December 16, 2021Jesse PrierBy Jesse Prier

Overview

On Monday, December 13, 2021, the California Public Utilities Commission (CPUC) announced its long-awaited proposed decision updating net energy metering (NEM) in California, the key financial framework for on-site solar producers. The top-line take-aways are as follows:

  • The changes are significant enough that the solar industry questions whether there is any future at all for new on-site solar energy in the state of California.
  • To get grandfathered into the current, more lucrative framework (“NEM 2.0”), organizations must submit interconnection applications for proposed new projects before the new rules go into effect. This provides 20 years on the legacy NEM framework, with rates often amounting to millions of dollars in savings for public agencies.
  • Any public agency considering on-site solar energy at any point within the next 5-10 years should act immediately and swiftly in this final window of certainty for exported solar power rates.

What is the window of time remaining to secure legacy NEM rates? The official sunsetting of these legacy rates is expected to take place as early as January 27, 2022 and as late as the end of May 2022.

Any public agency considering on-site solar energy at any point within the next 5-10 years should act immediately and swiftly in this final window of certainty for exported solar power rates.

What is Net Energy Metering?

Net Energy Metering or NEM refers to a utility bill credit for excess energy produced through on-site solar energy. As the meter “spins backward,” the solar facility reduces electricity bill costs for entities who have taken the step to procure solar energy.

This regulatory incentive was enacted to incentivize homeowners, businesses, and public entities to generate their own greener sources of energy. The exported solar power rate in this incentive was reduced slightly in 2016 in an iteration commonly referred to as “NEM-2” or “NEM 2.0.” As proposed, this pending update (“NEM 3.0” or “NEM-3”) is significant enough that future on-site solar projects are likely to lose all financially viability for organizations.

What Exactly Are the Changes Proposed under NEM 3.0?

The most significant changes proposed under NEM 3.0 center around the following:

  • Future compensation for exported solar energy will no longer be tied to retail rates (prices at which one buys energy from the utility), but rather to the latest iteration of the Avoided Cost Calculator (ACC). The ACC is a tool designed to assess the value of avoided costs on the part of utilities for each new addition of distributed energy infrastructure. NEM 3.0 applies this latest iteration of the ACC as the solar export rate (rather than the retail rate), resulting in significantly decreased value for customers from what is currently available.
  • Under NEM 1.0 and 2.0, electricity export value was guaranteed to be secured for up to 20 years from the time of the solar system’s interconnection filing. Under NEM 3.0, export rates on new projects are locked in for only five years into the future, after which point rates will be recalculated annually as CPUC updates its Avoid Cost Calculator. Visibility into what rates will be at the time of these annual recalculations is uncertain, adding significant risk to any solar investment.
  • NEM 3.0 involves a true decoupling of electricity imports and solar exports. Whereas the current program “nets” customer production against grid consumption within 15-minute billing intervals, this new system of “net billing,” as it’s being referred to, will do so instantaneously. This means that a customer pays the (higher) retail rate for every single electron imported from the grid and is compensated at the (much lower) ACC rate for every single electron exported to the grid.  This net effect of this change is further reduced savings.

Taken together, this makes it extremely challenging to have certainty of the potential savings for any new on-site solar energy systems.

Out of an abundance of caution, public agencies are recommended to act immediately and swiftly to submit interconnection applications before January 27, 2022, when updates take effect.

Who Is To Be Affected by The Switch to NEM 3.0?

The changes to NEM policy apply to electricity customers of the three investor-owned utilities falling under CPUC jurisdiction, including:

  • Pacific Gas & Electric (PG&E)
  • San Diego Gas & Electric (SDG&E)
  • Southern California Edison (SCE)

When Would My Public Agency Need to Act?

The submission of an interconnection filings for newly proposed solar energy should be submitted before changes to NEM are enacted. While it is possible that the ability to secure the more favorable rates from NEM 2.0 will be sunsetted as late as 120 days after NEM 3.0 is enacted – as late as May 2022 — the exact timing won’t be known until the regulatory updates are enacted in January. Out of an abundance of caution, public agencies are recommended to act immediately and swiftly to submit interconnection applications before January 27, when updates take effect.

How can a public agency submit an interconnection application?

Our ForeFront Power team is prepared to help public agencies looking to submit an interconnection application do so successfully. However, our team will need a few inputs from your team.

Utilizing your historical electricity bill data, our team of experts design a solar program from top to bottom, including system design, savings modeling, and all other necessary components. Once that is complete, our team of interconnection and utility experts complete applications on your agency’s behalf.

While this is typically a process that can be somewhat protracted, we’ve staffed up and are working around the clock to ensure that entities who are willing to act quickly to seize this final window of opportunity are able to secure up to 20 years of savings through the installation of clean energy systems on their premises.

The SPURR Advantage

Additionally, the team members at SPURR understand what it means for public agencies to undertake infrastructure investments such as on-site solar energy or energy storage. They’ve worked to make the process of renewable energy adoption simple for California’s public agencies through their piggy-backable RFP.

More than 50 public agencies in California—including schools, colleges, cities, counties and other public organizations—have piggy-backed off SPURR’s Renewable Energy Aggregated Program (REAP) to benefit from lower solar pricing and favorable contract terms that lower project risks.

Through a competitive RFP involving seven developers, SPURR selected ForeFront Power as its developer for all public sector contracts, thanks to ForeFront Power’s financial stability, pricing, experience, and references.

Have Questions?

Schedule your quick exploratory call today to uncover your agency’s potential savings profile and whether it is possible to secure legacy rates in this final hour.