The following is a contributed article by William Schulze, emeritus professor at Cornell University and a university fellow at Resources for the Future.
California has been a national leader in meeting solar energy targets for fighting climate change, but that could change in the near future. A key part of solar's success has been widespread adoption of rooftop systems by forward-thinking homeowners. Given that new technologies are initially expensive, homeowners were incentivized to adopt rooftop solar through rates using net energy metering, or NEM for short. NEM allows homeowners to share their excess energy back to the utility at the same rate they pay for electricity, so they are billed based on the net energy consumed.
Utilities complain that solar customers are not paying their fair share for the grid. Their proposed solution is a new rate structure called NEM 3.0, a brazen attempt to kill rooftop solar by punishing solar customers with excessive fees. It greatly exaggerates what rooftop solar owners should pay for use of the grid and ignores the environmental benefits that rooftop solar provides.
How bad are these proposed rate changes? Well, they're the most expensive in the nation. The proposal would increase the payback period for people who invest in rooftop solar to more than 20 years, making it unaffordable to the vast majority of potential solar customers. If approved, it will kill the rooftop solar industry in California.
Worse, for customers who have already purchased rooftop solar, NEM 3.0 changes the rules of the game that they relied upon when deciding to go solar, to the point that many will regret their decision to go solar in the first place. They will be victims of what amounts to an unethical de facto bait and switch strategy. The prior NEM 1.0 and 2.0 rates induced them to invest in solar, which would, under NEM 3.0, become a financial liability.
The real motivation behind this proposed NEM 3.0 is dubious. With California's utilities responsible for huge liabilities from causing wildfires due to failing to maintain their equipment, it appears they are now looking to make up some of that money on the backs of solar customers.
While the proposal claims to be seeking to encourage battery storage — and resiliency that is so critically needed in California — storage is another reason utilities are trying to kill rooftop solar. If storage is decentralized at local homes, businesses and schools, new transmission lines to access far-away solar farms and storage banks are less necessary, since solar homes will either use their own stored energy in the evening, or sell it through existing local lines to neighbors. The utilities' big plans to expand the transmission system — and earn a guaranteed profit on that spending from ratepayers — will be threatened if people continue to install solar and batteries to protect their access to reliable and clean power.
While Gov. Gavin Newsom has said there's "more work to be done" on the NEM 3.0 proposal, astoundingly, the negative features of NEM 3.0 are not getting the attention of many government leaders and academic experts. Utilities have long backed anti-rooftop solar and battery proposals across the United States. In fact, the conservative think tank The American Legislative Exchange Council (ALEC) has been promoting the "cost shift" narrative for years. Opposition to rooftop solar in California is nothing new, but California's leaders need to see beyond it and work with one another to meet our climate goals.
Perhaps the most surprising aspect of the NEM 3.0 proposal is that it contradicts the finding of California's three energy agencies that a large increase in rooftop solar is needed over the next decade to meet the state's energy and climate goals. Rooftop solar can also aid in protecting California's remaining natural areas. A study entitled "Protecting California's Climate and Land" by the Environment California Research & Policy Center notes, "State regulators calculate an additional 28.5 GW of rooftop solar will be built by 2045. By using this amount of rooftop solar instead of utility-scale solar, California can maintain existing land uses on more than 148,000 acres of land — an area about half the size of the City of Los Angeles."
The underlying battle that motivates the utilities' drive for NEM 3.0 is an effort to stifle competition from decentralized solar generation and energy storage. Killing rooftop solar will leave California customers at the mercy of electric utilities. The ruling on NEM 3.0 may be made by the California Public Utilities Commission as early as February 10. California has specific climate and decarbonization commitments and goals that its elected leaders are obligated to meet. The commission which is appointed by the governor and confirmed by the state senate must be held accountable to those commitments, and not to the utilities that are motivated by profit.
Correction: A previous version of this story had an inaccurate byline for William Schulze. He's a university fellow at Resources for the Future.