New rules change solar energy credits for multi-family, commercial buildings

This revamp of solar credits will destroy the industry, reduce incentives and doom California’s clean climate future!

This revamp of solar credits will relieve financial burdens on non-solar folks, incentivize battery storage and pave the way for California’s clean climate future!

If it feels like deja vu all over again that’s because, essentially, it is. The next battlefront in the solar wars — changing how solar energy generated by multi-family and commercial installations is credited by the Big Three electric utilities — has proceeded much more quietly than last year’s volcanic eruptions over single-family rooftop solar.

That might have something to do with the fact that there are more than 1 million single-family rooftop households in California, and while only 34,000 or so in the multi-family/commercial camp. The conclusion, however, is much the same.

After several postponements, the California Public Utilities Commission voted Thursday, Nov. 16 to slash credits for the energy multi-family/commercial generators send to the grid. Folks in these buildings will buy energy back at higher prices, critics contend. Changes will apply only to future customers, not existing ones.

The slides-off-your-tongue nomenclature here is “virtual net billing tariff,” or VNBT, and Net Energy Metering Aggregation, or NEMA.

“Under VNBT, tenants and property owners receive electricity bill credits for the value the renewable system provides to the grid,” says a fact sheet on the changes from the CPUC. “The amount of the credit is based on the hour of the day that the energy is sent to the grid. By storing solar energy when it is readily available during the day, customers with battery storage can send it back to the grid when it is most needed in the hours when the sun is setting.”

Changes also apply to NEMA, governing customers with multiple properties, such as agricultural customers, schools and nonprofits. Stay with us here.

Pandering to big utilities?

Last year, CPUC adopted changes for single-family, single-meter rooftop solar. These systems generate electricity when the sun is shining. About half is consumed in real time by the home. The other half is exported to the grid for use by others, explained Bernadette Del Chiaro, executive director of the California Solar & Storage Association.

The new rules slashed the value of that exported energy by some 80% or so, to some 5 cents per unit. The CPUC concluded that solar is now plentiful during the day, and the high compensation rooftop solar owners were getting for their solar power was far out of line with market rates.

“For a multi-meter property, like a school, farm, apartment building or strip mall, the CPUC decision yesterday went even further than what they did for single-family homes,” Del Chiaro said by email. “They said that you can’t self-consume electricity in real time at all — 100% of the electricity is considered an export and valued at that low 5 cent price. We fought for the right for these consumer groups to get to use that 50% of electricity that is generated by their own solar system and consumed in real time on the property, but the Commission said ‘no.’

“This is the sell low, buy high deal that no one in their right mind would take.”

The industry says solar installations have declined since the new, less-generous single-family solar rules went into effect in April, and they expect this to hurt as well.

“With this vote, the CPUC is denying schools, small businesses, apartment buildings and farms the ability to use the solar energy they produce on-site, and instead forcing them to buy their own solar back from the utility at full retail prices,” said a statement from the California Solar & Storage Association. “The changes eliminate a major incentive to go solar at a time when we need to ramp up solar installations.”

California is nowhere near the renewable energy capacity it needs, the solar industry is already experiencing a loss of jobs, and this decision is another step backwards, Del Chiaro said. “The only winners here are big utilities and their shareholders.”

Residents in multi-family buildings will be able to get their own meters, but economic incentives for building owners to install solar is lost because meters in common and shared areas —  hallways, gyms, outdoor areas, EV charging stations — will not be able to participate. If building owners aren’t motivated to install solar to begin with, individual tenants can’t benefit, they argue.

Seeking fairness?

The regulators, utilities and Public Advocates Office — the CPUC’s in-house Solomon-the-Wise — disagree.

Over the past quarter-century or so, California has provided robust financial incentives to goose the adoption of solar power. It worked so well that it has wound up costing non-solar customers billions of dollars a year to backfill those incentives, leading to painfully high electric bills for non-solar folks.

These adjustments are the state’s attempt to even the playing field while still encouraging solar’s growth — though perhaps at not such a gallop.

“The new tariffs contain improved price signals that encourage customers to adopt battery storage and export solar energy in the evening hours when the grid is most stressed and California needs to displace energy from fossil fuel power plants,” the PUC primer said, “continuing its efforts to modernize solar regulations to bolster the modern grid and reduce greenhouse gas emissions.”

The new tariffs only apply to future customers, and there’s a 90-day grace period for prospective customers to enroll in existing tariffs before the new rules take effect. The decision also authorizes $2.5 million to study the impacts of these decisions on equity, greenhouse gas emissions, electrification, installation trends and consumer protections.

The Public Advocate, whose job at the CPUC is to watch out for the little guy, supported the changes. They’ll help reduce rate impacts on non-solar customers — the overwhelming majority — and “improve price signals to encourage multi-tenant property owners to install solar with storage systems to support grid reliability,” Matt Baker, director of the Public Advocates Office, said in a statement.

“Given that low-income customers have historically been disproportionately impacted by solar subsidies because more affluent customers install solar at higher rates, we believe that the CPUC’s decision is a step in the right direction.”

The utilities supported change as well, saying it reduces the burden on folks who don’t have solar.

The primary purpose of VNEM is to enable solar installations for multi-family housing, said Jeff Monford, spokesman for Edison International, while NEMA allows eligible customer-generators to aggregate electrical loads from multiple meters. For example, an agricultural customer could use a single renewable generation system to provide NEMA bill credits to offset the electrical load from their home as well as from an irrigation pump located on an adjacent parcel, he said.

Challenge?

Del Chiaro, of the California Solar & Storage Association, said the commission did make a few exceptions to the no-onsite-consumption rule. Still, about half of the multi-family housing in California will be cut out because their commercial load is too high to make solar pencil out only for residential meters. Batteries don’t really help the situation because they’d also be under the buy high/sell low deal, she said.

“The whole idea of these two programs, VNEM and NEMA, is to allow properties with multiple meters to install one solar system on the property and attribute the solar to multiple meters,” she said. “If a battery is added under the new rules, it only exacerbates the problem because the property can’t make full use of the battery’s value.”

Solar industry advocates plan to challenge the decision. They’re urging the governor and others “to find ways to repair the damage done by the CPUC in order to keep solar growing, save green jobs, and help California get back on track with the state’s clean energy goals.”

It worked last time. After Gov. Gavin Newsom’s criticisms, the single-family rooftop solar rules went back to the drawing board for a do-over. We’ll see if history repeats itself this time around.