Solar advocates and investor-owned utilities are feuding again.
The arguments might sound a little wonky but take our word for it. There’s no love lost here. This is a rematch from California’s last skirmish over net energy metering (NEM) five years ago. And the many disputes that follow similar battlelines from solar state to state.
The utilities contend that NEM imposes an unfair cost shift from solar customers onto everyone else. People who champion solar say the benefits continue to outweigh the costs, and regulations should facilitate the energy transition rather than slowing it down. (For all you who are not policy geeks out there, those are fighting words.)
The problem confronting the grid isn’t new. The transmission and distribution networks, designed a hundred years ago to send power in one direction from centralized generators to end customers, has struggled to accommodate the need for bidirectional energy flow with producers popping up all over the place.
The solutions aren’t new, either. Two years ago, California adopted a proposal developed by SepiSolar that allows DC-coupled solar-plus-storage systems to qualify for NEM for the first time, in cases where storage exports only solar energy back to the grid.
Instead of driving up costs with utility charges and artificially lowering the value of solar, California can eliminate an entire system cost category, accelerate the transition to distributed energy resources, and resolve the conflict over NEM once and for all.
It’s time to set aside our differences and embrace energy storage.
Let’s do this.
Eliminating interconnection costs
California’s adoption of NEM for storage represents one of those rare occasions where engineering and policy reform work hand in hand to reduce hard costs and soft costs all at once.
Beforehand, AC-coupled solar-plus-storage systems needed separate inverters for generation and storage. They would routinely run up against grid constraints due to the relatively high AC nameplate rating. And higher system costs due to meters, relays, and switchgear equipment. And lower efficiencies due to power conversion in both directions—DC to AC and back again.
DC-coupled systems also faced the prospect of adding meters, relays, and other electrical equipment at the behest of the utility. And adopting system size limits based on the local distribution infrastructure. These requirements had been put in place to prevent system owners from gaming the system, like mini Enrons, charging batteries when electricity prices are low and selling when prices are high.
The utilities needed a way to tell a unit of solar energy apart from any other unit of energy on the grid. So did the IRS, which awards federal tax credits for storage based on how much energy comes from renewable sources.
Through a partnership with Nextracker and support from the California Solar and Storage Association (CalSSA), SepiSolar showed that a firmware modification to the DC-coupled inverter and battery system could be as effective as all the expensive hardware the utilities had previously required us to install. The inverter firmware disables the battery’s ability to charge from the grid.
See our NEM for storage white paper here.
It’s win-win scenario for system owners and utilities.
Accelerating the energy transition
The solution is elegant. Today, DC-coupled solar-plus-storage systems are no longer arbitrarily capped by the utility. Systems can use just one inverter and a single DC-AC inversion path. No extra meters, relays, or switchgear. The inverter’s AC rating determines system size, as it always has with solar projects that qualify for NEM.
And the entire project qualifies for the full investment tax credit. There’s no need for complex metering, additional relays, and the whole nine yards.
It’s true what they say, that the pace of evolution is speeding up. Here’s human evolution over 7 million years.
And here’s how the single-line diagram has improved for solar-plus-storage projects, going from the height of complexity (AC-coupled systems) to a little less complexity (DC-coupled systems before NEM for storage) to pure simplicity (DC-coupled systems after NEM for storage).
Turning the corner on NEM
The tone of this post has been a little tongue in cheek at times, but we recognize that the stakes are high for the solar industry and by extension the burgeoning energy storage market.
Last month, CalSSA warned members that a consulting firm had pegged utility costs associated with NEM so high that San Diego Gas & Electric would have to charge residential customers on NEM tariffs $177 per month just to break even.
While it’s unlikely the California Public Utilities Commission would approve such an astronomically high fixed charge, state regulators are considering fixed charges in the range of $50 to $70. Plus monthly charges of $5 to $7 per kilowatt (kW) installed. Plus $10 to $20 per kW each month in demand charges. All while cutting daytime net metering credits down as low as 10 cents per kilowatt-hour (kWh).
The California solar market will likely suffer if this is the outcome for NEM. A decision is expected to take effect in 2022.
NEM is also under a new threat in the California Legislature. Yesterday, the Assembly Utilities and Energy Committee approved a bill, AB 1139, that would make going solar more expensive for everyone. See CalSSA’s description of the bill for more info.
Meanwhile, regulators and industry advocates must not lose sight of the impact that NEM will have on energy storage. When solar is concerned without storage, it seems like there’s no room for compromise. Storage, on the other hand, has advantages for everyone.
For now, NEM for storage is optional. Systems can add batteries or leave them aside. In the future, regulators could make storage a requirement for NEM.
All that would be left to decide is at what penetration level would the storage requirement kick in.
At that point, solar advocates and utilities can take matters back into their own hands.
We can’t agree on everything, after all. Can we?
Seeking innovation solutions to extraordinary technical challenges? Contact us and we’ll show you what we can do.