Compensation Rates Make or Break Rooftop Solar
The final vote isn’t until mid-December.
But barring something extraordinary, California residents who haven’t already reaped the financial benefits of going solar are about to find themselves out of luck.
After considering more than a dozen proposals on how to compensate residents for the excess solar energy they send back into the grid during peak sun hours, California’s Public Utility Commission (CPUC) is set to approve one that slashes rates for future rooftop solar projects by a jaw-dropping 75%.
Since the current proposal is the only one on the table, it's all but certain to be approved when the CPUC meets in mid-December.
Already completed projects immune
Solar projects completed under the old rules are grandfathered and, hence, will continue to be compensated for the surplus energy they produce during peak sun hours at around the same rate at which they pay for electricity when there’s little or no sun.
But NEM (Net Energy Metering) 3.0—as the new proposal is called—will slash the compensation rate for future solar projects to well below what they'll have to pay for power when they need it.
Compensation rates make or break solar power
The rate at which you’re compensated for the surplus solar energy your solar panels produce during peak sun hours is probably the most important factor determining the financial wisdom of going solar.
The reason is simple:
Even though you need energy to power your home 24-7, your solar panels are going to produce little or none when there’s little or no sun.
But thanks to massive improvements in panel efficiency, a rooftop solar system will likely be generating more energy than you need during peak sun hours—so much more, that there’s a very good chance of the surplus completely balancing out the deficit.
The upshot is that in states like Pennsylvania, where utility companies are currently required to pay consumers for electricity at the very same rate they charged, there’s a good chance that going solar will mean never having to pay for electricity again.
But, while that may sound great to you, it sounds anything but to the big utility companies.
As a result, their attempts to cripple the economic viability of roof-top solar in California and other states by going after compensation rates have been anything but shy.
Rooftop solar under siege
California’s original rules—known as NEM 1.0—required utility companies to buy any electricity their solar-powered customers sent back to them at the very same rates they're charged.
In 2017, however, a substantially less solar-friendly compensation scheme known as NEM 2.0 went into effect. Though NEM 2.0 did allow utility companies to forego compensation for certain charges they amounted to less than 5% of the typical consumers' overall electric bill.
NEM 3.0
Average net metering rates in California currently range from $0.23 to $0.35 per kWh.
NEM 3.0 will slash those rates to an average of $0.05 per kWh to $0.08 per kWh.
That means that to be at all viable, future rooftop solar projects in California will have to include a battery to store the excess energy generated during peak hours.
The upshot is that NEM 3.0 will likely add another $5,000 or more to the cost of going solar in California.
Many homeowners and businesses who are now able to drastically reduce their energy costs by going solar but haven’t yet gotten around to doing so are going to suddenly find out those days are over.
The best time to go solar is now
Fortunately, like most states, California residents are grandfathered under whatever net metering proposal was in effect when their system was installed.
After all, if states didn't guarantee that compensation rates will remain the same for existing solar projects, making an informed financial decision about switching to solar power would be impossible.
That's good news for California residents who've already made the switch to clean and renewable solar energy. They'll still be getting whatever favorable return on investment they were counting on.
But, given that utility companies have by no means restricted their efforts to slash compensation rates to California, if you haven’t already switched to clean and renewable solar energy, the best time to do so—no matter which state you happen to call home—is probably now.