It is no secret that utilities across the country are resisting the growth of distributed solar. This time around, Southern California Edison (SCE), Pacific Gas and Electric (PG&E), and San Diego Gas & Electric (SDG&E), California’s three largest utilities, are grappling with integrating battery-backed solar systems into the grid. The utilities are refusing to integrate solar systems with integrated battery storage systems if both system components are behind the same meter.
This may seem like a trivial issue because battery-backed systems add about 25 percent to the cost of rooftop solar systems and only make up a small part of the solar market. Nevertheless, Bloomberg predicts that battery costs will fall 57 percent from $1,893 per kWh now to $807 per kWh of storage capacity in 2020 making battery-backed systems more attractive to customers. Similarly, Lux Research Inc. forecasts that the global market for solar systems combined with energy storage will rise from less than $200 million this year to $2.8 billion in 2018. Coupled with the fact that California accounts for more than 30% of solar installations in the U.S., these predictions mean the stance of California’s big three utilities’ on battery-backed solar could have a major impact on the growth of solar.
Utilities Disagree with Installers
Utilities have stated a variety of reasons for their resistance. One possible motivation for their concern is that these systems further distance customers from utility need, disrupting the typical investor-owned utility (IOU) business model more so than standard solar systems without energy storage. In addition, utilities stress there is no way to guarantee that power flowing to the grid from these systems is from renewable sources (i.e. that customers can take advantage of the net metering system). In theory, customers could charge their batteries from the grid – whose source is not necessarily renewables – and then discharge that energy back to the grid to take advantage of net energy metering (NEM) credits.
Installers of battery-backed solar systems insist that customers would not do that. They note that the controversial systems are not designed to discharge onto the grid. Instead, they are designed so customers can use their own power at night (i.e. disconnect from the grid and use solar power stored in the battery) and/or so customers have a backup in case of grid failure. To use the systems like utilities state, customers would have to circumvent the programming of their system. Moreover, installers note customers would not receive any economic benefit by discharging their batteries onto the grid because the kilowatts generated are less valuable than the cost of wearing down the battery.
A New Storage Mandate Could Change the Situation
The utilities’ position creates a major concern for installers of these systems as they risk losing business. Because new California RPS guidelines are not yet set, installers fear that utilities are trying to set precedents that would negatively impact future rules. However, a new energy storage mandate from the California Public Utilities Commission (CPUC), SCE, PG&E, and SDG&E will be required to incorporate customer owned storage into their grids. The CPUC mandate requires that SCE, PG&E, and SDG&E add a combined 1.325 GW of energy storage to their grids by 2020. Of the 1.325 GW, 200 MW must be met behind the meter (i.e. customer-sited storage). Furthermore, utilities can own no more than half of the storage assets they acquire. Both of these conditions will benefit current and potential owners and installers of battery-backed solar systems in California. The specific rules for the news mandate have yet to be set, so stay tuned for potentially more good news.
Sol Systems will continue to track the progress of this debate. If you are currently working on any projects in California, please contact our team at firstname.lastname@example.org or (888) 235-1538 ext. 2. Our team is happy to discuss your project with you and assess financing opportunities.
About Sol Systems
Sol Systems is a boutique financial services firm that offers investor clients direct access to the renewable energy asset class and provides developers with sophisticated project financing solutions. Founded in 2008, Sol Systems focuses on meeting the most critical needs of the industry, including SREC monetization, capital placement, tax equity, and New Market Tax Credits. To date, the company has arranged financing for thousands of projects and facilitated hundreds of millions in investment on behalf of Fortune 100 companies, private equity, family offices and individuals.
For more information please visit www.solsystemscompany.com.