Proceedings have come to a conclusion around the future of distributed solar projects in California. On December 15th, the California Public Utilities Commission (CPUC) formally adopted the new Net Billing Tariff as a successor to the Net Energy Metering program. For background, we invite you to review our series of articles covering these proceedings over the past couple of years. Now that the Final Decision has been made, here is a brief summary of the outcomes as it relates to commercial-scale solar projects.
Summary of the New Net Billing Tariff
Reduced Export Compensation Values: Instead of earning credits based on retail electricity rates, exported electricity will be valued at a significantly discounted rate, based on the CPUC’s Avoided Cost Calculator (ACC) for Distributed Energy Resources, which equates to about an 80% reduction in value of exports when compared with NEM 2.0. The ACC export compensation value vary for every hour of the day, vary by month, and vary between weekdays and weekends. To give you a sense of the variance, 2023 weekday export values in PG&E’s territory range over the year from less than $0.01 / kWh to $0.04 / kWh in most of the strong solar producing hours of the day.
An Export Compensation Value Lock-In Period of 9 Years: For the first 5 years of the new Net Billing Tariff, customers will be able to lock in their export compensation values based on a nine-year schedule of values from the most recent ACC (which is updated every two years). Following this lock-in period, export compensation rates will be based on the most recent ACC. Customers enrolling after the first 5 years will not receive a lock-in period.
NEM Aggregation Projects Will Remain Under NEM 2.0 Until Further Review: The Final Decision allows for NEM Aggregation (NEMA) projects that apply for interconnection after the NEM 2.0 sunset date to stay on NEM 2.0 for 9 years. It is expected that this window of opportunity will close in the next year or so. However, for new solar projects that have multiple electric utility meters on the same or contiguous parcels, NEMA under this abbreviated 9-year window of access to NEM 2.0 will present an opportunity for consideration.
Legacy NEM 1.0 and NEM 2.0 Tariffs Will Not Be Changed By This Decision: The CPUC reversed course regarding making changes to tariffs for existing NEM 1.0 & NEM 2.0 projects. In the December 2021 Proposed Decision, the CPUC proposed to shorten the period for customers with existing NEM 1.0 & NEM 2.0 projects to stay on these legacy tariffs to 15 years before having to transition to the new tariff. In the Final Decision, the CPUC expressly states that while the Commission “has the authority to revise NEM 1.0 and NEM 2.0 tariffs”, the Commission “should not revise the NEM 1.0 or 2.0 tariffs”.
How To Get Projects In Before The Sunset of NEM 2.0
To secure NEM 2.0 for new projects, customers need to submit an interconnection application to their utility by April 13, 2023. For nonresidential customers, the application needs to be “free of major deficiencies” and include:
- a complete application
- a signed Authorization to Act on a Customer’s Behalf
- a single-line diagram
- an oversizing attestation (if applicable)
To keep their NEM 2.0 eligibility these systems will need to be built (have a final building permit) within three years of the submittal of the interconnection application.