The following is a contributed article by Arlen Orchard, CEO and General Manager of Sacramento Municipal Utility District.
With the new year and decade came a new push for the use of renewable energy and carbon reduction in California. Specifically, as of January 1, 2020, the 2019 Building Standards took effect and included a requirement for the use of solar in all California new home construction in the form of rooftop solar or community solar programs.
As a long-time leader in supporting clean energy, SMUD developed an off-site community solar program, Neighborhood SolarShares, as one option to help home builders comply with the requirement for solar on all new homes. It's an innovative solution that recognizes rooftop solar doesn't work in all cases and will help builders provide more affordable housing solutions to consumers while still achieving carbon reduction.
This is the first program of its type designed to meet the California solar mandate for new home construction. In fact, we are the first to put forth a viable application to utilize the community solar option included in the 2019 Building Standards. As the first, we are proud to be shaping the future for how a community solar program may work.
Challenges and benefits
But that didn't come without challenges. As we developed the program, we worked to navigate what the community solar option really implied and what would make a viable option. For instance, the code does not specify locational requirements; size restrictions; minimum benefits; nor does it address logistical issues such as IT and recordkeeping of renewable energy credits.
Our proposal will use solar energy from within our service territory and from sources that are 20 megawatts or less. Furthermore, these are new sources of solar energy that are not currently in our portfolio. This program guarantees a net benefit to consumers and will maximize solar production in support of the state's carbon reduction goals. This 20-year financial guarantee is something rooftop solar can't provide.
This guaranteed benefit of $10 per KW per year was based upon financial calculations that take into account SMUD's entire system generation as well as savings from certain components that make up our rates.
And we can provide certainty in the system because we have energy experts who accurately site the projects and continually monitor weather, performance, output and technology upgrades.
Importantly, the California Energy Commission earlier approved an offsite “community solar” compliance option as one way for developers to meet the new mandate. We're pleased that CEC staff has once again recommended the Commission approve SMUD's Neighborhood SolarShares proposal at its Feb. 20 Business Meeting.
Broad support and rooftop opposition
Notably, our proposal enjoys broad support ranging from legislators, the NRDC, labor unions, business groups, low-income and affordable housing advocates, chambers of commerce and developers. In fact, more than 30 members of the California Legislature signed a bipartisan letter of support including the Chairs of both the California Senate and Assembly Energy Committees. The docket can be found here.
Since SMUD first proposed the program in November, we have made a number of compromises to address the concerns from the rooftop solar industry. Specifically, we revised our application to ensure that all the solar resources allocated to this program come from within our service territory; are new resources; are 20 megawatts or less; and, that we will collaborate with builders so they can offer a choice of rooftop or community solar at the point of purchase.
Despite being an approved compliance option and having been recommended for approval by the CEC staff, CEC Commissioners were lobbied extensively by the rooftop solar industry to reject the proposal.
The issues raised by Commissioners in November echoed those above, which we have addressed in the revised application. One key issue is whether SMUD is preventing customers from installing rooftop solar or battery storage after they subscribe to the Neighborhood SolarShares program. This couldn't be further from reality. Customers can add additional solar and battery storage, and we even offer a battery incentive of $2,000 to do so.
The rooftop solar industry argues that Neighborhood SolarShares provides less of a financial benefit. Though that may be true, with Neighborhood SolarShares, homeowners don't have to pay the up-front costs of a traditional system, nor do they have to pay ongoing operation or maintenance costs. And those with community solar receive guaranteed, reliable solar power for 20 years.
As the CEC prepares for final approval on Thursday, we look forward to offering a lower-cost solar compliance option that benefits all consumers. We see increased solar use and choice as a benefit to everyone, and our program advances our strong support for California's climate change goals.
The inaccuracies and misdirection put forth by many in the rooftop solar industry were disappointing, especially since we share the same goal — to increase the use of renewable energy for environmental and health benefits.
The reality is that utility-scale solar energy delivers the same carbon-free environmental benefits regardless of where it's produced and does so at a much lower cost to consumers than rooftop solar.
Rooftop more expensive
According to a report by the Legislative Analyst's Office, rooftop solar is more expensive and does not fully maximize solar use due to the weather, shading and siting of rooftop solar panels. In fact, rooftop solar costs 2-5 times more than utility-scale solar. Community solar gets perfect orientation, sun tracking and ongoing maintenance — effectively capturing more solar benefit, which will not degrade over time.
SMUD's proposal to the CEC is rooted in economics and reality. It's well-documented and proven that utility-scale solar, like our community solar offering, is the most cost-effective and reliable solar power available. In fact, utility-scale solar delivers more energy per dollar spent on the generation system when compared to rooftop solar – effectively maximizing a community's clean energy investment and minimizing costs to our consumers.
Rooftop solar and community solar can certainly coexist. Our community solar option simply provides a compliance option when rooftop solar is not feasible. In cases where there is a dense tree canopy, or significant shading from nearby buildings; or when the rooftop pitch and orientation doesn't allow for maximum solar generation, Neighborhood SolarShares can provide a low-cost solar option so everyone can benefit. They can effectively work together to ensure that solar use in California is available for use by everyone.
Rooftop solar certainly has its benefits and we have fully supported its adoption in our territory, providing more than $250 million towards it. For those who have money up front to pay for a system, they can enjoy the benefits of selling solar back to the grid. When combined with a perfectly configured system of solar plus battery storage, they can avoid the impact from certain power outages. However, the presumption of energy independence is a misnomer. Homeowners with rooftop solar and battery storage are still connected to the grid and actually rely on the grid more than non-rooftop solar customers because of their two-way interactions buying and selling power.
Contrary to assertions by the rooftop solar industry that we do not support solar, all Neighborhood SolarShares does is offer a choice to home builders. They appreciate and value that choice. Some developers have indicated that market demand for rooftop solar is strong so they will continue to include rooftop solar as the standard in their development. While others value the opportunity to offer a lower cost alternative to consumers in a state where affordable housing is now a recognized crisis.
At SMUD, we recognize it isn't one size fits all in addressing climate change and we will continue to wholeheartedly support all forms of solar. To date, 210 MW of customer-owned rooftop solar has been installed in SMUD's service area, and our energy portfolio includes over 170 MW of utility-scale solar. Over the next three years, SMUD will bring nearly 270 MW of new utility-scale solar online. And over the next 20 years, we will install nearly 1,000 MW of utility- scale solar in our service territory. Currently, the Neighborhood SolarShares program is 13 megawatts, which accounts for a very small percentage of our planned solar resources.
Today, SMUD's energy portfolio is on average 50% carbon free and will grow to 80% carbon free by 2030.
With the CEC's approval, SMUD will provide a cost-effective choice for builders and consumers to expand solar, support choice, reduce carbon emissions and advance affordable housing. It's solar, done right.
Correction: A previous version of this article misstated the guaranteed net benefit of SMUD's community solar program. It is $10 per KW per year.