Community solar has the potential to propel California towards its goals of clean energy, grid reliability, energy equity, and affordable housing. However, the success of these initiatives hinges on the California Public Utilities Commission (CPUC) not allowing the state’s major utilities to undermine them.
A broad coalition consisting of solar industry groups, consumer advocates, environmental justice organizations, labor unions, and the state’s homebuilding industry has been advocating for a new payment structure for community solar. This structure is known as the Net Value Billing Tariff (NVBT).
The coalition argues that the NVBT is critical in revitalizing California’s stagnant community solar market and making it both cost-effective and efficient. The need for a payment structure for community solar was mandated by AB 2316, a state law enacted last year.
As California approaches the September 26 deadline to apply for federal community solar grants amounting to $7 billion, the coalition is urging the CPUC to implement the NVBT program and not allow it to be derailed by the arguments put forth by utilities such as Pacific Gas & Electric, San Diego Gas & Electric, and Southern California Edison.
Everyone vs. the Utilities
Brandon Smithwood, senior director of policy at community solar developer Dimension Renewable Energy, describes California’s community solar war as a battle between everyone and the utilities.
The coalition’s level of consensus is unusual in California’s solar policy landscape, which has seen environmental and consumer advocates clash over the value of rooftop solar systems. However, on this particular issue, groups that have been at odds for years have united and resolved their differences.
The potential impact of this cooperation is immense. If the CPUC approves the NVBT, California could lead the nation in community solar within a few years.
According to Canary Media, the tariff could facilitate the construction of approximately 8 gigawatts of community solar. This would position California alongside other leading states like Colorado, Massachusetts, Minnesota, and New York in terms of community solar progress.
Expanding community solar would offer cheaper and cleaner energy options to Californians who are unable to install solar panels on their roofs, including lower-income households and the 17 million renters without access to solar power.
Community solar allows multiple customers to subscribe and receive a share of a project’s energy output, using the generated revenues to offset their utility bills.
The Advantages of NVBT
The NVBT payment structure has several distinguishing features compared to previous payment structures, as explained by Aaron Halimi, the founder and president of Renewable Properties.
Firstly, it doesn’t impose limits on the capacity that can be built, ensuring that project developers have a predictable revenue stream for the next decade. This encourages long-term investment in the market. Halimi highlighted that his company shifted its focus towards this upcoming program.
Secondly, the NVBT requires the installation of batteries alongside community solar projects to balance the solar-saturated grid. This is achieved through the use of the avoided-cost calculator, a complex formula determined by the CPUC.
The avoided-cost calculator rewards projects that contribute energy during periods of high grid demand, typically occurring in the late afternoon and evening hours of summer and early autumn. Batteries are crucial for community solar projects to generate revenue under the NVBT.
This proposal aligns with the CPUC’s broader efforts to encourage the integration of batteries with solar power. Rooftop solar systems have already been incentivized to incorporate batteries, while large-scale energy procurements have emphasized the importance of energy storage.
AB 2316 mandates that a majority of subscribers in a community solar project must come from low- to moderate-income households. The NVBT coalition has committed to structuring payments for these households to ensure significant reductions in their utility bills.
Why Utilities Are Opposed
There are several objections to NVBT from California’s three major investor-owned utilities.
One argument is that the program would unfairly burden the majority of utility customers. Another argument suggests that the process of connecting community solar projects to the grid and crediting them for the energy they generate might violate federal law.
Supporters of NVBT strongly criticize these utility arguments, claiming they distort the facts or misinterpret the law.
A key point of contention between utilities and NVBT advocates is whether community solar projects should be treated differently than rooftop solar, batteries, electric vehicle chargers, and other distributed energy resources connected to the low-voltage distribution grid.
Utilities argue that these projects should be subject to different rules overseen by the Federal Energy Regulatory Commission (FERC) as larger-scale generators. However, historical evidence shows that the CPUC has consistently considered community solar projects as distributed energy resources under state regulatory jurisdiction, not FERC’s.
Furthermore, the track record of community solar programs in over 20 states, some operating for more than a decade, contradicts the notion that they should be regulated by FERC.
Utilities have also contested NVBT’s use of the avoided-cost calculator for community solar battery projects. However, the CPUC has previously affirmed that the avoided-cost calculator is an appropriate method for valuing distributed energy resources.
Utilities’ arguments against using the avoided-cost calculator imply that it works only for individuals who own their homes or a narrow subset of renters. This goes against the intentions of AB 2316.
How The Utilities Could Cost California $7 Billion
Critics argue that the issue with these utility arguments goes beyond being misguided. They have also caused the CPUC to spend several months gathering testimonies and stakeholder comments to refute them.
This is problematic because it delays the state’s ability to present a compelling proposal to secure a portion of the $7 billion federal funds from the “Solar for All” program, created under last year’s Inflation Reduction Act.
Obtaining a share of this money could be instrumental in making financially feasible community solar projects, particularly in the Los Angeles area. These projects could help alleviate stress on the grid and reduce dependence on costlier forms of solar energy, such as peaker plants.
Additionally, federal funding could enable the implementation of projects that yield even greater cost savings for low-income customers who participate in them.