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A Brief History of California’s Solar Agreement, Net Energy Metering

Policy
Solar contractor installing a panel on a roof

As we see the devastating effects of climate change across the globe, most recently in Texas where communities were suffering in freezing temperatures without water or power for days, it has become clearer than ever that we need to transform our power supply to renewable energy in order to increase resiliency. This past summer, California experienced the opposite, where sky high temperatures and demand for air conditioning resulted in rolling blackouts for California residents. In a time where it is crucial to increase the deployment of renewable energy, the United States’ largest solar market, California, is under attack. What happens in California will likely be the example for other states, and this is a crucial battle that we’re on the front lines of right now. 

The success of rooftop solar relies heavily on net energy metering (NEM), a solar producer’s agreement with the electric utility company. At a high level, NEM is a billing structure that allows solar customers to sell their excess electricity back to the grid. The amount is then applied to their utility bills, leaving the solar customer to pay the net amount of energy used. California’s first solar agreement, known as NEM 1.0, was extremely successful and accelerated the transition to solar for California residents, businesses, schools and municipalities. Since then, investor-owned utilities (IOUs) across the state have continuously attacked rooftop solar, proposing egregious policies that would make solar economically infeasible. In 2016 the second solar agreement rolled out initially in the San Diego Gas & Electric utility territory, and made its debut for Pacific Gas & Electric (PG&E) and Southern California Edison in 2017. This successor tariff is known as NEM 2.0, and after a tough battle against the utility companies, the California Public Utilities Commission decided that the new solar rate would be similar to the first, maintaining the major benefit of allowing customers to sell electricity back to the grid at retail rates. However, NEM 2.0 required all solar customers to transition to a time-of-use (TOU) rate and non-bypassable rates. Under a TOU rate, a customer is charged different rates based on the time of the day with designated on peak and off peak times. The highest rates are during peak demand, which is late afternoon and early evening, while off peak times occur early in the morning and late at night and have the lowest cost. The new rate structure under NEM 2.0 has serious implications for solar customers, because it changes the value of the energy sold to the grid based on the time. This means that in order to get the highest NEM credits, customers need to sell the bulk of their energy during peak hours. Although NEM 2.0 is substantially less beneficial to solar customers compared to its predecessor, it still retained the major benefits of being able to sell energy back to the grid. Solar companies even began to adapt to TOU rates by designing solar systems to face west in order to capture the maximum energy possible during the late afternoon. Now, California’s IOUs are attempting to make modifications to net metering, ushering in NEM 3.0. 

As details of NEM 3.0 continue to unfold at the California Public Utilities Commission, it is clear that the IOUs are calling for drastic cuts to NEM. The California Solar and Storage Association (CALSSA) estimates that the economic value of going solar will be reduced by 50-75 percent with the IOU’s proposed changes. Decisions made during these proceedings will not only affect new solar customers, but existing customers as well as the IOUs have proposed removing grandfathering periods for current customers, essentially forcing all solar customers onto NEM 3.0. 

With the understanding that NEM 3.0 could kill rooftop solar and that California is a leader and looked to as a model for shaping renewable energy programs, it is not an understatement to say that we are fighting to save solar. We are calling on organizations to sign this net metering letter and individuals to sign this petition, by early April, which will be sent to Governor Gavin Newsom and the California Public Utilities Commision. 

Our founder, Tara Hammond, began a small local coalition to save rooftop solar in California last year and the coalition has quickly grown to a statewide grassroots effort, with more than 70 organizations being involved. To learn more or to join the battle, please reach out to our Climate Justice Policy Advisor, Karinna Gonzalez at karinna@hammondclimatesolutions.com.

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Villa Lakeshore Apartments in Lakeside, which BQuest provided a SOMAH bride loan for, allowing the property to install solar, which saves tenants $1,600 a year on utility bills

California bill could restructure traditional incentive programs

New bill could restructure traditional incentive programs in California

It is no secret that traditionally, clean energy infrastructure has primarily been accessible to wealthy homeowners in California. More than a million homes and businesses have rooftop solar, but the state’s environmental justice communities, which are in the most polluted areas, have been left out. In order to reach the state’s climate and clean energy goals, it is necessary to provide clean energy access to everyone and a big part of how we get there is programs. 

The Solar on Multifamily Affordable Housing (SOMAH) Program was created by California Assembly Bill (AB) 693 introduced by then Assemblymember Susan Eggman in 2016, which included the largest investment of its kind in the nation - $1 billion over the next decade from five of the state's gas and electric  investor-owned utility companies greenhouse gas cap-and-trade auction proceeds to subsidize solar panels on multifamily affordable housing across the state. For tenants, this means reduced utility bills, better housing security and job training opportunities. For housing complex owners, the solar reduces common area electricity costs, reducing overhead expenses. The program had a very successful launch, becoming fully subscribed within the first 24 hours of opening the program with more than 240 applications representing 74MW of solar capacity. However, after the successful launch, the program has experienced a significant decrease in applications in subsequent years, only receiving a total of 20 applications in 2022. 

A required third-party evaluation of the program identified a number of barriers to program participation. A major barrier cited from property owners was gap financing. SOMAH Program projects can be lengthy, and the current incentive structure requires the property owner to float the rebate amount, which can be thousands of dollars to hundreds of thousands of dollars, sometimes for a year. The program recognized this issue and rolled at progress payments, which paid a portion of the incentive for certain project milestones, but this simply is not enough for some property owners. Recognizing the need for gap financing in order for these projects to participate in the program, Hammond Climate Solutions Foundation and BQuest Foundation began working together to provide no interest bridge loans for SOMAH projects, providing much needed funds for projects that would have otherwise not moved forward. After funding a handful of projects, BQuest realized they could scale this opportunity a lot more quickly and reach many more property owners by creating a loan guarantee instead of financing these projects on a one by one basis. A loan guarantee would allow the property owner to access the rebate on the front end, backed by a loan guarantee from BQuest, without putting ratepayer money at risk and allowing BQuest to scale their impact. 

In February 2023, Senator Eggman introduced Senate Bill (SB) 355, which expanded SOMAH Program eligibility to include tribal housing, housing owned by public agencies and increased the income threshold among other things. At this point, Hammond Climate Solutions Foundation and BQuest had already been involved in numerous meetings with the SOMAH Program administrators, the California Public Utilities Commission (CPUC) energy division staff, the Governor’s Office and were actively involved in the SOMAH proceeding at the CPUC and while support for this idea was given by all parties, implementing something like this had proven to be slightly more difficult. Since SB 355 addressed the lack of applications in the SOMAH program and expanded eligibility, we met with Senator Eggman’s staff and proposed an amendment to the bill to include language for a loan guarantee and not only was the language added with no opposition, it was signed by Governor Newsom on October 7! 

This is a huge win for California and an opportunity to prove that incentive programs structured in a way that provides the rebate on the front end can work and will eliminate barriers to participation. You can read the full bill text here.     

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Photo of the largest rooftop community solar project in the U.S, located in Carroll County, Maryland

California could lead the nation in Community Solar, if the utilities stop fighting it

California leads the nation in rooftop solar installations but has fallen short in creating a viable community solar market. Now, that can change.

California leads the nation in rooftop solar installations but has fallen short in creating a viable community solar market. Last year, Assembly Bill 2316 (AB 2316) unlocked the potential for California to lead the nation in community solar over the coming years by finally creating legislation that will tell the utilities to create a program that will credit customer’s accounts for renewable electricity produced elsewhere and set a compensation for the bill credit. Now, the utilities are attempting to derail a new proposed program called the Net Value Billing Tariff (NVBT).  

The NVBT would finally allow California renters, nearly 17 million people, and low-income households to take advantage of bill savings while using clean energy. There are a couple of things that make the NVBT different from failed community solar programs in California. The first is that it would require the installation of batteries with community solar projects, to alleviate the strain on the grid during peak hours (currently 4-9 p.m.), once demand is higher and solar energy being exported to the grid is dropping off as the sun sets. The second is that AB 2316 requires that low-and-moderate income households make up a majority of subscribers, ensuring that this program will benefit those who are paying a disproportionate amount of income towards skyrocketing electricity rates. Finally, this program has no caps on capacity, meaning the doors are truly open for developers that want to build these projects. 

One of the biggest advantages of community solar is that the solar power systems can be placed on rooftops and in parking lots, and the systems don’t require large plots of land like utility scale solar does. Community solar can also support local clean jobs and stimulate the regional economy. With the state’s target to procure 85 gigawatts of clean energy by 2035, there is already a large amount of projects in the desert trying to connect to the grid, however community solar projects can be a lot closer to the customers they serve, meaning they are able to connect to the lower voltage grid, eliminating the need for more costly and fire-causing transmission and distribution lines.    

It is no surprise that the only arguments against a program that could potentially replace dangerous peaker plants comes from the state’s three investor-owned utilities. The main argument coming from the utilities is that community solar should be treated like large-scale generators that have a different set of rules and guidelines than other distributed energy resources like rooftop solar. 

The California Public Utilities Commission proceedings tend to move pretty slowly, so there isn’t a definitive date for when we can expect the NVBT to be voted on by the commissioners. California has now passed the September 26 deadline for states to apply to $7 billion in federal funding as part of the Solar For All grants and having a community solar program in place would have made California’s application a lot more competitive.

While the utilities have successfully blocked attempts to make solar more accessible, including the decision to slash the state’s net energy metering program last year, hopefully the state can get it right on this one.

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Let’s Go! San Diego Transit Relief

Do you live in San Diego County? How satisfied are you with the current state of roads and public transportation? You may be approached, if you have not been already, with these questions by a friendly volunteer in the next few months as the November 2023 deadline to submit measures for the 2024 ballot quickly approaches.

The County’s transit infrastructure has been in decline for many years now. Local governments in the region have poured millions of taxpayers’ dollars into expanding freeways, but we know from looking at Los Angeles and other regions that more lanes increase the number of cars on the road. More cars on the road means more air pollution, which disproportionately burdens the health and well-being of BIPOC communities and communities of concern. 

It’s time for us to come together and create change. Let’s Go! San Diego is a campaign focused on building a better future for local families by delivering essential transportation improvements: reducing congestion, upgrading highway safety, fixing roads and making public transit more reliable and accessible. Some of the other projects that Let’s Go! will fund include:

  • Purple trolley line extending from South County to Sorrento Valley
  • Moving Rail Line connecting to San Diego International Airport
  • Increased service on bus and trolley routes
  • Habitat preservation and stormwater upgrades

Vehicles make up 50 percent of greenhouse gas emissions in California, 80 percent of nitrogen oxide pollution and 90 percent of diesel particulate matter pollution. Thus, an improvement to our transportation system means progress for meeting local and statewide climate goals

So, how will this be funded? The measure proposes a half-cent increase to the County’s sales tax, meaning for every $20 you spend, $0.10 will go towards improving our transit system. Tax increases are not often appealing, however, we wholeheartedly believe that the impact of this measure far outweighs the individual costs. The lack of viable transportation alternatives for County residents limits access to jobs, education, medical offices and recreational facilities. San Diego County needs more and better options, which is why it is crucial that residents bring this measure into next year’s ballot.

The broad coalition supporting this important effort is composed of over 30 nonprofits, unions, environment groups and businesses. Launched by SanDiego350 and the Environmental Health Coalition, this grassroots effort continues to grow in strength. Check out the complete list of endorsements here: Let’s Go! San Diego Endorsements.

If you haven’t signed the petition yet, visit one of the locations here to bring this measure one step closer to becoming a reality. Also, consider joining the campaign to stay up to date on our progress and spread awareness to friends, family and neighbors so that San Diego may deliver long-awaited transit improvements to the County.

Photo Credit: Let’s Go! San Diego

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