California Upgrades its Net Metering Policy

California's solar industry scored a significant policy victory with the passage of AB 510, which raises the requirement on the state’s electric utilities to “net meter” customer-sited solar systems to 5% of a utility’s annual peak demand from 2.5%.

Net metering is an accounting practice for customer-generation systems – primarily used with solar PV – that addresses the real time mismatch between a customer’s solar system output and the customer’s electricity use by netting the two power flows over some designated period of time, usually the customer’s monthly billing period, with any credits carried over to subsequent billing periods with an annual true-up. The importance of net metering to solar economics is that the customer’s solar electricity is valued at the utility’s higher retail rate rather than at lower wholesale generation prices.

The California bill was championed by Assemblymember Nancy Skinner and supported by an array of solar companies and organizations, including the Solar Alliance, Vote Solar, and Environment California. Applied Materials lobbied for the bill both as a company and as a member of the Solar Alliance. Governor Schwarzenegger, who favored elimination of the net metering cap altogether, signed the bill on February 26.

Pacific Gas & Electric (PG&E) is already nearing the 2.5% level and thus additional system interconnections (and solar sales) were at risk. The new 5% level should support full build-out of the California Solar Initiative, which envisions 3,000 megawatts (MW) of customer-sited PV deployment by the end of 2016 and is the largest such program in the United States.

According to the Database of State Incentives for Renewables & Efficiency (DSIRE), 43 states and the District of Columbia have net metering policies but as is so often the case with state renewable energy policies, the rules can vary significantly. Many states place limits on the maximum system size that is eligible for net metering, with size limits as low as 10 kilowatts (kW) in some states, as well as caps on the total amount of capacity or aggregate production for which utilities must provide net metering. Twenty states plus D.C. have programs that are either uncapped or capped at more than 5% but 14 states have caps under 0.2% of utility peak load, and half of these states do not offer net metering at all.

These inconsistencies, as well as ongoing state battles over net metering, point to the need for a national policy, as well as for standardized procedures for clean power producers to interconnect to the grid. Shouldn't individuals and businesses be encouraged rather than discouraged to invest their own private capital to help solve our energy and environmental challenges? Shouldn’t schools and public agencies have the opportunity to save on their electricity bills with solar power? Net metering allows the competitive market to provide cost-efficient solutions for obtaining cleaner electricity supplies through distributed generation.

Applied Materials supports the standardization of net metering and interconnection rules in accordance with industry best practices, such as the model rules established by the Interstate Renewable Energy Council (IREC).

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