Note to CPUC: Check Your Premises
The California Public Utilities Commission (CPUC) is considering a proposed decision (PD) that would repurpose California’s retail solar industry under the guise of encouraging solar adopter investments in on-site energy storage. The PD is based on several invalid premises.
First, that by distributing a customer’s rooftop solar electricity in a neighborhood and community, an electric utility incurs costs that add up to several times the price it pays its customers for solar electricity.
Only after solar generation capacity on a distribution circuit reaches a significant portion of circuit capacity are grid upgrades required. Transmission upgrades are not required because rooftop solar electricity affects demand profiles but does not physically enter the transmission system. The utility’s generation costs are lowered during some hours and are impacted in other hours to the same extent they would be if locally generated solar electricity were not available and had to be made up by increased production in solar power plants.
Second, that low income customers now substantially subsidize residential rooftop solar installations owned by other customers.
Subsidies actually go in the opposite direction. In California rate subsidies in the range of 25 to 35 percent are available to low income customers and are funded by other customers. By making rooftop solar less affordable, the proposed decision erects new barriers to making solar power accessible to low income customers and renters.[1]
Third, that a complex system of incentives and penalties, the most important of which are to be quantified at a later date, will sustain the current rate of solar adoption decisions.
The CPUC is considering whether to mandate a more complex, less understandable and less attractive rooftop solar value proposition. Doing so will cause electricity customer confusion and hesitation. Solar adoption rates will plummet.[2] Many retailers and installers currently specializing in residential solar installations will elect not to participate in a market for solar paired storage. They will close their doors, leaving former customers with no place to turn when advice, support, upgrades and equipment replacement and service needs arise. Erosion of competition will result in higher prices.
Fourth, that it is possible to bring about increased investment in solar paired energy storage by making investments in rooftop solar much less attractive to homeowners.
Hopes that a shift of economic rewards from solar ownership to storage ownership will increase investment in solar paired storage are unrealistic. Rather, California’s retail solar industry will be decimated, and neither significant additional customer-owned solar nor customer owned storage will be available to “give the grid what it needs” [3].
Fifth, that California’s solar industry will “keep growing” [4], and solar installers can continue to experience revenue growth by installing both rooftop solar arrays and battery storage units.
The proposed decision aims to make rooftop solar and solar paired batteries into economically neutral options rather than, as now with rooftop solar, investments that pay back. [5] This approach will result in payback periods too long to be of interest to electricity customers, and in some cases even longer than 20 to 30 year expected life of rooftop systems. The value proposition for solar per will no longer economically attractive. Rooftop solar adoption rates will plummet.
The life cycle economic value of solar paired energy storage cannot be accurately estimated based on information in the PD. As a result, adoption of on-site battery storage will not increase. Adoption will depend, as now, on the design and stability of time of use pricing schemes.
Sixth, that retail solar installers and local permitting authorities are ready to install and service on-site battery storage,
Lack of training and experience is a barrier. Until a stable and profitable stationary battery market is established, inexperience on both sides of the local permitting process will drive cost increases and retard fulfilment of sales. National solar retailers may see an opportunity to gain experience with solar paired battery sales and installation, but local installers and customers will face costly permitting delays.
Seventh, that the current benefits of rooftop solar accrue only to the solar adopter and are limited to avoidance of grid electricity costs.
Other (non-solar) customers benefit from rooftop solar because it reduces the need for new transmission investments. Communities benefit because rooftop solar adoption strengthens local economies in multiple ways: 1) freeing up funds for local purchases, 2) increasing property and sales tax revenues, and 3) creating resilient local electricity supply to power school based emergency centers[6] during disaster recovery and to power resilient neighborhood microgrids in low income areas. The state benefits to the extent on-site solar adoption reduces carbon emissions and increases its inventory of local resilience assets[7].
The proposed decision sets aside a long-standing bipartisan policy regarding on-site solar energy. The policy should remain in effect because it is foundational to creation of a just and affordable state-wide renewable energy eco-system. Its underlying premises are valid. The underlying premises of the proposed decision are not. Better informed and more robust on-going and future consideration of the benefits of rooftop solar can be a positive outcome of the current policy tug of war between electric utilities and local clean energy advocates.
References:
[1] Community solar is available to low income communities in other states and was authorized several years ago by the California legislature. But the CPUC implemented AB 843 by adding bogus “transmission access” fees to local solar generation and distribution costs, rendering community solar projects unattractive to cities and counties and other prospective investors. Instead of affordable community solar, the CPUC offered “green tariffs” that low income customers cannot afford. Other states are taking the lead regarding community solar.
[2] This has happened in other states that made (and later reversed) decisions like the one the CPUC has under consideration. Ref: https://ourcommunitynow.com/california/schwarzenegger-we-put-solar-panels-on-1-million-roofs-in-california-that-win-is-now-under-threat
[3] According to the commissioner in charge of the CPUC decision process, “the state wants the solar industry to keep growing, but net metering needs to evolve to provide what the grid really needs, and that involves energy storage.” Ref: https://www.sacbee.com/news/california/article256552966.html
[4] Ibid
[5] California rooftop solar currently pays back at rates of return that are modest compared with returns available to for-profit utility transmission infrastructure owners. By contrast, electric utilities have come to expect a return on low risk capital investments that ranges from ten to fifteen percent depending on corporate bond market prices. Residential rooftop solar system owners do not expect comparably attractive returns.
[6] Ref: https://www.nrel.gov/docs/fy06osti/38435.pdf
[7] Ref: Inventory and Integration of California’s Local Energy Resilience Assets