SOLAR LAWS UPDATE

Boden Energy Solutions Explains Changes to Net Metering Program

By Breeana Greenberg

BECAUSE CALIFORNIA S NEW Net Metering Program takes effect on April 14, homeowners producing solar energy may see a dramatic decrease in the value of the credits they receive for exporting energy to the electric grid.

The new program, Net Energy Metering 2, changes the credit value for solar energy sent back to electric grids to incentivize storing excess energy with home batteries, according to Tyler Boden, founder of Boden Energy Solutions and a solar energy consultant.

Net Energy Metering 1, created in 1996, gave homeowners full retail value credits per kilowatt hour of solar energy produced and sent back to the utility grid. Under Net Energy Metering 2, which was created in 2016, customers receive full retail credit minus fees for solar energy sent back to the grid.

“Net Metering 3 is changing the dynamic, so that the export credit value is far less than retail value in most cases,” Boden says.

Using an “avoided cost calculator,” each utility company will set the credit value of exported energy, fluctuating throughout the year.

With San Diego Gas & Electric, for example, solar energy compensation can drop as low as $0.001 per kilowatt hour sent to the utility grid in April or as high as $2.795 in September.

“The credit value is much less than retail; on average, it’s about a 75% reduction in the value of exported energy statewide,” Boden says.

“The bottom line is the utilities want to incentivize people not to send them energy, and so this new net metering, or what’s considered net billing structure, will do that by giving people a much lower credit value for exporting energy to the grid,” Boden adds.

Instead, Boden explains, homeowners will be incentivized to store their solar energy with a home battery in order to offset their energy consumption during the peak time of use billing, generally between 4 p.m. and 9 p.m.

“In general, that will help to save people more money than if they were sending energy back to the grid,” Boden says. “So, that’s really where batteries will be valuable, and that’s exactly what the (California Public Utilities Commission) and the utilities are trying to incentivize people to do, is to add storage along with solar so that they’re sending less energy back to the grid.”

Energy companies want to incentivize homeowners to send less energy to the grid, because the companies incur costs while selling excess energy and supplying energy after sundown.

“During the day, when so much solar is being generated and sent onto the grid, they sometimes have to sell that to neighboring states at a discount, and I think even sometimes negative value,” Boden says. “In the evening, when the sun comes down, they have to generate all the energy to supply the demand during the ramp up when the sun is coming down and people are using more energy.”

Homeowners who submitted a complete application by 11:59 p.m. on April 14 were considered grandfathered into NEM 2 for 20 years from the date that they received permission to operate their solar systems. Those grandfathered in will continue to receive full retail credit minus fees for energy sent to the grid.

The program will not impact municipal utilities, only large electric investor-owned utilities such as Pacific Gas and Electric, Southern California Edison and San Diego Gas & Electric.

Since the return on investment for energy credits will be much lower for those who are not grandfathered into the previous net metering, Boden says that some homeowners may decide to add solar storage, such as a home battery or add a solar system that does not fully offset their electric usage.

What to Keep in Mind When Determining if a Home Battery Is Right for You

When homeowners are evaluating whether or not adding solar energy storage or a home battery is right for them, Tyler Boden—founder of Boden Energy Solutions and a solar energy consultant— explains that there are many factors that help curb the cost of installation.

“When someone is adding a battery, whether it’s along with a solar installation or without, because of the Inflation Reduction Act passed into law last year, they would get a 30% tax credit on the cost of that battery, before incentives,” Boden says.

There are also state rebates from the self-generation incentive program giving homeowners $250 per kilowatt hour of energy capacity for batteries that they add.

“So, in general, that’s somewhere in the ballpark of $2,500 for somebody who adds a single battery,” Boden says. “So, that’s another incentive that will help.”

From a savings standpoint, Boden explains that it’s easy for homeowners to determine their return on investment based on the capacity of the battery, energy use and cost of energy during that time.

Boden adds that the return on investment will vary by utility company and rate schedules, so it would take a deeper analysis of energy use to come up with an exact return on investment on the cost of the battery.

However, homeowners can get a general idea of their return on investment by using the following calculation:

“So, based on the energy capacity of the battery for a single cycle, you can factor that against the cost of energy during that time and, generally, the battery would discharge between 4 p.m. and 9 p.m.,” Boden says.

“Multiply the depth of discharge of the battery by the cost per kilowatt hour from the utility per day, assuming that the battery would cycle once per day charging from solar and then exporting,” he adds.