Late last year, the California Public Utilities Commission passed a new iteration of the state’s net energy policy, which determines what happens with excess energy. Dubbed NEM3, this policy significantly lowers the number of credits ratepayers with rooftop solar receive when they send excess energy back to the grid. Climate justice advocates believe that this policy adoption will have long-standing impacts as solar incentives continue to diminish across the country. And while advocates are sounding the alarm on what is now at stake for California’s clean energy future, NEM3 is just one example of how climate progress in America is at risk.
Before the revision to NEM3, California’s previous net energy metering policy—1995-96 SB 656—was intended to diversify the state’s energy resource mix, stimulate economic growth in California, and encourage private investment in renewable energy. The bill instituted solar credits, a key incentive that helped to make California a leader in residential solar and, over time, has helped to make clean energy accessible to middle- and working-class communities. Thanks to the CPUC’s expansion of a number of Solar for Disadvantaged Communities programs, a Lawrence Berkeley National Lab analysis found, middle-income and working-class households outpaced wealthy households in adopting solar in 2021.
[This] key incentive policy helped to make California a leader in residential solar and, over time, has helped to make clean energy accessible to middle- and working-class communities
Despite that forward progress, NEM3 was passed unanimously on December 15th in a CPUC public meeting. Beginning in April 2023, the decision will impact anyone looking to adopt rooftop solar in the state as well as some existing solar ratepayers. The new policy cuts the number of credits that rate payers are entitled to by 75 percent—from $0.30 per kWh to $0.05 per kWh. This decision will especially affect schools and churches as they will see the biggest reduction in solar credits. NEM3 also stretches out the payback period on a solar installation from an average of six years to over 10 years. How quickly solar adoption grows is largely dependent upon how much solar panel owners can be compensated, so the new policy is a setback. In a January 2023 press release, the Center for Biological Diversity points out that the December 15 decision comes after years of the utility commission’s clear opposition to solar, which allows for energy independence, stops the utility commission from monopolizing the energy system, and is the biggest competition the state’s private utilities face.
When California first began looking to revise the policy in 2021, a report published in July that year detailed a vision of a NEM3 policy that could have helped the expansion of the state’s solar adoption. That vision included solar incentives primarily focused on homeowners and landlords, providing greater support for community buildings, and enabling the creation of virtual power plants. Using case studies from California, Hawaii, and Missouri, the report concludes that “policy changes like sharply reducing net metering payments and imposing high, solar-only fixed charges that reduce the economic viability of solar power can slow its growth—and, in the most extreme cases, can cause solar installations to plummet.” Sadly, California’s NEM3 policy may lead to a significant slowing of solar adoption.
“Rooftop solar is good for everybody whether they have solar or not,” says Dave Rosenfeld, executive director of Solar Rights Alliance, an association of California solar owners. The most detailed study on distributed energy generation in California concluded that rooftop solar could save ratepayers over $120 billon over the next 30 years. That is equivalent to saving each ratepayer $300 per year, whether that ratepayer has solar or not. When people generate and store their own energy locally, the need for long distance power lines is reduced. In turn, utilities can spend less on building and maintaining transmission lines, lowering rates for customers.
California aims to fully remove fossil fuels from its energy portfolio in order to become carbon neutral by 2045. But to get there, the state needs to triple the rate of solar expansion, which could include rooftop solar and large solar panel projects. “If we don’t meet those clean energy goals, a lot of people stand to lose because that’s more pollution and more climate change, “says Rosenfeld.
Grassroots and Nonprofits Fighting Back
“This could be the biggest cut to net energy metering in the country” —Jessica Tovar
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The Local Clean Energy Alliance and Solar Rights Alliance are two grassroots organizations that fought hard to stop NEM3 leading up to the December 15 vote. The entities helped to get over 100,000 people to testify at public meetings, send letters, and speak out against the CPUC’s continued hold on the state’s energy. Solar Rights Alliance organized 10 rallies across the state with climate justice activists in cities including San Francisco, San Diego, and Palm Springs in a Solar Day of Action, held on December 1st, to raise awareness of what was at stake in the vote.
“This could be the biggest cut to net energy metering in the country,” says Jessica Tovar, LCEA’s lead organizer, in a press call days before the vote. She explains that slashing these credits especially hurts disadvantaged communities and harms middle- and working-class families and that utilities are the only party that will benefit from the new metering policy. The opportunity for a large majority of ratepayers to adopt solar and potentially get out from under utility debt is now farther away, Tovar points out.
The rooftop solar battle does not stop here, however; three other environmental groups are pushing back on the decision. Earlier this month, Environmental Working Group, Center for Biological Diversity, and Protect Our Communities Foundation appealed the CPUC decision and are bringing attention to the fact that it will harm environmental justice communities that can benefit from solar energy, San Diego Union-Tribune reports.
“The CPUC needs a reset to fit an emerging new world of electric power. We now have strong competition for utilities from distributed solar, battery storage and microgrids, a technological and economic transformation the likes of which we haven’t seen in more than 100 years,” says Ken Cook, Environmental Working Group president.
A Possible Pattern
Following California, North Carolina might be on track to cut solar credits to ratepayers, too. The day after California’s NEM3 was passed, North Carolina’s largest utility, Duke Energy, filed a joint proposal along with other industry groups that proposes a number of changes to the state’s existing net metering policy. Those changes similar to California’s include reducing the number of credits ratepayers would be compensated for excess energy. Duke Energy’s proposal also includes instituting a monthly bill to ratepayers that switch to solar in the future, and credits would vary based the time of day and electricity demand. The North Carolina Utilities Commission is set to vote on the proposal sometime this year.
In Florida, the state’s biggest utility, Florida Power & Light, launched a statewide lobbying campaign that included giving $3.2 million to legislators, Tampa Bay Times reports. This expansive lobbying effort led to the passage of HB 741, which will do away with all rooftop solar incentives by 2028. Major utilities in other states such as Indiana are also battling to significantly diminish their net metering programs.
“There is a lot of outrage from different members of the community,” says Tovar. She believes that the state is moving in the wrong direction as besides NEM3, keeping the state’s last nuclear power—Diablo Canyon Nuclear Plant—open past its set retirement date is under consideration, CBS reports. The cards seem to be tipped in the favor of the utilities Tovar points out. “We need to act in a way that shows energy in a human right—that’s what we at Local Clean Energy Alliance remain committed to in this fight,” says Tovar.