Southern California Edison is asking regulators for permission to improve clean energy offerings for customers who can’t install rooftop solar.
The utility connects between 3,000 and 5,000 solar roofs per month, but many of its 15 million customers don’t own their homes or have access to a suitable rooftop for solar generation. By the company’s own admission, the existing program to serve those residents with community solar didn’t work well enough.
Drawing on lessons from California and elsewhere, SCE proposed a suite of clean retail offerings in late September, including 100 percent clean energy and a new community renewables option. The former would drive additional utility-scale renewables development; the latter would enlist the utility as a customer aggregator on behalf of community solar projects.
“Community solar is going to be built by a third-party developer, but currently, it's challenging for that developer to amass all of these different little subscribers,” said Jill Anderson, SCE's vice president for customer programs and services, in an interview at Solar Power International. “What we're doing is helping connect customer demand to the market.”
The utility has asked the California Public Utilities Commission for permission to recover up to $5.87 million in administrative costs for the new “Green Energy Programs,” to be launched in 2021.
If successful, the program would create new opportunities for community solar in the largest state solar market, which has nonetheless struggled to deliver steady work at the community scale. It also would burnish clean power options from one of the state’s three investor-owned utilities at a time when community-choice aggregators are wooing customers with promises of cheaper, cleaner power.
California's community solar market hasn’t lived up to the state's front-runner status.
“For a market that is leading the country in utility-scale, commercial and residential solar, California’s community solar market is abysmal,” said Austin Perea, a senior analyst covering distributed solar at Wood Mackenzie Power and Renewables.
California has deployed a cumulative 112 megawatts of community solar, which isn't nothing, but the projects have tended to be one-offs rather than a steady, predictable deal flow, Perea said. Those deployments pale in comparison to California's 5 gigawatts of residential capacity.
Measured another way, California's overall solar market accounts for roughly 40 percent of U.S. solar capacity. Its community solar only accounts for 10 percent of U.S. community solar.
Structural problems have held back progress. Community solar developers anywhere must corral a large number of customers to subscribe before a project can get off the ground. California’s pricing policies made that harder than usual.
“The CPUC didn’t approve fair pricing structures for the [utilities’] community solar programs,” said Susannah Churchill, California director at advocacy group Vote Solar, in an email. “Customers therefore have to pay a premium to sign up for community solar, severely limiting demand.”
The adoption numbers for SCE’s existing Green Tariff Shared Renewables (GTSR) program attest to that lack of enthusiasm.
Fewer than 1,000 customers are currently enrolled in Green Tariff, which procures 100 percent clean electricity, SCE said in the filing. The program contains an Enhanced Community Renewables component, designed to give customers access to community-based clean energy projects, but no customers have enrolled in that program.
“Numerous barriers for customers and developers, including program caps and sizing restrictions, make it difficult for SCE to subscribe customers to either GTSR program,” the company noted.
GTSR imposes a 2-megawatt cap on non-governmental accounts, for instance, which blocks large commercial customers from participating. A 1-megawatt cap on environmental justice projects has prevented developers from achieving economies of scale for those projects.
SCE's new deal
SCE envisions its new Green Energy Program delivering 181 megawatts of generation.
In response to the earlier issues, SCE wants to lift the cap for its New Green Tariff from 2 megawatts to 5 megawatts.
The community renewables program will be largely revamped.
In the new design, a municipal or large commercial customer with at least 500 kilowatts of load sponsors a community solar project. The sponsor consumes at least 80 percent of the generation, and up to 20 percent will be available to community residents for subscription. The contracts will last for 10, 15 or 20 years.
If regulators approve, procurement and construction schedules would push deliver of energy from new community projects into 2022 or 2023, the utility said.
Rather than leaving it up to developers to make community projects happen, SCE wants to lend a hand.
"Helping the developer connect to the customer is one big step forward," Anderson said. "That doesn't exist today."
Utility encroachment into residential clean energy tends to set off alarm bells for solar industry advocates, but this is different than a utility-owned residential pilot.
For one thing, all the solar installation would be bid out to the industry; SCE isn’t getting into the solar development game, just helping developers assemble their subscriber list. Furthermore, the customer base here is precisely those residents who cannot get rooftop solar for themselves.
Just how effective the utility will be at identifying customers remains to be seen. Plenty of power providers have struggled to convert retail customer relationships into solar leads. It's also hard to tell what effect the 80 percent sponsor requirement will have on project development; it could be a high bar to reach, or it could nourish the financial health of the projects.
The big picture
This small programmatic change interacts with macro-level transformations underway in California’s grid.
Gov. Jerry Brown signed a law in September banning carbon emissions from electrical generation by 2045; that means the overall energy mix is headed in the direction of the green tariff.
“As we all are starting to see that we need to go even further if we're going to fully decarbonize the grid, finding as many creative ways to integrate renewable energy and respond to customer demand at the same time is moving us forward,” Anderson said.
Rooftop solar capacity does not count toward California’s renewables targets, though it does reduce net demand for power. The larger-scale projects built for the green tariff program, though, will count toward the targets, while making customers feel good about their clean choices.
Meanwhile, the major utilities are grappling with customer defection to community-choice aggregators, whereby cities and counties source their own power and deliver it through utility wires. CCAs promise cheaper, cleaner power options, in part because they don't have to pay off legacy power contracts from the days before wind and solar got so cheap.
SCE’s new program would also offer cleaner power options than the current energy mix, without the risk of relying on a brand-new purchasing entity with little or no credit history. This could serve to assuage SCE customers who would otherwise look elsewhere for local, zero-carbon alternatives.
Is the price right?
Ultimately, the success of the green energy program will come down to cost.
Some customers are willing to pay more for the knowledge that their electricity comes from clean sources. But when solar companies pitch a rooftop system, they try to demonstrate how much money it will save compared to the utility rate.
SCE has little incentive to undercut its own prices. Its filing touts “low or no premiums” for the 100 percent clean offerings, which is different from paying less.
It does, however, expect the new community solar to be cheaper than the existing program. That's partly because renewable power-purchase agreements keep getting cheaper.
"The new programs also propose a structure that is common to other tariffs where the program administration costs are shared by all customers and not just those participating," Anderson added.
Customers who qualify as living in disadvantaged communities will receive additional discounts, "so opting for green supply or community solar might even lower their energy bills,” she said.
“What you ideally want is a discount to your bill in order for a community solar market to really take off,” solar analyst Perea said.
If regulators approve the proposal, customers will get to weigh the costs and benefits for themselves, four or five years down the road.