The Net Energy Metering Cap Redefined: The Sun Is Shining on Rooftop Solar in California
On May 24, 2012, the California Public Utilities Commission (CPUC) voted in a 5-0 decision to greatly expand the net metering program for rooftop solar power generators. The net energy metering (NEM) program, first established in 1995, allows homeowners and businesses that install rooftop solar panels to have a standard contract with their utility which gives them a monetary payout at the end of each year if their energy output exceeds their energy use. Under the net energy metering program, the electric utilities of Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE), and San Diego Gas and Electric Company (SDG&E) are required to make net metering available to customer-generators on a first-come-first-served basis until the total generating capacity exceeds five-percent (5%) of the utility’s “aggregate customer peak demand.” The CPUC decision clarifies that the “aggregate customer peak demand” is the aggregation, or sum, of all individual customers’ peak demands, including their non-coincident peak demands. This will have the effect of significantly increasing the total generating capacity that is eligible for net metering, thus opening up greater opportunities for solar project developers, their customers and investors.
Prior to this decision, each utility used a different calculation method to determine where the 5% cut-off is. For example, PG&E divided the capacity of NEM-eligible generation by the highest peak demand-ever across its entire system, using a 60-minute interval. Other commenters, including the Solar Energy Industries Association (SEIA), argued that to calculate the aggregate customer peak demand, utilities should instead add together all of their individual customer peak demands regardless of when they occur in order to account for the non-coincident nature of customer peaks i.e., to properly account for individual customers whose demand peaks at different times during the day. Under SEIA’s methodology, the “aggregate customer peak demand” would be the summation of each individual customer’s peak demand, not the system-wide peak demand as a whole. The CPUC agreed with this interpretation, determining that the utilities shall use the highest recorded sum of non-coincident peak demands in a calendar year in calculating the 5% limit. The utilities argued that this decision will only serve to increase the rates to their customers, while generator-customers get to benefit without contributing their fair share toward the maintenance and improvement of the grid. Sempra Energy, SDG&E, PG&E, and SCE estimate that this will shift $1.3 billion a year in costs from solar to non-solar customers. However, SEIA and others hailed this decision as a “step forward,” predicting that the demand for NEM solar will more than double, increasing the demand for solar panels and availability of clean energy jobs. Already, California’s solar industry employs tens of thousands of workers. More importantly from an industry perspective, it was predicted that the net metering cap would have been reached in 2013 for PG&E, and shortly thereafter for the other utilities. This cap would have thus prevented the admission of new NEM customers, limiting the potential solar market as soon as next year. Instead, the CPUC “decision ensures that the solar industry will continue to thrive for years to come, and we are fully committed to developing a long-term solution that secures the future of the industry in California,” according to CPUC President Michael Peevey.
Going forward, a public workshop will be held in June to determine how best to estimate individual peak demands for those customers who do not yet have a smart meter. Further, the CPUC has ordered the preparation of a cost/benefit analysis for the NEM program to be completed on or before October 1, 2013. Lastly, cap or no cap, the NEM remains scheduled to end January 1, 2015, unless new CPUC rules are issued.
- Senate Bill 656 (stats. 1995, ch. 369).
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- Cal. Pub. Util. Code Section 2827(c)(1) (2012).
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