What started out as a rate-reform bill that had been pushed by California’s utilities ended up as a law to increase the state’s renewable energy offerings. Among the big winners are the rooftop solar businesses, which expect to see more people buy their product now that the law has passed.
The law, known as AB 327, will ensure that the net metering laws, which had been set to expire in a year, will remain in place. It’s a complicated calculation but the end result is that the three major investor-owned utilities there — Sempra, Southern California Edison and PG&E Corp. — must have installed at least 5,200 megawatts of net metered generation, which allows customers to sell any unused power that they self-generate back to the utility.
The law will also remove the cap set on the amount of power — and therefore reimbursements — that had been previously set under the net metering laws. It had been 5 percent of a utility’s non-peak load. Finally, the law lifts what had been a ceiling on the amount of renewable electricity that a utility would need to generate. There had been a 33 percent renewable portfolio standard. Now, that level is considered to the minimum amount that the utilities must offer.
Can the state handle all those renewables requirements? That is, does the grid have enough space on it? “The best way to do more renewables is to keep those electrons completely off the grid and to put it on people’s roofs,” says Bryan Miller, vice president of public policy at Sunrun in San Francisco, which provides such rooftop solar panels. “At its most basic level, the law removes the regulatory constraints that had been on California’s renewable markets.”
Right now, California generates about 20 percent of its electricity from renewable energy, although most of that comes from hydropower. A report recently issued by the California PUC says that as of January 2013, there was enough renewable generation on line or under construction to reach the 33 percent goal by 2020. It expects much of that future generation to come from solar power.
To be exact, since 2003, 5,142 megawatts of renewable capacity were added to California’s grid. There will be 3,521 megawatts added this year, which far exceeds 2012 levels that had been 1,957 megawatts. Total: 8,019 megawatts. Still, the agency says that it is keenly aware of the issues that could thwart further development, namely a lack of sufficient infrastructure as well as the array of environmental permits that are required to build such transmission.
Beside finding space on the grid, other concerns are that wind and solar power are intermittent sources. That means if the wind is not blowing or the sun is not shining, then the utility must provide back-up power, which is transported along the gird. And that brings up another hurdle that had to be overcome and it is one that is also getting fiercely debated in other states such as Arizona and Colorado.
Indeed, 29 states have renewable portfolio standards while 43 states have net metering laws that outline exactly who gets paid for what when consumers generate their juice. Those laws are especially important to rooftop solar developers. As discussed, California re-calibrates all costs and reimbursements, as well as creates the framework to institute a completely new set of net metering laws.
“There are still elements of the bill that will play out in the market, but with this extension, we expect the state to hit 5,000 megawatts of net-metered customers in California by 2017 — representing hundreds of schools, families, businesses, hospitals, community centers and churches — that were able to invest in solar and reduce their reliance on fossil fuel energy for the coming decades,” says Mike Hall, chief executive of Borrego Solar Systems.
“While the economics of solar are attractive in many regions without policy support, Governor Brown’s signing of California AB 327 into law will help continue the momentum for solar innovation and adoption in the state,” adds Mike Dooley, VP of marketing at San Jose-based Advanced Energy Solar Energy.
California’s utilities have gone along with the bill. But, historically, those companies — and others around the country — have been skeptical of the net metering laws. That’s because those power companies must still procure enough electricity to meet what could be their peak demand — all to send electrons to consumers using distributed generation when the sun dims or the winds cease.
At the same time, grid maintenance is not free and even if those “self-reliant” customers infrequently use such services, they still need to pay their fair share. Otherwise, those costs would fall on a fewer people and raise their price of power. The Edison Electric Institute has said that the industry collectively spends $25 billion a year to keep up the grid.
Basically, if financial incentives cause more people to go off the grid it would affect revenues. That diminishes utilities’ means of improving overall grid performance, says the institute. It also hurts their ability to access the capital markets. “The financial risks created by disruptive challenges include declining utility revenues, increasing costs, and lower profitability potential, particularly over the long-term.”
In the end, Californians of most stripes coalesced around this law. Now the debate will continue in other sections of the country.