There’s been some ado about the CPUC’s recent release of a draft California Net Energy Metering Cost-Effectiveness Evaluation. This study was flawed to begin with (we’ll talk more about that below) and is now rendered outdated and irrelevant given the passage of AB 327 earlier this month . . . but its results have clearly raised some questions, so here’s our high-level take:
First, a bit of a history lesson: With distributed solar growing at a record pace, California regulators have been working to assess the benefits, costs, and policy path forward for this dynamic new resource. But this particular study’s parameters were actually mandated by utility-backed legislation passed last year, AB 2514. Through no fault of the CPUC or the study’s research firm E3, the results of the study were a foregone conclusion: it was designed to confirm the utilities’ claims about net metering being a cost burden and – ultimately – protect their old way of doing business. We raised that alarm back in July 2012 when the bill was passed, and so we aren’t surprised to see findings that do in fact wrongly attribute a net cost to our successful solar program.
To start with, the 2012 legislation required that solar consumed on-site be included in the study. Just like turning off the lights or buying a new refrigerator to reduce the amount of energy you use, solar used on-site places no burden on the utility system. It simply means that you’re buying less power from the utility and avoiding use of the grid altogether. And it certainly isn’t relevant for an analysis of solar’s grid impacts, which is why prior CPUC cost-benefit analyses of net metering never included it. The inclusion of energy consumed on-site inaccurately skewed the draft study’s results to show more costs associated with net metering. Those results change dramatically for the better when onsite consumption is removed from the equation.
So what we have here is a study that was stacked against solar from the start. The truth is that solar delivers widely recognized benefits to solar and non-solar customers alike. It encourages private investment in valuable mid-day power generation – the utilities themselves have said that reduces the need for investment in expensive power infrastructure. When we crunch the numbers properly, we find a $92 million annual net benefit to the grid. And that’s not even accounting for all the many environmental and economic benefits of California’s rooftop solar market. Let’s not forget why this program exists in the first place: to build a healthier, more prosperous, more resilient solar-powered California. Rooftop solar is successfully harnessing innovation and private investment to do just that. Any assessment of the costs and benefits of net metering should account for these very real broader societal benefits. If you want to learn more about the program’s success, our friends at Environment California just released a report on the importance of net metering to solar in the state.
But whether or not you take issue with the study findings, the results are now unquestionably irrelevant following the passage of AB 327. Approved by the Legislature on Sept 12, this bill opens the door for a residential rate reform process at the CPUC. As E3 states many times in the study, how rates are designed have a tremendous impact on the results of an analysis like this. The Commission has been conducting a proceeding for the last year taking lots of stakeholder input on how to reform residential rates, and has stated its intent to issue a decision on rate changes by the end of 2013. So this study — which was once intended by the utilities to weaken the net metering program — is now little more than an academic exercise.
The real news of the last few weeks is that California rooftop solar is here to stay. Thanks to leadership from Sacramento on AB 327, we have removed a looming 2014 suspension date on net metering and ensured the CPUC will uncap the program altogether after the existing 5% cap is reached. And Californians themselves strongly support continued solar growth. A poll conducted for Vote Solar last year showed that an overwhelming majority — 86% — of California voters support making net metering more widely available. Our state’s record market growth proves that’s not just lip service: Californians are speaking volumes about solar support with real investment. To date, more than 160,000 individual systems have been installed on homes, schools and businesses statewide, with highest growth now occurring in mid and low-income communities.
The hullabaloo around net metering impacts is really the result of a concerted effort by some utilities to stop the growth of rooftop solar, which they see as a threat to their old way of doing business. Utilities are corporations, and like all corporations they are working to maximize shareholder value, not customer value. They are also monopolies that get a guaranteed rate of return from new power infrastructure that they build. Our new consumer-driven, decentralized approach to energy represents a marked change from the way utilities have been doing business for over 100 years. No wonder they’re worried.
Let’s also remember that utilities are given that special monopoly status to serve the public good – and this public wants more control over their energy with solar power. Rather than standing in the way of such progress by ordering flawed studies and creating new barriers, utilities should be finding ways to move with their customers into the 21st century. That begins by properly recognizing the value of customer investment in solar power.