Sun
On December 15, 2022, the California Public Utilities Commission approved a revision to the net metering program for the state’s investor-owned utilities. The changes replaced the long-standing net energy metering rates (NEM) with a net billing rate structure (NBT) – colloquially known as “NEM 3.0” – that significantly reduces compensation for behind-the-meter solar PV systems. The NEM tariffs remained open for new interconnection requests until April 15, 2023, but after that date all new interconnection requests were submitted under NBT. Now, a year later, we have the opportunity to evaluate how California’s solar market has evolved under this new compensation regime.
As a precursor to its annual Tracking the Sun report, Berkeley Lab has released a short technical briefing detailing key trends in California’s residential solar market since the rollout of the new NBT structure. The aim of this analysis is to provide empirical insights into how the market has developed over the past year, confirming some expectations while revealing some notable surprises.
Key trends include:
- PV installations in the year since the implementation of the NBT (as of April 15, 2023) were approximately the same as the year before, but 80% were NEM systems related to the flow of interconnection requests submitted during the months before (and installed after) the NEM rates closed.
- As expected, more and more customers are installing storage alongside PV, but the turnaround is quite pronounced: storage attachment rates have increased from around 10% under NEM to 60% under NBT.
- Perhaps as a result of that sudden increase in demand, inflation-adjusted installed prices for paired PV+storage systems have increased by around 17% under NBT, compared to their levels under NEM (this is for host-owned systems, including any loan – financing of “dealer costs”).
- Most surprising is the dramatic shift in solar adoption to less affluent zip codes. While the reasons for this development require further research, it likely reflects a larger share of NBT systems associated with California’s new solar mandate for new homes, as well as the growing impacts of programs and policies supporting the adoption of solar energy and storage by LMI households.
- Another notable shift is the sharp increase in the percentage of third-party ownership (TPO), from 24% under NEM in the previous year, to 44% under NBT, reversing TPO’s previously steady movement. This may partly reflect exogenous factors related to high interest rates and federal tax incentives, but is also consistent with an underlying shift toward new construction and less affluent households, both of which have historically had higher TPO rates.
- As expected, PV systems are smaller under the NBT: approximately 9% overall and 17% for systems installed together with storage. This shift is likely driven in large part by the lower compensation for network exports offered under the NBT, although systems installed in new construction and by less affluent households also tend to be smaller.
- The installer market has become more concentrated under NBT, with the top 5 installers representing 51% of the market, compared to 40% under NEM (although most of that difference is related to the state’s largest installer).
To be fair, not all of the trends described above can be entirely attributed to NBT, as other important factors also played a role. This brief summary of the data does not attempt to analyze the effects of the many factors. But at least at first glance, NBT appears to have already had significant impacts on California’s residential PV market. These and other consequences will undoubtedly come into sharper focus in the coming year, once the NEM backlog has been completely cleared and a “new normal” under NBT has been introduced.
News item from Berkeley Labs
