Storage

California’s net billing tariff is doing what it intended

California’s net billing tariff is doing what it intended
(Photo courtesy Giorgio Trovato on Unsplash)

In April of last year, the California Public Utilities Commission (CPUC) enacted drastic reductions to Net Energy Metering, the program responsible for reducing the costs of going solar. The value of distributed generation shared back to the grid by homes and businesses was slashed by 70-80%, in favor of incentivizing residential and commercial paired solar and storage to better suit the state’s evolving grid needs.

In the wake of CPUC’s decision, the California Solar and Storage Association (CALSSA) and other organizations warned of potentially devastating closures and layoffs across the state’s solar industry, while some companies recognized an opportunity in growing battery demand.

The latest U.S. Energy Information Administration data indicates California’s net billing tariff (NBT) is doing what it intended, and residents are increasingly pairing solar installations with storage.

additions of California residential net-metered photovoltaic solar and battery paired systems
Data source: U.S. Energy Information Administration, Monthly Electric Power Industry Report, Form EIA-861M (formerly EIA-826). Around 99.5% of total small-scale residential installed capacity in California is net metered, a method for compensating behind-the-meter resources. Small-scale systems are less than one megawatt of installed capacity. Data from October 2023 to April 2024 are estimated preliminary data.

The Monthly Electric Power Industry Report shows the share of new solar systems paired with battery energy storage has increased since the EIA started collecting data in October 2023. In April 2024, more than 50% of residential solar photovoltaic installations were paired with battery storage, compared with just over 20% in October 2023.

California’s NBT offers a variable compensation rate, incentivizing the flexibility of paired storage because it allows customers to send electricity to the grid during hours when demand is high, typically at night.

Solar paired with battery installations makes up about 9% of all installed residential net metering capacity in the state, with over 40,000 new installations added between October 2023 and April 2024, per the EIA. Those installations accounted for 232 MW of new battery storage capacity.

California resident net metred photovoltaic solar and battery storage paired systems and other residential solar
Data source: U.S. Energy Information Administration, Monthly Electric Power Industry Report, Form EIA-861M (formerly EIA-826)

The increasing amount of battery storage comes after California residents installed a record amount of solar capacity eligible for compensation from electricity utilities in the third quarter of 2023.

California net-metering solar photovoltaic capacity
Data source: U.S. Energy Information Administration, Monthly Electric Power Industry Report, Form EIA-861M (formerly EIA-826)
Data from March 2023 to March 2024 are estimated preliminary data. Q1=the first quarter of the year; NBT=net billing tariff (new compensation rate); NEM=net energy metering (old compensation rate)

The report’s principal contributors Alex Gorski and Katherine Antonio show California residential solar capacity eligible for net metering increased by 22% in the third quarter of 2023 compared to the same period in 2022, as customers installed capacity before the compensation structure changed. The growth rate slowed in the fourth quarter after the changes took effect, but net metering-related capacity continued to increase. California now has more than 12,000 MW of installed solar capacity in residential net metering systems smaller than 1 MW.

Capacity installations increased initially after the California Public Utility Commission announced a grandfathering scheme for NEM 2.0 customers for 20 years, which led to an interconnection application backlog during the first quarter of 2023, according to an analysis of the impacts of the new policy by the Lawrence Berkeley National Laboratory.

In California, residential units account for more than 70% of the net metering installed capacity and approximately one-third of the total solar capacity in the state. EIA’s data show that during the third quarter of 2023, 83,376 new residential net metering photovoltaic systems were installed, compared with 70,152 systems connected under the old NEM 2.0 rule during the same period in 2022. However, EIA could not differentiate the systems that requested to be grandfathered to NEM 2.0. The first quarter of 2024 saw an additional 46,631 systems installed. Since January 2022, an average of 21,000 solar systems have been added every month.

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