If you flipped through the December 2023 issue of Time magazine, you might have seen an article focused on fraud in the solar industry and the bad actors perpetuating it.
In the 20 years since founding installer Independent Solar, I’ve seen these bad actors and their shady business practices firsthand. While I’m saddened to say that these companies have eroded some of the public’s trust in our industry, they aren’t the only ones to blame. Thanks to changing regulations, customers don’t always see their promised savings and if customers feel like solar power is just a bait-and-switch followed by an endless maze of shifting regulation, it’s no wonder fewer and fewer households are willing to sign solar contracts.
I’ve already seen that shift beginning. Regulatory winds are blowing and solar customers have been thrown into what can only be called a sea of confusion. This has been evident since it washed over California in April 2023 in the form of new net energy metering tariff NEM 3.0.
NEM 3.0
If you aren’t familiar with the situation, NEM 3.0 drastically reduced the amount of compensation solar homeowners receive for unused electricity which is sold back into the grid.
Before NEM 3.0, California did what most states do — it used one-to-one net metering, so customers were credited the same amount for exported solar power as they’d pay to use that amount of electricity from the grid. That meant that their electricity often paid for itself.
NEM 3.0 moved from net metering to net billing. It’s a small change in terminology but a big change in practice. With net billing, the reimbursement rate is calculated based on the day, time, and even month the customer uses the electricity. It’s a deliberately complicated system and the bottom line is that customers are being reimbursed about 75% less than they were before.
Industry suffering
As a result, some solar customers are, understandably, starting to panic. They aren’t alone. Research firm Wood Mackenzie has predicted that, in 2024, solar installation rates in California will decrease by 38%. Investment bank Roth Capital Partners expects something even more dire — a 50% contraction in the solar market in 2024.
Unfortunately, customers who purchased solar power systems for the savings are seeing those returns evaporate before their eyes. Under the new regulations, customers can still save almost as much as before by installing a battery but that is pretty costly so it’s not an option for everyone.
If you live in another US state, you might be relieved that you aren’t dealing with NEM 3.0 but the truth is that many other states are following suit. In fact, Arizona actually beat California to the punch when it came to lowering overall customer energy savings. It drastically reduced customer savings in 2016, far ahead of California.
Further hit
The Arizona legislature is now considering whether it should lower compensation rates even further. Sadly, I think it’s likely that Arizona will lower those compensation rates.
I believe this was always the legislative plan: incentivize homeowners to install solar panels with artificially low rates and then placate utility companies by reducing reimbursement levels. This is hardly a regional issue. Several other states – including Arkansas, Hawaii, Idaho, and North Carolina – have recently made similar changes to slash savings.
As a result, it’s an uncertain time for customers. Unless something changes, solar companies nationwide will see a continued reduction in solar power installations and this is especially true for states with turbulent legislation like Arizona, where panels are installed with the promise of significant savings, they are then reduced, and the legislature is already considering reducing them again.
I think the executive director of the Arizona Solar Energy Industries Association, Autumn T. Johnson, was spot-on when she said, “It’s hard to argue that you should invest $30,000 or $40,000 or $50,000 into a solar system on your home when you have absolutely no idea how the [public utilities] commission is going to treat that from a regulatory perspective tomorrow or next year because they cannot be counted on to maintain the decisions they’ve previously instituted.”
Incentive
Solar is a major upfront investment that is meant to reduce long-term costs but it only works in customers’ favor if they save enough on utility bills to make the solar panels pay for themselves. The less consumers save on energy, the longer that takes.
From a customer vantage point, if they’re still paying almost as much for utilities as they did before, why bother with the cost of solar power?
As an industry, we are responsible for showing our customers that solar is still good for their wallets. It’s still good for the environment, after all.
We also have a responsibility to advocate against billing adjustments that decimate consumer savings. NEM 3.0 might make solar power seem like a bait-and-switch, and without adjustment on our part, it will be. However, with trust, open communication, and intelligent advocacy, we can help customers move toward the new frontier of truly on-site solar power.
About the author: Randy French, owner and founder of Phoenix-based Independent Solar, began the company in 2003. French pioneered rooftop solar installation and expanded across the state. His company has built a reputation for quality and customer satisfaction. Independent Solar provides residential and commercial solar solutions, is committed to innovation and customer care, and now serves Arizona, Nevada, and Texas.
The views and opinions expressed in this article are the author’s own, and do not necessarily reflect those held by pv magazine.
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I have to disagree. Net billing is an essential step forward.
Otherwise you have home owners selling their electricity at retail prices (What is that – 30 cents per KWh in CA?), at a time when whole sale prices might be negative.
That provides no incentives to invest in storage or demand management, and will eventually bankrupt the utilities. Why not charge the car at 7pm then, using the electricity you gave to the utility at 2pm?
Far better would be for the state to pay a production bonus (say 5 cents per KWh), and then homeowners sell at whoesale price at the time, even if it is negative. Then many homeowners will invest in a battery. Fill the car battery and the home battery when its sunny, and sell some electricity at a profit in the evening.
The solar industry needs to address this challenge if it is to grow as it should.
Your implied assumption is that rooftop solar customers should be providing the grid storage.
Rooftop solar customers bring one thing to the table: their ideally distributed roofs and their capital. In exchange they were paid a retail reimbursement rate.
Now the argument being made was a sham about equity. No one bought that utilities cared about equity so it was really about storage.
Storage eventually may be able to be done effectively by the homeowner. Its still very expensive and it means lots of big lithium batteries. I think with today’s tech this storage is better done centralized with other technologies that are more scalable and sustainable.
Why not have the utilities build the storage along with transmission lines?
Why should the consumer be required to invest in storage or demand management? Shouldn’t that burden be on the utility company? The business whose sole purpose is to (re) sell power?
As far as paying the utility to take excess power (which seems to be what you’re suggesting), that would be stupid. At that point, any sane person would just switch to off-grid mode.
None of this addresses the main point of the article, which is solar sales will be shrinking precisely at the time when we need for them to grow if we’re serious about renewable energy.
Under NEM 2.0, you never get paid retail rates for electricity sent back to the grid, you get credit for it. If you don’t use those credits, you eventually get paid wholesale rates for them, which are basically nothing. Nobody is making money off a solar installation under NEM 2.0.
The credits are also proportional to the current Time of Use rates. Generate extra power during peak hours when the grid needs it most, you get more credit than if you generate during off peak hours.
If too many people are going solar and the power companies don’t want to be giving people peak rate credits when the sun is shining, the Time of Use hours should be shifted to reflect this. More flexibility in changing Time of Use was the correct answer to the problem, not Net Billing.
The CPUC information on NEM 3.0 states they want people to install Battery Storage in addition to Solar. Changing Time of Use rates might actually accomplish that goal. Under NEM 3.0 though, people have zero incentive for ever putting power back into the grid. So if people do actually install Battery Storage, you’re just going to see a massive drop in grid flexibility because people are going to basically “cut the cord” to the grid.
Net metering is done. Get over it. The future is DC. DC appliances, DC cars, and DC storage with grid backup.
Selling power back to the grid as a retail customer should be banned unless they want to sell for 4 cents KWHr same as coal power. Otherwise it is a rip off. Who is going to pay for all the expensive trucks and union workers to come out and fix your power lines if everybody’s selling power back to the grid and there to get their power for free come on people math doesn’t add up.
In an increasingly renewable grid net billing is fair. Midday almost all electricity is made by solar. “I don’t like it” is different from “that’s not fair”
Rather than Net Billing, isn’t changing the Time of Use rates a better solution to that problem?
Right now the only way to fight back is not to connect the solar panels to the grid and buy batteries!!! It will be more beneficial to owners as they have back up to the blackouts…. I have a ‘gridtied’ inverter with a LIMITER, it is synced to the grid but it is not feeding back to the grid…, but for blackouts I will also need a separate inverter for the battery and ‘offgrid’ mode…
It’s unfortunate but this has become the norm for Americans with everything these days. Politicians along with their corporate Sugar Daddy’s continue to be allowed to fleece the American Middle Class. We’ve had a 38 panel solar array in Southern California now for 6 years. When we started we were getting 1200 a year back. Now we’re paying 1200 a year. We have nothing fancy. A small 1100 sqft house and a small work shop. It’s outright theft by the electric company.
Every epochal change in history has been fought by monied interests. Cars were just a noisy, dirty fad according to saddle and buggy makers. Passenger aircraft would never work according to ocean liner companies. The FF industry is using every dirty trick in its book to fight renewables of every type, while knowing from its own research that GW and CC were caused by their products. The changes are under way right now, but the US is a late follower, not a leader. We need to keep putting the positive accomplishments in as many venues as possible for they are astounding. The electrification of everything is underway: cars, trucks, trains, heat pumps, ships, and with more to come. The future is here no matter the naysayers.
Solar I can understand why utilities would want some discount on buying back solar from home owners but if the discount is prohibitive to the homeowners that takes away the insensitive to have solar. With the fluctuating output of solar it does present problems for the utilities so they can not pay what they charge but both parties need to gain from this to make it work
The onsite solar industry needs to look to Australia, where the residential PV $/W are half to a third of those in the USA and lobby like crazy for reforms to our rules and regs and codes that increase PV system installed costs here. (OK, we’re probably going to need to accept some tariffs.)
TOU rates need to be the norm and will decrease electricity costs for the majority of consumers by bringing them utility wind or solar, or transferring solar from their neighbors. TOU rates are a linchpin of a sensible cost-effective grid transformation to high levels variable renewables. PV installers need to partner with other contractors and services who can help customers increase self-consumption. Electric rates in general will balloon if a significant number of customers blast 10 kW of PV into the grid from 9-3, then suck that out at dinnertime, and have a “net-zero” bill.
Absolutely agree Fred. Here in Oz it costs about US$10k to install a good quality 10kW solar system. We get a $3k rebate so it only costs us $7k.
Our observations are that the US have a lack of standardisation that means way higher system design, permit and install costs. You’ve also got a lot of generators/power utilities protecting their own interests.
Come talk to us, we’d love to help you figure it out!
It is not difficult to analyze solar for any home that has net hourly usage data.
The results tell the story why net billing is so devastating for solar only, and not a lot better for solar plus storage.
It is my opinion that the California PUC analysis was done in a way to support their conclusion to go with net billing – again, look at the analysis.
Most people don’t understand the dynamics of solar. For example, when your AC turns on you’re an importer, when it turns off you’re an exporter. So even when your annual net usage is zero (with solar-only), you’re likely exporting a lot more than you’re importing, with very little savings under net billing.
Batteries help some, but not as much as you might think. In the CPUC analysis, the savings look larger because for some reason, in the September data, a couple of hours each day had very large export reimbursement rates. These rates are expected to decrease rapidly over time, so these particular savings largely disappear
Another issue are solar company PPA’s. Full net metering support these PPA’s (for at least some savings), but I doubt net billing would. Again, the analysis would need to be carefully evaluated.
Instantaneous metering (vs net hourly metering) adds another (smaller) financial hit to solar customers.
Solar isn’t even available where I live in New Jersey. They say the grid can’t handle incoming electricity from more solar. I bought the house expecting to put solar panels on it. The house needed a new roof, which made it eligible for a free roof from the government so instead now I pay for all my electricity, and I paid for a new roof on my own and electric company has no incentive to increase its ability for return electricity from solar
Net Billing is a rip-off and in the end the power companies will completely lose access to household solar energy or kill the industry.
The entire ROI to install solar panels on your home is to significantly reduce the cost of any incoming electricity from the utility. As it is, the ROI on the previous plan was 10 to 20 years. Given the life span of the solar panels, making it a 30 to 40 year ROI, doesn’t make any sense.
The Net Bill plan is designed to get either get rid of household solar or completely get those houses off the grid.
I don’t think you quite understand the issues. You can’t continue with the previous billing because you are treating the grid as a battery. It wasn’t designed for that. With NEM 3 you are treated like a power producer so you get paid wholesale rates. What you need to do is buy battery storage so the states need to incentivize that.
The IOUs have a big problem- survival! There is so much capital being invested in renewable technology and so much innovation taking place that their days are number. High tension wires can be replaced by modern designs that increase capacity y 40% and all those backed up grid choked wind and solar projects will come to market sooner rather than later. It took the IRA act to make thos possible as well as extension of the 30% federal ITC that’s like free money. The sunk costs of the utilities are just that, sunk. There’s no point in reviving failed industries like coal as their time has passed – due to health disasters and recognition of cc and gw caused by fossil fuels. We in the usa eliminate the worst offenders first- coal- and move up the chain to nat gas and oil. It has to happen or many billions of people will die due to forced migration due to drought, flooding and no insurance for hurricanes and other results of cc.
So, although they dither at the PUCs of this country, they’re trying to soften the blow for those that lose their jobs joined to the ff industry. It’s a delaying tactic.
It would be better for them to embrace the future and welcome the change that will ultimately flatten them like a tsunami. Keeping the pressure on the old industries is the mode today and change is inherently hard. Think how much better life could be in a clean energy world, it’s a no-brainer when compared to our history of pollution, sickness and high health care costs we seem to take for granted. It does not have to be so.
Why do solar panel owners/companies feel that they should be paid retail rates for the electricity that they put back into the grid? They are no different than any other electric generation plant, albeit smaller, and the power those solar panels produce is no different than the power generated by power plants, dams, or large commercial solar/wind farms. Utility companies buy power at wholesale rates and sell it at retail rates; the profit is what pays for the infrastructure that must be built, maintained, and upgraded. Any utility company would eventually go bankrupt if forced to pay the same for the electricity they purchase as what they sell it for. Net metering may have been a great way to entice people to install solar, but that model cannot be sustained for the long term or large scale.
Very well said Gary
It costs PGE almost nothing to move an extra electron from my rooftop to my neighbor’s nextdoor or the one across the street or down the street. Moving PGE’s “wholesale electron” produced out in the desert or somewhere in Nevada and delivering it to my neighbor’s house is vastly more expensive. To allow PGE to credit my extra electron at PGE’s “wholesale rate” is a blatant rip off. So much for for NEM 3.
If it was not so costly to pay all the subsidies, I would find it hilarious to hear the whining. Solar will succeed when it is cost effective, when it is economically feasible, when it can stand on its own two feet, when it can pay its own way, when it is no longer a boondoggle. When solar is no longer dependent on subsidies from the govt or the utility company, when you do not depend on the grid, it will succeed. Until then, buy McDonald’s stock and pay your electric bill with the dividends.
McDonald’s stock is -8.30% Year To Date and -7.37% over the last year. Readers better not take seriously any of your two points.
Right Jubal, and let’s just forget about the warming, ignore the terror in our grandchildren’s eyes, and keep living life with our voraciously consumptive habits because they’re proven to work so well and comfortable. Solar energy is here to save humanity from itself, and it’s the only thing that can, but we’ll have to make some sacrifices and end our carbon addiction to choose it. While we’re waiting on the world to change, the decision to aggressively adopt this solution by any means necessary sure seems extreme. To say that solar is gonna have to prove itself better before you’ll stop trashing the planet completely ignores the fact that it already has. So you can’t justify refusing to adopt it based on its shortcomings. Put your faith in McDonald’s or any stock you want, but soon they will all be completely worthless when your legacy is a dying planet. We cannot continue grid energy generation using fossil fuels. Solar is not just one of the options here. It is our only option and we need to stop thinking of this as if we have a choice. It doesn’t matter what it costs me to go solar, I will pay it. To say that we care about the planet and future generations, but take no action, is not an option. I do not own a home, but I just bought EV, and my legislators are hearing my position on the urgent need for community solar almost daily. If the fracturing of our stable climate doesn’t terrify you enough to step up and radically change, then you really don’t understand the issue.
The author does not get it. It’s a grid, not a bank, but more importantly Net Metering is a huge tool for incentives. The first stage was to get solar to grow power generation, and it make sense to buy it at retail because the generation happens at peak demand. Once you get enough you need new incentives because there is nowhere to store excess and the time of day when peak demand happens shifts to when the sun is not shining. The new incentive is for homeowners to add storage at their home site. It’s simple really.
I completely agree. This is the way it works. Incentivizing solar was the first step, and logically, the battery back-up will be next. The reason why the batteries are not given much weight or incentive right now is honestly because they still suck. They aren’t quite the stellar technology they soon will be and they are expensive for what they can actually do, and they can’t warranty them beyond 10 years. I know that net metering will be under attack in the years to come, but as a solar sales consultant, I hesitate to encourage purchasing a battery in any solar install contract. There will be a game-changing announcement very soon about a new residential solar battery technology that uses H2 to greatly extend battery life and storage capacity. When batteries are on the market that last as long as the panels, we’ll all be home free. Then the feds will roll out the incentives for adding them and the grid can shrivel up and die. So, please make the switch now! Just GO SOLAR and hang on to net metering a couple of years more, because technology is omnipotent and with Solar + H2 truly anything is possible.