Net metering across the United States is under threat. Several states are transitioning from the traditional net energy metering (NEM) system toward successor tariffs that remarkably reduce the value of exported energy. Many of the policy actions happening today will result in standalone solar no longer being the financially sound option for homeowners and businesses.
Full-retail NEM, which accredits solar exports at the same level as utility exports, is under threat as utilities continue to force regulators to implement successor NEM tariffs. These forms of compensation structures and successor tariffs being enforced and proposed across the nation vary significantly. Some determine export figures at discounted fixed rates, while others use non-bypassable charges (NBCs) to compound the retail rate.
In this post, we explore current NEM updates to help you keep track of state-specific changes that may affect solar consumers.
CPUC’s Proposed NEM 3.0 decision
Recently, the California Public Utilities Commission (CPUC) proposed a transition from a net-metering to a net-billing system, creating an opportunity to adjust the dollar value of credits to a different rate from the energy’s import price. CPUC provides that it refers to this tariff as the Net Billing tariff instead of NEM 3.0. The commission also provides that solar customers will face a long-term Market Transition Credit and additional Grid Participation Charges to promote storage connected to solar systems.
In California, NEM 3.0 updates propose several changes. Stripping down the net metering program can serve as ammunition for states aiming to squash or dismantle distributed energy deployment.
Net Billing Tariff
The Net Billing Tariff introduces lower incentives compared to the previous net-metering tariff. CPUC decided to switch to the new plan after realizing that the current net-metering tariff disproportionately affected low-income ratepayers and non-solar customers. The commission’s report highlights that NEM 1.0 and 2.0 inspired equity concerns due to misalignment between value and costs, which further generated revenue under collections to be recovered by non-participating consumers.
CPUC refers to this new program as the updated version of net billing that includes an export compensation rate configured to the value behind-the-meter energy production systems added to the grid based on import rates and avoided cost values that promote solar paired with storage and electrification.
The Net Billing Values for a customer’s interconnection for the first five years draw from a schedule of values for each hour from the preceding Avoided Cost Calculator, which includes avoided cost values for specific climate zones. The commission provides that this lock-in period aims to ensure client-sited solar continues to promote consumer protection measures while growing substantially. After five years, export compensation draws from the average monthly avoided cost values.
The Takeaway
The CPUC’s ruling on net metering affects the future of distributed solar energy in the United States. While the types of reforms continue to vary, one constant factor is that they erode the value of solar. The most striking element of these regressive NEM 3.0 updates is that they create an opportunity for pairing solar with an energy storage system (ESS) and a stronger price signal.
Now is the time to go solar before the proposed changes make solar power more expensive. Contact Solar Optimum to learn more.
