RELEASE: The Need for Net Metering Reforms and the False Argument about the Cost of Diablo Canyon

Berkeley, Calif. — Today, the Breakthrough Institute’s Director of Climate & Energy Dr. Zeke Hausfather and Associate Director, Nuclear Energy Dr. Adam Stein published a new analysis on California’s new net metering reforms and rooftop solar, with a comparison to the closure of Diablo Canyon, the state’s last remaining nuclear power plant. As the authors point out, rooftop solar accounts for 9% of the total electricity generated in the state, about the same as Diablo Canyon.

Hausfather and Stein write, “[T]he rapid growth of rooftop solar has led to significant unintended consequences. Historically most of the state’s rooftop solar has been installed by high-income households; half of the state’s solar adopters are in the highest 20 percent of earners, while only 4 percent come from the lowest 20 percent.

They continue, “Net metering allows households to reduce their bill far more than the market value of the excess solar they produce, effectively shifting the cost of both producing electricity and maintaining the grid onto households without solar who tend to be lower-income. Most estimate this cost-shift to currently be around $1 billion, which will increase as the grid costs are placed on an ever-smaller group of customers that do not have solar.

Click here to read the full analysis.

Dr. Zeke Hausfather and Dr. Adam Stein are available for comment.

The proposed fix to net metering, called NEM-3 by the California Public Utilities Commission, “reduc[es] the net metering payments…based on the estimated value of solar to the grid – but allow[s] much higher rates for homes with solar plus storage who sell electricity back to the grid during evening periods.” However, to deal with legacy customers the proposed fix would slap a fee of around $48 per month for most household with solar. This, they argue represents a “regulatory kludge,” whereas a “clean slate would be much preferable: switch all rooftop solar, both legacy and new, to be paid for the real-time value of any new solar they sell to the grid, but do not subject rooftop solar to any additional monthly charges that do not apply to other residential customers.”

This gets to the crux of the matter — “The way we design rates matters. Subsidizing low-carbon technology can help accelerate deployment. But we need to do it in a way that is just and equitable and maximizes the emissions reductions per dollar spent. The current system that subsidizes richer households with higher rates for poorer ones is clearly not.

“California also needs to seriously consider how to best reduce its emissions and reach its climate targets at the lowest possible cost. While net metering is in real need of reform, it has always been a relatively costly way to reduce emissions. Rooftop solar is, generally speaking, around three times more expensive per kWh generated than utility-scale solar. The subsidies given to net metering currently amount to around$3.4 billion per year, and all of California’s rooftop solar currently generates as much electricity annually as its last remaining nuclear plant – Diablo Canyon.”

The authors conclude, “If California chose to avoid shutting down Diablo, they could reduce emissions at a far lower cost than that of net metering; even if you consider the incorrect and artificially inflated cost estimates pushed by Friends of the Earth, PG&E, and others of approximately $1.4B per year that spurred the decision to retire Diablo Canyon prematurely, there is no comparison. That doesn’t even take into account the weather-dependent nature of NEM solar, vs the 24/7 clean energy Diablo provides, or the millions in investments that need to be made to the grid to manage high levels of residential solar production.

“The hypocrisy here is notable, as the same clean energy and environmental NGOs that staunchly oppose keeping Diablo Canyon online are having a fit about the proposed NEM 3.0 decision based on its potential impact to California CO2 emissions and further expansion of rooftop solar."