As highlighted in our recent articles, the California Public Utilities Commission (CPUC) is proposing devastating changes to the State’s Net Energy Metering (NEM) Program. The NEM Program has been wildly successful in empowering electricity customers in California to deploy solar PV and battery energy storage systems to save money, increase resiliency, and enhance sustainability. However, in their recent Proposed Decision, the CPUC is proposing changes that would undermine the value of existing solar projects, and render many potential projects as non-viable. The Proposed Decision includes several dramatic changes to NEM, including a substantial discount to the value of credits for exported electricity and a shortened 15-year period for existing solar customers to enjoy their current NEM 1.0 or NEM 2.0 tariff.

To evaluate the impacts of this proposed change, TerraVerde Energy evaluated a solar + battery project portfolio that we recently developed on behalf of one of customers. This project included 4 solar projects and 1 solar + battery project deployed under a power purchase agreement on behalf of a California Public School District in PG&E’s service territory.

Implications for New Projects: Lower Export Credit Values Will Kill Many New Projects

To understand the implications of the Proposed Decision on new solar projects, we compared the School District’s expected savings in year 1 under the current NEM 2.0 tariff vs. the new proposed tariff. The following table shows the difference in year-1 savings per site between NEM 2.0 and the Proposed Decision.

Site Project Description Year-1 Savings NEM 2.0

vs. Proposed Decision

1 Elementary School Solar ($14,876)
2 Elementary & Middle School Solar (NEM-A) ($17,032)
3 Elementary School Solar ($19,693)
4 Middle School Solar ($14,508)
5 High School Solar + Battery (NEM-A) ($36,062)

Under the current NEM 2 Tariff, the District is expecting to save $45,162 in the first year of the project. If this project were to be deployed under the rules outlined in the Proposed Decision, this same project would result in a $57,009 loss (increase in electricity costs) in year 1. The reduction in the value of credits for exported electricity is simply too devastating and will likely kill the economic viability of many potential new solar projects.

Implications for Existing Solar Projects: Significant Lost Savings In Later Years

To understand the implications of the Proposed Decision on existing solar projects, we compared the School District’s expected savings over a 20-year period for this solar + battery project portfolio under the current NEM 2.0 tariff vs. the new proposed tariff. When factoring in the limited 15-year access to the legacy NEM 2.0 tariff, the expected outcome is a $773,824 loss in savings.

Site Project Description 20-Year Benefits

(NEM 2.0)

20-Year

Benefits

(Proposed Decision)

Difference
1 Elementary School Solar $630,520 $517,557 ($112,963)
2 Elementary & Middle School Solar (NEM-A) $323,326 $193,988 ($129,339)
3 Elementary School Solar $760,923 $611,378 ($149,544)
4 Middle School Solar $329,829 $219,662 ($110,167)
5 High School Solar + Battery (NEM-A) $1,276,905 $1,005,093 ($271,812)
Totals $3,321,503 $2,547,678 ($773,824)

Though less impacted than potential new solar customers, existing solar customers who paved the way for the State to advance in its energy and sustainability goals are now facing substantial losses in their solar portfolios.

The Time Is Now To Take Action

Whether you have existing solar projects, or are considering new projects, you can take action today. The CPUC could issue their Final Decision as early as January 27, 2022. If you or your team would like to join the conversation, you can submit your comments to the CPUC through their website or by emailing public.advisor@CPUC.ca.gov.

If you are exploring future solar opportunities, it’s vital that you move swiftly to submit your interconnection applications to your electric utility ASAP while NEM 2.0 is still available. As independent advisors, TerraVerde Energy would welcome the opportunity to meet with you and discuss how we could support you in determining whether you have energy project opportunities and get your interconnection applications submitted. Write to us at hello@terraverde.energy to get started today.

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