California is a national leader in renewable energy, with 18,260 megawatts (MW) of solar capacity installed at the end of 2016. To put that into perspective, that is enough sun energy to power 4,715,000 homes, which is over 10 times as many homes as the number two state, Arizona. With all that renewable energy comes over 100,000 jobs, and a huge reduction in carbon dioxide (27 million pounds of CO2 that is not emitted by power plants) and a reduction in smog producing nitrogen oxides and the health threatening fine particulate matter.
While California has been moving forward aggressively relative to other states, they are all far behind where we need to be with renewable energy, with California generating only an estimated 22 percent of their energy from solar, wind and geothermal energy in 2016. Nonetheless, we can learn a great deal from California's move toward renewable energy.
Policy: One Step Forward, One Step Back
California's renewable portfolio standard was initially set at 20 percent by 2017 in 2002. In 2011, California increased its goal to 33 percent by 2020 and in 2015 moved the bar again, this time aiming to generate half the state's energy from renewables by 2050. Senator Kevin de León is challenging the state to move the bar again, this time to 100 percent renewable energy by 2045. These goals could not be realized without policies that foster the development of clean energy.
One policy that has advanced rooftop solar across California is net metering, which allows homeowners who install solar panels to get credit for the energy they generate toward their own energy use, and allows them to sell any excess energy into the electrical grid. When California set up their net metering program, homeowners would get a 1 to 1 kilowatt hour (kWh) credit for energy generated and used, and solar energy producers were also protected from additional fees utilities want to levy on them alone. This easy to understand and predictable system of billing made solar energy more affordable to homeowners and businesses that wanted to invest in clean renewable energy.
This net metering policy was one of the principle drivers of renewable energy in California. While the move toward renewable energy is good for California's environment and ratepayers, utilities and fossil fuel interests saw it as a threat to their profits. In 2013 the California legislature, bowing to pressure from these powerful interests, passed legislation to replace California's successful net metering program with a system that allows utilities to impose fees on solar producers and subjects them to time-of-use rates. Each of these moves will drive up costs for solar generation, but the fees alone will cost solar producers an estimated $4,000 to $6,000. These fees can increase over time, so the costs to solar producers could go well beyond these estimates.
In 2015, the California Public Utilities Commission (CPUC) approved a huge change to California's net metering policy that is taking root across the state. The plan was touted by CPUC Commissioner Mike Florio as one that makes neither utilities nor solar advocates happy. When you look at the details from the perspective of solar energy generators, Commissioner Florio's comments are like telling a kid you have decided not to punish them for cleaning their room, and instead will force them to sit in the corner. Under the rules, the solar generators have seen fees increase, albeit less than the crippling amount utilities were demanding. The utilities, on the other hand, were able to increase fees on solar energy for people with solar panels and recently have been shifting to time-of-use rates. This means people with solar panels get a reduced rate for energy they generate during the day when the sun is shining, and higher rates later in the day when the sun is not producing as much energy.
The utilities complain people are using more energy in the early evening hours, and are using this to justify paying people less for solar energy they produce outside of that time. Additionally, the switch incentivizes solar generators to face solar panels westward so they generate more energy when the energy demand is higher. The logic is this will save utilities money by keeping dirty gas-fired power plants offline during peak energy demand times because it is expensive to fire them up daily for just a few hours of additional energy.
On the face, this seems reasonable, but is also a way to make fossil fuels less expensive, while increasing the costs for solar energy generators. Solar energy generators can expect to receive less revenue from existing solar arrays because their panels will either be most effective when the sun is shining the brightest, or less effective when rates are more favorable. Utilities on the other hand get to pay lower net metering rates per customers.
The new rules have taken place in all areas of the state except those serviced by Southern California Edison, which covers 180 incorporated cities and 15 counties, including Los Angeles, Orange, Riverside, San Bernardino and Fresno. This is because areas in the state served by other utilities have already reached the 5 percent cap on total net metered generation set by the California Public Utilities Commission to trigger the enactment of the new net metering rules. The new solar rules in the area covered by Southern California Edison will take place on July 1 of this year when the new net metering rules are mandated for all of California’s investor-owned utilities, whether the 5 percent cap is met or not.
I spoke to Daniel Sullivan, the president and founder of a company that installs solar panels all over Southern California, and they are not happy about the changes to the net metering policy. Sullivan compared attacks on renewable energy by utilities to putting a frog in water, and slowly turning up the heat. The frog will swim around and essentially boil to death, not realizing the changes in temperature until it is too late.
Sullivan suggested that households that want to go solar can adjust to the new rules by purchasing and installing a battery. This will allow solar energy generators to store energy during peak generation times, and use the stored energy at peak price times. This solution, he notes, would cost a homeowner around $6,000 in upfront costs, a fee that would increase the payback period for solar investments, but would still be cheaper for many homeowners than not using solar at all.
Encouraging solar energy generators to install batteries is good, but this is hardly a reason to justify keeping the time of generation laws. Batteries are an important tool that we need to deal with fluctuations in energy generation that come from reliance on renewable energy. Recent reforms to the Self Generation Incentive Program will help some California homeowners receive partial rebates for the costs of battery installation, but nowhere near what is necessary for everyone to have access. Rather than disincentivizing solar to encourage battery use, the state should consider energy storage requirements for solar installations. The state should also increase the benefits of the program to allow more homeowners to access it, and extend the program past the 2021 deadline.
The state's Public Utilities Commission is expected to review the net metering rules in 2018, and it is almost certain that the utilities will continue to push for policies that will increase costs and reduce benefits for solar providers, while improving the bottom line for dirty and climate change inducing fossil fuel facilities. This review will provide an opportunity for renewable energy advocates to push to remove these punitive time of generation rules, remove costly fees advocated for by utilities, and reinstate retail net metering in California. These changes will be necessary if California wants to envision the plan for 100 percent renewable energy put forward by Senator de León a few weeks ago.