Sign up for daily news updates from CleanTechnica on email. Or follow us on Google News!
The problem with policy is that it can change. California has had a policy for years that requires utilities to compensate homeowners and small business owners for any electricity they export back to the grid from their own states. solar systems on roofs. But there is also such a thing as too much of a good thing. California has been leading the clean energy energy revolution for decades, but today there is so much solar energy available – especially in the late afternoon when the sun is strongest – that much of it is wasted. It is either given away to those who will take it, or sent to the ground.
Most CleanTechnica Readers are aware that the utility industry has been openly hostile to rooftop solar since it first became available. First, it disrupts the way the electrical grid is structured: one or two central power plants that transport electrons to the community through a series of substations. It was never intended to be a two-way street, and accepting electricity from the margins of the grid created structural problems that utilities would rather avoid.
But there's more to it than that. For more than a hundred years, most utilities have been for-profit, investor-owned companies that have been given exclusive rights to provide electricity within a given area. It irritates them immensely when others try to gain the monopoly. Their general attitude is: “We have the exclusive right to supply electricity to this market and we will do everything we can to avoid sharing our rights with invaders!”
The great thing about solar panels is that anyone can install them and generate electricity themselves. How dare they! It was never possible for individual homeowners to build their own cogeneration plant or nuclear power plant. Solar energy on the roof leads to the democratization of electricity and that is anathema to the utility sector. Why, before you know it, someone gets the wild idea to share some of the rooftop solar energy with a neighbor, and where will that leave us?
Net metering is the engine that has powered the rooftop solar industry since its inception. Installing rooftop solar panels isn't cheap, even with various federal and state incentives. The money that utilities had to pay under various net metering schemes went a long way in making rooftop solar affordable to many, especially low-income families for whom monthly electricity bills represented a significant portion of their household budget.
A rooftop solar earthquake
Last year, the California Public Utilities Commission (CPUC), with the active support of the state's largest utilities, eliminated existing net metering rules. The new plan, known as NEM 3.0, reduces the amount utilities must pay their rooftop solar customers by 75 percent. Ouch! As a result, requests for new rooftop solar systems skyrocketed as people tried to get in on the action before the new rules came into effect. After NEM 3.0, applications dropped by approximately 50 percent. Since then, several major rooftop solar companies have gone bankrupt.
The CPUC justified the change by saying the state needed more batteries to absorb electrons during the day and return them to the grid at night. In fact, the number of residential batteries installed in California has increased. But batteries are expensive and add quite a large amount to the overall cost of a rooftop solar system. The amount the utilities now have to pay to access that stored electricity is barely enough to justify the extra cost, but it can reduce utility bills if it is consumed by the homeowner themselves.
According to CNETNEM 3.0 presented significant challenges for solar companies. Solar Insure, a solar insurance company, says 32 solar companies in California closed their doors in 2023 and 2024. Among them were well-known top solar companies such as ADT Solar. Those closures had ripple effects. The California Solar and Storage Association reported a 22% decline in solar jobs in California, meaning 17,000 fewer jobs by the end of 2023.
Solar Plus rooftop battery storage
However, the impact on household batteries has been dramatic. Berkeley Lab reports that since the enactment of NEM 3.0, there has been a 50 percent increase in the number of battery storage attachments – the linking of a storage battery to a rooftop solar system. Vincent Ambrose, chief commercial officer of solar battery maker FranklinWH, said the impact may be more dramatic than that. His company's data shows that the attachment rate is 90% to 100% since the start of NEM 3.0. “This increase is not only a good thing for battery companies, it is also good for the energy grid and homeowners looking to secure their energy resilience,” Ambrose said.
Carina Brockl, Chief Revenue Officer at Aurora Solar, says NEM 3.0 has initiated a steep learning curve for installers to effectively design and market solar and storage systems. “Although the cost of batteries is falling – making them increasingly affordable – the industry had previously believed that the economic viability of combining solar and storage would still be several years away. NEM 3.0 has accelerated the feasibility of battery technology in the market.”
While battery prices may be falling, rising interest rates caused homeowners' interest in solar-plus-storage to decline, while contract prices rose significantly, Ambrose said. “This, together with rising interest rates and installer bankruptcies, forced finance companies to tighten lending guidelines. As a result, solar installers faced liquidity problems, leading to bankruptcies.”
Lawrence Berkeley National Laboratory has looked at the data since NEM 3.0 came into effect, and while it confirms that more solar and battery installations are happening, it says the average cost of those systems increased 17 percent last year. It's the old riddle of supply and demand. Suddenly everyone wants a battery with their rooftop solar system, but there aren't enough batteries or trained installers to meet the demand. That's why prices have increased, something the CPUC doesn't seem to have taken into account.
Microgrids and virtual power plants
The result of the new rules is that fewer customers send electricity back to the grid, because the economic incentives to do so are simply lacking. California needs a robust system of virtual power plants, similar to what Green Mountain Power is doing it in Vermont, but the new rules don't do enough to encourage VPPs, says Canarian media. That is something that the CPUC has not sufficiently taken into account.
Furthermore, the state and utilities appear to have completely ignored the potential of vehicle-to-home (V2H) technology. California has more electric cars per capita than any other state. The batteries in those cars could easily form the basis of a broader microgrid that would allow utilities to store more solar energy during the day. Instead of companies buying grid-scale batteries, they could rent some of all those batteries and combine them into microgrids with demand response strategies to form a number of local microgrids.
Each CleanTechnica The reader would like to advise the utilities and the CPUC on how to come up with a comprehensive plan that focuses on the future rather than on policies that were outdated years ago. What the CPUC has done is create chaos. The citizens of California deserve better.
Do you have a tip for CleanTechnica? Do you want to advertise? Would you like to suggest a guest for our CleanTech Talk podcast? Contact us here.
Latest CleanTechnica.TV Videos
CleanTechnica uses affiliate links. See our policies here.