The California Public Utility Commission voted in favor of extending net metering at retail rates on Thursday, striking a major blow in favor of rooftop solar installers and against utilities in the state. The decision was a major success for solar proponents in the ongoing war over net metering that is playing out across the country as rooftop solar installations continue to gain in popularity.
Cash 4 Solar Rays
The 3-2 vote approved a plan that, while offering up some new fees to utilities in exchange for connecting consumers to the grid, still fell well short of the measures lobbied for by utilities companies like Southern California Edison, San Diego Gas & Electric, and Pacific Gas & Electric.
Net metering allows customers with solar panels to sell the surplus electricity produced by their installation back to the utilities at retail rates. It’s a key policy for making rooftop solar attractive. Given that home electricity use is commonly at its highest rates during the evening, rooftop solar panels are producing electricity at times when it’s less likely to be used. By selling it back to the grid, solar panel owners can credit their accounts for electricity they’re likely to use in the evening.
Utility companies, however, insist that the additional costs for maintaining the power grid where thousands of individual customers are selling power back are being borne by the rest of their customers. Across the country, utilities have been pushing for rule changes that would make net metering less attractive and spread the costs more evenly.
Under the new California proposal, new net metering customers will pay a one-time fee to utilities to hook up their solar panels of between $75 and $150, and then will continue to pay a fee of about $0.02 per kilowatt. Previously at issue had been a utility company proposal for an additional transmission fee that might have doubled the monthly fees and eroded the cost savings that would make solar panels appealing for home customers.
The decision had stocks for solar companies focused on rooftop installations rising sharply, with SolarCity (SCTY) gaining almost 8.5% and Sunrun (RUN) up over 20%.
A Short-Term Boost for Solar
The ongoing fight over net metering speaks to the growing power of the solar industry and its increasing economic viability. Crashing prices for photovoltaic panels has helped make them viable for both utility-scale projects and rooftop installations alike, creating a new reality where solar is no longer simply a pie-in-the-sky ideal for environmentalists.
The issue, though, is an intriguing one for a variety of different reasons. Firstly, despite the effort to paint this as a simple solar vs. traditional utilities debate, it’s really more of a debate between different visions of the future of solar. Sure, a lot of growth for solar companies is getting driven by rooftop installers like SolarCity, but First Solar (FSLR), the world’s largest solar company, is focused on utility-scale solar projects here and abroad and has actually fought net metering.
It’s worth noting that California has passed legislation calling for half of its electricity to come from renewable energy by 2030. That would mean that the utilities, far from representing a staunchly anti-solar stance, are going to be legally required to embrace the technology rapidly over the next decade. Utility-scale installations are actually much more cost effective than rooftop solar’s piecemeal approach.
Additionally, the future for rooftop solar doesn’t appear to lie with net metering regardless of today’s decision. The potential for high-capacity, rechargeable lithium-ion batteries to store energy during the day for use at night could mean that selling power back to the grid isn’t something that will drive solar growth for long. This is undoubtedly something folks at SolarCity understand, as it’s their chairman, Elon Musk, who is driving this particular innovation at one of his other companies, Tesla (TSLA).
Still, in the short term, this decision is likely to keep the momentum for residential solar installations going, even if its importance may not last for much more than a decade.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer