These days, it’s rare to see rooftop solar installers and investor-owned utilities aligned on state policy issues. But in California, the two industry groups are both lobbying for behind-the-meter solar to count toward the state’s expanded renewable portfolio standard.
SB 350, the “Clean Energy and Pollution Reduction Act of 2015,” seeks to increase the state’s renewable energy target from 33 percent by 2020, to 50 percent by 2030. It also calls for cutting petroleum use in the transportation sector by half, and doubling the energy efficiency of buildings over the next 15 years.
The bill has already passed the California Senate, and is now making its way through the Assembly.
One of the issues both utilities and solar installers have raised is that distributed solar should not be treated any differently than utility-scale solar as the state crafts the rules around meeting the new 50 percent target. As the RPS stands today, California utilities are only required to buy energy and renewable energy credits (RECs) from utility-scale solar plants.
In a letter to the Assembly Committee on Utilities and Commerce, Southern California Edison wrote, “state policy should not pick technology winners and losers, favoring only utility-scale renewables, and instead must recognize all [greenhouse gas]-reducing strategies toward the state’s ambitious goals, and count renewable distributed generation as a means to achieve the RPS and state climate goals.”
Pacific Gas & Electric has made the same argument, calling on the Assembly to include an amendment that would “expand the scope of eligible renewable resources to include distributed generation facilities such as rooftop solar that the state already acknowledges are renewable, yet do not count toward the RPS goal.”
This change would give utilities more ways to meet the lofty 50 percent RPS goal. It would also give them a potentially more affordable way to meet the goal by leveraging existing and future private investment toward meeting the RPS, rather than necessarily having to contract for new large-scale projects using ratepayer dollars.
"Given significant uncertainty in regulatory policy, we are concerned that failing to give ‘behind-the-meter’ solar equal treatment jeopardizes the future growth of this segment of the industry and could leave hundreds of millions of dollars in private investment on the table,” said The Alliance for Solar Choice (TASC), a solar lobbying group, in a letter to the Assembly.
“It’s important to note that California solar customers and solar developers are utilizing private capital, and not ratepayer dollars, to deploy these systems,” the letter added. “We believe that leveling the RPS playing field will increase compliance flexibility and help reduce overall RPS compliance costs as well as help better align utility interest with those of consumers in the deployment of distributed generation.”
Rooftop solar is one of the fastest-growing sources of clean energy in the U.S., especially in California, where there are already 200,000 installed projects and 50,000 people employed by the industry. And yet, according to TASC, California is the only state in the country that does not count distributed solar toward the state’s RPS goal, either through a distributed generation carve-out or by generating RECs.
The issue has made strange bedfellows of power companies and rooftop solar installers, which have clashed in several states over the future of net energy metering. Meanwhile, it has pitted rooftop solar companies against large-scale solar installers, which are actively lobbying against the RPS change.
“The RPS is the single most important driver for wholesale renewables in California, and probably in the country,” said Shannon Eddy, executive director of the Large-Scale Solar Association. “Without the RPS mandate in place, utilities typically don’t buy wholesale renewable energy, so it is one of the only drivers we have available.”
"Keep them in separate programs"
To say that rooftop solar is entirely excluded from the California RPS as it exists today is not entirely accurate. The RPS is divided into three categories, or buckets, and while rooftop solar does not qualify under categories one and two, it is technically able to generate RECs under category three, the “unbundled RECs” category.
“The question is, why do the rooftop advocates want behind-the-meter solar in bucket one?” said Eddy. “It will in no way affect rooftop purchasing behavior, but it will dampen the wholesale market.”
“This isn't an either-or conversation -- we need all of it, we need as much solar on-line from rooftop and wholesale to meet our climate goals, and the best way to do that is to keep them in separate programs,” she said.
The controversy here is that utilities are not required to buy RECs from customer-sited projects under category three, whereas they are required to buy energy and RECs from utility-scale projects under category one.
Equally important is that category three RECs have been eligible for a dwindling share of annual REC compliance obligations. In the final 2017-2020 timeframe of the RPS, category three RECs can account for 10 percent or less of the compliance requirements. Over the same period, category one projects must account for 70 percent or more of the requirements.
If distributed solar projects were allowed to produce RECs under bucket one, it would serve as an additional income stream for the industry -- and a potentially pivotal income stream, with the federal Investment Tax Credit set to expire at the end of 2016.
“The rooftop solar industry is a startup industry that needs certainty in order to thrive,” wrote Lauren Randall, manager of public policy at Sunrun, in an email. “If we don't count rooftop solar, we're putting the industry at risk. That means putting tens of thousands of jobs at risk, and jeopardizing a resource that delivers significant water savings during a time of major drought.”
This week, SB 350 passed in the Assembly Committee on Natural Resources and was transferred to the Appropriations Committee. The bill has been amended to require the Public Utilities Commission to consider the economic and environmental benefits of distributed solar. The PUC may also authorize utilities to procure a certain percent of their retail sales from onsite generation to meet local electricity needs, but the bill leaves that percent figure blank.
The amendments will help to move the conversation forward, but the issue of giving rooftop solar equal standing with utility-scale solar under RPS has yet to be resolved. California's legislative session ends on September 11.