As California continues its focus on expanding the amount of solar in the state, and the costs for installing solar rooftops have decreased, the California Public Utilities Commission (CPUC) is creating a new cost structure to be fairer to all customers.
The CPUC, in a public process, has asked interested parties to submit proposals to replace the existing Net Energy Metering (NEM) structure.
On Aug. 3, Southern California Edison (SCE) submitted its proposal to the commission for how the existing program should be changed. The CPUC will consider SCE’s proposal, along with others and issue a decision by the end of the year.
Caroline Choi, SCE’s vice president for Energy and Environmental Policy, describes SCE’s proposal and how it continues the company’s efforts in support of solar power.
Q. There is often confusion regarding the way in which Net Energy Metering works and what changes are being sought by policymakers. What is the state of the current program?
A. While the rays of sun are free, the technology needed to harness them, convert them into electricity and transfer that electricity to where it is needed is not. Not only is there an investment needed by the customer to install solar panels on their roof, but the utility must also continually invest in the lines, poles and other equipment to connect that home to the power network (grid), so that the home gets power 24/7.
The utility supplies electricity when the customer’s solar system is not powering the home and also buys electricity from the customer when the customer generates more than they can use at any given time.
Said differently, solar customers remain connected to the power network, which provides them energy when the sun is not shining, when bad weather blocks its rays or when the home uses more power than the rooftop system produces.
Q. How has SCE supported solar over the last decade, and why are you proposing changes?
A. SCE believes that solar is a critical part of our energy future and has helped many thousands of our customers generate their own power — SCE has more than 125,000 rooftop solar systems installed in its territory, totaling nearly 600 megawatts. About 23.5 percent of the energy delivered by SCE in 2014 was from renewable resources as we ramp our way up to 33 percent renewable energy by 2020.
Customers who generate their own power make use of the power network, whether receiving electricity from the network, feeding into the system or using it as a backup resource. They need to share in the costs of these important assets. Absent doing so, it shifts costs to customers who don’t elect to have their own solar. SCE’s proposal would make changes to ensure costs are more equitably shared by all, while continuing to provide for a robust rooftop solar market.
The existing NEM program was designed to encourage the installation of residential rooftop solar at a time when it was very expensive to do so. Now that the costs for the installation of solar have greatly declined and the industry has matured, changes are also needed in the NEM program.
Q. How would customers with installed solar be compensated under SCE’s proposal?
A. Under SCE’s proposal, customers who generate power would still buy energy from the utility when their systems do not produce enough power for their needs, such as at night. All residential customers will continue to take advantage of time-of-use rates to pay the rate best suited for them.
For the energy that customers generate and provide to the grid, they will receive compensation based on the costs that the utility would pay in buying that energy from other sources. It also would include an amount to recognize the contribution that the renewable power makes to the state’s renewable energy goals, assuming policymakers count this energy toward those goals.
Q. SCE is proposing a customer charge for customers who produce power? What impact do you believe it will have on customers wanting to go solar?
A. It is important that all customers who use the grid help pay to operate and upgrade the grid to create a 21st century power network that is more efficient and supports the increased use of rooftop solar, electric vehicles, battery storage and other clean technologies.
SCE’s proposal recommends a small monthly charge, for use of the power network, of $3 for each kilowatt of installed solar system capacity — put more simply, the smaller the size of the solar system installed, the smaller the monthly fee.
A house with a 3-kilowatt system would pay a charge of $9 per month to support the power network. A house with a larger 6-kilowatt system would pay $18 per month. While this level of charge does not fully compensate for the solar customer’s use of the power network, it is more equitable to the non-solar customers on the system than the present NEM structure.
Q. Will SCE profit from the changes you are proposing?
A. Customers who generate power remain connected to the power network and in fact it is the network that enables them to import and export power from their systems. This proposal does not increase the total amount of money or profits SCE receives from its customers.
What SCE is proposing is a recognition that the solar industry has matured and that costs have fallen dramatically, so it is time to update the structure used to enable rooftop solar to reflect these advances in solar technology. The proposal submitted to the CPUC would increase the support that future NEM customer-generators would pay to support the power network, while still providing a substantial incentive for customers to go solar.
Q: Why are you imposing a $75 interconnection fee plus unspecified "engineering review fees" for solar systems? Do you impose that fee for any other service, or is this an effort to kill solar?
A: SCE has proposed a $75 “Customer Interconnection Application Fee” that would apply to all NEM applicants. This fee is based on actual costs incurred by SCE to process NEM applications, including mandated verification tasks and assurance that the renewable generating facility can safely interconnect to the SCE distribution system without impacting reliability and safety for all utility customers. These costs are documented in SCE’s recent NEM Interconnection Cost filing (SCE Advice Letter 3239-E dated 6/30/15) to the commission.
Q: The solar industry argues that now is not the time to reduce NEM support because the federal investment tax credit is being taken away. What assumptions did you make about the future of the credit? Does SCE support extension of the credit?
A: SCE assumed a reduction from 30 percent to 10 percent for the federal Investment Tax credit beginning Dec. 31, 2016, which is consistent with the default assumption pre-set in the commission’s public tool. SCE believes that tax credits specific to fuel sources should be phased out over time as Congress turns its attention to tax reform. Even taking the reduction of the investment tax credit into account, SCE sees continued growth in renewable distributed generation in California under its successor tariff proposal — up to triple the currently installed distributed generation capacity.
Q. How does SCE’s proposal continue to support solar in your service area?
A. SCE’s proposal would increase the level of support that future customers who generate power provide toward the cost of building and upgrading the power network, while still substantially reducing the typical customer-generator’s bill when they install solar.
SCE has calculated that under its proposal, a customer can fully recover the cost of installing rooftop solar over seven years, which is reasonable given the expected life of most systems.
Q. What about disadvantaged communities? The CPUC is seeking proposals to help those customers access solar. How does SCE’s proposal help those customers?
A. SCE’s proposal encourages the development of rooftop solar in disadvantaged communities. Under SCE’s proposal, qualified low-income homeowners will receive upfront incentives for solar installations, and incentives will also be provided to benefit renters in specified areas.
SCE’s proposal also calls for targeted outreach efforts in disadvantaged neighborhoods to promote available programs for qualified and low-income customers to help them meet their specific energy needs.
Q. How does SCE’s proposal impact the roughly 125,000 SCE customers that have already invested in solar, many of them when solar was very expensive?
A. All of SCE’s customers who currently have solar systems installed on their roofs as well as customers who install solar systems before July 1, 2017 (or perhaps earlier if SCE reaches the cap imposed by the state legislature) are “grandfathered” under the existing NEM program for 20 years and will continue to operate under the existing rules. SCE’s proposal does not apply to those customers.