The missed opportunity for equitable clean energy access
Over the past three years, an unusually broad coalition has come together in California to champion a new way to finance and build community-solar-and-battery projects. This coalition includes solar companies, environmental justice activists, consumer advocates, labor unions, farmers, homebuilder industry groups, and both Democratic and Republican state lawmakers – a rare instance of concord in a state riven by conflicts over rooftop solar and utility policy.
Supporters say the plan, known as the Net Value Billing Tariff (NVBT), could enable the building of up to 8 gigawatts of community-solar-battery projects over the coming decades. These projects would be connected to low-voltage power grids and sell low-cost power to subscribing households, businesses, and organizations, with at least 51% of the capacity serving low-income residential customers.
The missed opportunity for community solar
However, on May 30, 2024, the California Public Utilities Commission (CPUC) voted 3-1 to reject the coalition’s NVBT plan. Instead, the CPUC ordered the state’s major utilities – Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric – to restructure a number of long-running distributed solar programs that have failed to spur almost any projects in the decade or more they’ve been in place.
Critics warn that these utility-backed plans won’t create a workable pathway to expanding community solar, a class of solar power that has become a major driver of clean energy growth in other states and a key focus of the Biden administration’s energy equity policy. They also fear that the CPUC’s reliance on state and federal subsidies to boost the economic competitiveness of these existing failed community-solar models might jeopardize the state’s ability to even qualify for the $250 million in community-solar funding that the Biden administration has provisionally offered it.
“We are cheating ourselves out of the benefits of community solar and storage with this decision,” said Derek Chernow, western regional director for the Coalition for Community Solar Access (CCSA), which represents companies and nonprofits that advocate for community solar.
The NVBT plan and its benefits
Since CCSA devised the NVBT in 2021, it has won “unprecedented bipartisan broad-based support from stakeholders that don’t typically come together and see eye to eye on clean energy issues,” Chernow said. The plan was modeled on a successful community-solar program created by New York, which has led to more than 2 gigawatts of projects in that state.
The NVBT structure would have allowed community-solar-and-battery projects to earn steady revenues from the power they produce, based on a complex calculation of benefits. These benefits include helping to meet state climate goals, bringing clean power to underserved customers, and supporting utility grids by avoiding the cost of securing power during peak demand.
Unlike California’s existing community-solar programs, the NVBT would have incentivized projects to add batteries to store and shift solar power from when it’s in surplus to when it’s most needed on the grid. And under AB 2316, any new community-solar-and-battery projects in California must provide at least 51% of their capacity to serve low-income residential customers at prices that reduce their electricity bills.
“We’re very interested in seeing renters have access to community-solar projects,” said Matt Freedman, a staff attorney at The Utility Reform Network (TURN). “And we’re excited that the California statute requires at least 51% of the benefits go to low-income customers. We think that’s revolutionary – that we’re putting low-income customers first in line to receive the benefits of these projects.”
The CPUC’s decision and its flaws
The CPUC’s decision to reject the NVBT plan and instead order utilities to restructure existing failed programs is widely criticized. The CPUC agreed with the state’s big utilities that the solar-and-battery projects the NVBT would finance could increase costs on some utility customers in excess of the value those projects would provide to customers at large.
To reach that conclusion, the CPUC compared the value of community-solar-and-battery projects against the wholesale “avoided-cost” rates of electricity generated by power plants, utility-scale solar-and-battery farms, and other large-scale resources. This comparison failed to account for the unique benefits that distributed community-solar projects can provide by delivering power much closer to customers than far-off power plants and solar farms connected by expensive high-voltage transmission lines.
“A better comparison would be against a form of solar-and-battery power that community projects could actually supplant to significant economic benefit – the solar systems all new homes and many new commercial and multifamily buildings must include under California building codes,” Freedman said.
The CPUC’s newly enacted Community Renewable Energy Program (CREP) structure, which restructures two existing tariffs that allow distributed energy projects to sell their power to utilities, is also widely criticized as being extremely unattractive to clean energy developers. Neither of those tariffs reward projects that invest in batteries to store solar power when it’s not as valuable for the grid and discharge it during times of grid stress.
Furthermore, the CPUC has ordered utilities to use “external funding or incentives” to offer credits to subscribing customers, as the retail electricity rates in California are five to six times higher than the wholesale rates the CPUC would allow these projects to earn. However, the only money the CPUC has identified for these external sources is $33 million in state-approved funding, which advocates say is far from enough to support a viable community-solar market.
The path forward and the risks
CCSA has calculated that the $249 million in federal funding California is set to receive would allow only about 50 megawatts of community-solar-and-battery projects to achieve economic viability under the CPUC’s proposal and still achieve the Solar for All program’s low-income energy-cost reduction targets. This is a far cry from the gigawatts of solar-and-battery projects financed and built by independent developers on a cost-effective basis that the NVBT could have incentivized.
Moreover, there are concerns that even this relatively small-scale expansion might not be possible if developers decline to participate due to lack of clear long-term economics.
“Even if the state gets the commitment from the money, will we be able to spend it? If you design a program that developers don’t subscribe to, and there are no resources under the program, there’s no draw on the program,” Freedman warned.
CPUC Commissioner Darcie Houck, who voted against the decision, echoed these concerns, noting that the “reliance on funding that may or may not be available in the future puts the program either at risk of failing or potentially having to have ratepayers cover the full cost of the program going forward.”
Without significant changes, the structure set by the CPUC’s order stands little chance of spurring the kind of community-solar growth happening in other states. The U.S. Department of Energy has set a goal of building 25 gigawatts of community solar by 2025, a fivefold increase from today. But advocates fear that the country as a whole “can’t get to these federal goals without California – and California can’t get there with this proposed decision.”
Conclusion
The CPUC’s rejection of the NVBT plan and its replacement with a structure that solar companies say is bound to fail represents a missed opportunity for California to unlock the immense potential of community solar. This decision undermines the state’s clean energy and equity goals, threatens its access to federal funding, and deprives underserved communities of the benefits of distributed, affordable renewable power.
As the Joint Action for Water blog, we call on the CPUC to reconsider its decision and work with the broad coalition of stakeholders to implement a community-solar program that truly delivers on the promise of equitable clean energy access for all Californians. The stakes are high, and the time to act is now.
