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August 3rd, 2012

Solar PV: California PUC Dramatically Expands Net Metering Program

by Andrew Price, President & COO

The California Public Utilities Commission (CPUC) recently voted 5-0 to dramatically increase the amount of solar PV projects allowable under the state’s net metering cap. State law limited the number of net metering projects by imposing a cap. The sum of the nameplate capacities of all net metering projects could not exceed 5% of utility “aggregate peak demand”. The big three utilities in California - Pacific Gas & Electric, Southern California Edison, San Diego Gas & Electric – interpreted this cap as applying to the coincident peak demand on their systems. In other words, each utility simply divided the nameplate capacity of all net metering projects in their service territory by their peak system demand. The resulting percentage had to be below 5%.

This is the same method used to calculate overall net metering limits in other states, including Massachusetts. (See my previous blog, Solar PV Net Metering: A Case Study, for a discussion of net metering in Massachusetts.) Most sates with net-metering programs cap participation in order to limit the total amount of cross-subsidy between ratepayers with and without net metering projects.

In their recent vote, the CPUC found that “aggregate customer peak demand means the aggregation, or sum, of individual customers’ peak demands.” To comply with this order, California utilities must use non-coincident peak demand in the denominator, effectively increasing the amount of net metering projects that would fit under the same 5% cap. Using individual customers’ peak demands is only possible for most small customers because of the recent deployment of new smart meters across California. Smart meters record detailed information about both kWh energy and kW demand usage.

The CPUC ruling could ultimately double the number of solar PV projects that are allowed under the net metering cap and result in 2.4 to 5.2 GW of additional solar PV capacity in California. Pacific Gas & Electric, one of the largest utilities in the US, was projecting that it would hit the 5% cap in 2014 under the previous methodology. This date will be pushed far into the future by the new ruling.

In a concession to opponents of expanding the net metering cap, the CPUC mandated a cost-benefit study on net metering programs by October 2013 and established a sunset date on the program of 1/1/2015. The sunset provision will only kick-in if a new net metering policy is not established before this date.


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