our money where our mouth is.  Starting today, we are modifying our solar installation contracts to provide an opt-in checkbox for new clients to be signed up for the Solar Rights Alliance, with Run on Sun making a donation in their name to help support the important work of organizing solar clients statewide.

We are never going to be able to match the money coming from the utilities and their allies.  But what we do have is tens of thousands of happy solar owners all across the state.  If we can organize even a fraction of them, we will be able to speak directly to policy makers and let them know that the value of installed solar power systems must be protected.  That is a fight that we need to take on, and the Solar Rights Alliance (along with our wonderful trade association, CALSSA) is key to winning that fight.

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.

Every now and then we get a call from someone who has solar installed at their home but they’re not happy.  Typically this occurs when they get their “true-up” bill at the end of the year, and are shocked to see that the amount that they owe is way more than they expected!  In many cases this leads them to believe that the system simply isn’t working, and now they want a third-party (like Run on Sun) to come out and evaluate the performance of their system. 

Here are the three leading reasons why that bill is so high…

Your system just isn’t working!

Although this tends to be the number one suspected reason for why the bill is so high, generally it isn’t the actual cause.  Most systems are installed properly and are in operation.  But every now and then we come across a system that simply isn’t working at all.  That was the case with one man who was convinced that his system had never worked and that the company that installed it was simply out to cheat him.  We didn’t see signs of that—the system had been installed and the overall workmanship was acceptable on the surface, so it wasn’t like someone just slapped the panels on the roof and ran away.  But here’s the thing—this was an Enphase system so there should have been monitoring in place to answer the question of how well the system was working.  Except that the installer had never bothered to complete the setup of the monitoring system!

When we came out we were able to access the Envoy directly, and while it could see the microinverters, it was clear that they had never produced any power—in over a year!

So how can a solar system owner prevent this?  Simple—when your system goes live, make sure that the installer walks you through the operation of the system so that you can see with your own two eyes that the system is actually producing power.  (This could be a readout on the inverter/monitoring system, or a spinning performance meter, or an indication that utility meter is going backwards.)  Better yet, ask them up-front how will you be able to know that your system is working, and then when it goes live, make them prove it to you!

If you believe that your system isn’t working, and you live in the greater Pasadena area, give us a call at 626-793-6025, or email us to set up a service call!

Your system is working, but…

This second case is actually far more likely: the system is performing, but it is not meeting your savings expectations.  In our experience there are two main reasons for this: hype and over use.

Beware the hype

One reason for this disconnect is that a dishonest sales person over-hyped the savings to be had from the system installed.  For example, we have seen “savings” projections based just on the size of the system, without regard for how shaded the system was, or its orientation - to say nothing of the actual rate structure that is being used by the utility. 

Shaded systems produce less energy.  Systems aligned away from South will produce less energy.  A utility customer on a time-of-use rate structure may well save less than one on a tiered rate structure (depending on how those rates are designed).

The point is to beware of overly simplistic savings projections.  A proper analysis will factor in all of these issues to provide the best possible estimate of savings.

Solar is not a silver bullet

Even the best savings projection is predicated on future energy usage being consistent with the historical data that the solar company was given (unless increases are specifically discussed and included).  While many people with solar power systems become vigilant about reducing their overall energy consumption, others go in exactly the opposite direction.  Indeed, it is not uncommon to hear people say that part of why they want to “go solar” is so they can afford to run their air conditioning “more” during the summer. 

Solar power systems are finite resources—they can only produce so much energy consistent with the size of the system, and most utilities limit system size to the historical energy usage average at the site.  If you install solar, but then triple how much energy you use during the year, you shouldn’t be surprised if you are not saving any money!

What we have here is a failure to communicate!

Which leads us to the most likely culprit—there has been a failure to communicate between installer and consumer.  At the root of this is Net Metering and the complexities of most energy bills.  (A big part of the blame here goes to the utilities who seem determined to make their bills as complicated as possible!)  Let’s provide an overview of this issue and then illustrate with a specific example.

How Net Metering Works

Solar system owners - at least here in SoCal - operate under utility rules known as Net Energy Metering, or just Net Metering for short.  Here is how this works: on the day when your solar power system is given “Permission to Operate” (or PTO) by the utility, your billing will shift to Net Metering (often the utility will change your meter to allow for that switch).  Every day, as your system operates, you will either be exporting (selling) energy back onto the grid, or importing (purchasing) energy from the grid. 

Think of it this way: you get up at 6 a.m. and it’s dark outside.  You turn on some lights, the radio, coffee maker, etc.  Your solar system isn’t producing anything (it’s dark outside, remember?) so you are purchasing energy from the grid.  You go off to work as the sun comes up, and your system turns on.  All day long, your solar system is producing energy, but there is no one there to use it—the A/C is off, the TV is off, the house is dark—so all of that excess energy is sold back to the utility.  Your fancy new meter keeps track of all of that energy coming and going.

Every billing cycle the utility will look at those readings—how much energy did you sell compared to how much did you purchase—and “net” out the difference.  If you were a net seller of energy, you will have a credit.  If you were a net purchaser of energy you will have a balance due.  But here is where some people get confused—your bill won’t ask you to pay for the energy you used that month.  Typically you  will only be charged for whatever “customer charge” there may be along with taxes and other fees.  The bill for your energy usage (or credit, if you are so lucky) is carried forward to the next billing cycle, and the next, and the next, until you get to the anniversary of your PTO date.  Now your usage will be “trued up” and you will either get a bill to pay (assuming that for the year you were a net energy purchaser) or a check (assuming you were a net energy seller, but don’t get too excited because that payment is really tiny).

Here’s the thing, depending on how much of a net energy purchaser you were, that bill could be pretty significant, in some cases well over a thousand dollars or more!

Of course, you would have been receiving bills every cycle that showed what you were accumulating (either a balance due or a credit) but since there is no related payment required, it is easy for some to overlook those bills, and if this process has never been explained—or even if it was but the consumer simply didn’t “get it” at the time—this can lead to a nasty surprise.

Bottom line - solar companies need to do a better job here in explaining how this works.  (Hence this post!)

A real-life example

Consider a hypothetical solar system owner, let’s call him Bob.  Now Bob is a smart guy, but this is the first solar power system he has ever owned.  His installer explained everything to him when the system went live, but Bob was distracted by the excitement of a potentially zero bill.  His system has Enphase microinverters so he has been receiving energy production emails from Enphase every month, and that looked cool, but he never attempted to reconcile his Enphase report with his utility bill (Bob’s not so big on balancing his checkbook, either).  But to be fair to Bob, the Enphase report that he receives is for each calendar month, but his billing is every two months, and they aren’t calendar months; rather, they run from meter read date to meter read date (e.g., 7/28/2016 to 9/26/2016).

The good news is that Enphase has a reporting feature that allows you to enter any two dates since the system went live and receive day-by-day energy production, with the total at the end.  Let’s see what we can learn when we put Bob’s billing data next to his production data from the Enphase reporting feature:

Ten months of Bob’s usage versus production

The first two columns show the start and end dates for each meter reading/billing cycle.  The bought column is the amount of energy that Bob purchased from his utility.  (Whoa, what happened during the latest billing cycle???)  The sold column is the amount of energy that Bob sold back to his utility during that period, as reported by the utility.  The next column is the amount of energy that Bob’s system produced during the dates in the billing cycle, according to the Enphase website.  But wait, how can this be?  In that first period, the utility says that Bob only sold 774 kWh of energy, but Enphase says his system produced nearly twice as much, 1,338 kWh!

How do we make sense of this disparity?  The answer is simple: local consumption.  It is important to remember that the utility has no idea how much energy Bob’s system is producing, all they see is how much energy Bob is selling back to them.  So both Enphase and the utility are correct, they are just measuring different things.  Enphase measures total energy produced.  The utility measures energy sold to them—the difference is energy used to power Bob’s house that didn’t come from the utility; rather, it came from the solar system!  In that first billing cycle, Bob’s system produced 1,338 kWh and of that, 774 kWh were sold back to the utility, meaning 564 kWh of that production were used to power his house.  And that means that Bob’s total consumption for the month is the amount that he bought from his utility, 1,402 kWh, plus the solar production that was consumed locally, 564 kWh, for a total consumption of 1,966 kWh.  Applying that reasoning to the rest of the data shows that Bob’s overall consumption has increased in every billing cycle except one, with a whopper over the holidays!  (Maybe too many holiday lights?)

The production data shows that Bob’s system has been performing appropriately - increasing over the summer months, decreasing over the winter months.  Here’s a graph that puts that all into perspective:

Bob’s solar power system: Lifetime energy production versus expected.

The blue represents the actual energy produced each day.  The gray line is the predicted system production (in this case modeled using the CSI calculator). Over the lifetime of the system, the maximum amount of energy produced in a day was 29.7 kWh (42% above what was predicted for that day) and on the day when this graph was created, the system produced 15.7 kWh.

Generally, the performance peaks well above what is expected (particularly in the late June through early November period).  But once we get into mid-November things deteriorate—not because of a fault in the system, but because of abnormally wet weather here in SoCal (as we head into a 1″/hour rain storm today!).  For much of the past two months, actual production has fallen well below what was predicted, with just 77% of predicted being realized so far this month.  And yet, despite all of that, overall the system has still produced 99% of its estimated lifetime production.

This points out a couple of key things to me: First, you just gotta love the data that is available through the Enphase monitoring system.  It allows system owners and installers alike to have near-real time access to system performance, as well as to review long-term data to discern trends and uncover patterns.  Priceless!

Second, we as solar professionals need to do a much better job of informing our clients so that they know what to expect.  (I’m leaving out the hype-sters who couldn’t care less what the consumer knows as long as they make a sale.) 

We live with this stuff every day but for most of our clients, this is all brand new, and confusing.  We need to take the time to explain how this works so that they can understand the actual value of their investment.