California Public Utilities Commission decision preserves solar's future in the golden state

California Public Utilities Commission decision preserves solar's future in the golden state

On the latest front in the ongoing battle between rooftop solar companies and large investor-owned utilities, last week the California Public Utilities Commission (CPUC), in a 3 to 2 vote, extended, with minor changes, a Net Energy Metering (NEM) framework favorable to the continued expansion of distributed solar energy in the state.

Suppliers, customers, and investors can all agree that this new era of certainty regarding rooftop solar will make addressing California’s future energy needs much easier. 

“The new order from the CPUC only makes minor changes [to NEM], and such adjustments are part of an understandable process to ensure both a fair market for roof-top solar, as well as the obvious necessity of a stable grid,” said Scott Clausen, Policy & Research Associate at the American Council on Renewable Energy (ACORE). 

The decision upholds NEM for customers who choose to go solar now, and ensures that they can stay on the same tariff rate for 20 years. It also adds on a small interconnection free, and requires customers to take service on a time-of-use rate schedule, meaning that rooftop solar generation will be credited more during times of peak electricity demand. The decision received mostly positive response from the solar industry.

“We are pleased with where things ended up on NEM,” said Andrew Hoffman, Senior Director of Strategy & Market Development at Visalia, California based CalCom Solar. “The PUC is making a statement that distributed generation is an important piece of our energy and environmental future in California.” 

Advocates hailed the decision as being in-line with the state's recent moves to promote clean energy, including the passing of SB 350 last fall, which mandates utilities to get 50 percent of their electricity from renewables by 2030. 

“The decision on net metering [is] consistent with meeting the state's aggressive targets for increasing use of clean energy,” said Amy Allen with Bay Area. 

Three of California's largest utility companies – Pacific Gas & Electric (NYSE: PCG) , Southern California Edison (NYSE: SCE), and San Diego Gas & Electric (SDG&E) – called for an alternative proposal which would charge small commercial and residential solar customers for each Kwh of electricity they use from the grid, and reducing the net metering rate over time. They also wanted to eliminate virtual net metering. This would, in effect, reduce the amount of compensation distributed solar users would receive, making it less financially viable.

“The utilities' proposals [would have] killed the future of rooftop solar in California,” said Allen. “Their proposals would cut compensation to solar customers by 50 percent and make rooftop solar no longer economical for California ratepayers.” 

The positive impact this decision will have was reflected as solar stocks jumped after the decision was made last Thursday, with SolarCity (NASDAQ: SCTY) leading with an 8.5 percent gain. 

"This news is positive for solar," said Edwin Mok, Senior Analyst for Solar/Photovoltaics at Needham Equity Research, to Benzinga. "It removes the negative policy overhang in California, which is the largest U.S. residential solar state, the added cost for solar customers is small ... and it expands the market by increasing scope to systems larger than one megawatt."

Utilities, conversely, were upset, with SDG&E claiming that it would add $300 to non-solar customers’ bills by 2025. 

The California decision is in stark contrast to recent decisions in neighboring, sun-rich Nevada, where NEM was gutted in pro-utility decision last year. Many hope that the CPUC rule, which ensures solar's future in the nation's largest state, impacts the decisions of regulators across the country. 

“There were over 150,000 petition signatures, from all walks of life, that went to the PUC in support of a good NEM decision,” said Hoffman. “I hope that other states take a look at that and see how important NEM is for their communities.”


Companies to Watch

SolarCity (NASDAQ: SCTY)  – One of the leading solar rooftop companies, recently decided to leave Nevada after the public utilities commission there restricted NEM. Currently 10 analyst firms have “Strong Buy” recommendations for Solar City.

Pacific Gas & Electric (NYSE: PCG) – The major utility in the San Francisco Bay Area, PG&E strongly opposed the CPUC decision, which it feels places undue burden on non-solar customers. The analyst consensus on PG&E is “Buy”.

Southern California Edison (NYSE: SCE) has been a leader in energy storage but also stood alongside other investor owned utilities in opposing the CPUC's decision.

SunPower (NASDAQ: SPWR), based in San Jose, California, has a close relationship with Tesla Motors, and recently released what it claims is the world's most efficient rooftop solar panel. The analyst consensus on SunPower is “Strong Buy”

Sunrun (NASDAQ: RUN) is the largest dedicated residential solar company in the United States, and commended the CPUC decision. The current analyst consensus on Sunrun is “Buy.”

Nithin Coca is a freelance journalist who focuses on energy, environment, and economic issues in developing countries, and has specific expertise in Southeast Asia. Nithin's feature and news pieces have appeared in global media outlets including Al Jazeera, Quartz, Atlantic Cities, SciDev.Net, Southeast Asia Globe, The Diplomat, Penang Monthly and numerous regional publications in Asia and the United States.

Originally published on February 2, 2016