Solar tax credit extended; What’s next for PG&E net-metering?

This is a bit of a paste-eating (read: boring to most all but we the solar geeks) blog post, but we feel it’s valuable to share a few important updates for property owners who are considering going solar.

Federal Investment Tax Credit (ITC)

In late December, as part of the $900B Covid-19 relief package, the 26% Federal Investment Tax Credit for solar systems was extended through 2022. (It was slated to drop to 22% this year.) Even through the lens of a rah-rah solar practitioner, it’s difficult to see the relationship of our industry to the pandemic … but, we’ll take it (and, it’s a benefit that accrues to homeowners who invest in solar). Good news.

PG&E Net-Energy Metering

In August 2020, the California Public Utilities Commission (CPUC) commenced deliberations for Net-Metering 3.0. (Background: “Net-Metering” is the accounting mechanism by which PG&E, as mandated by the CPUC, is required to compensate property owners for their solar generation. From 2005 through late 2016 [Net-Metering 1.0], property owners were compensated at the full retail rate [the same price PG&E charges for electricity] for their excess solar generation. Under the current program, Net-Metering 2.0, solar owners receive full retail compensation with two changes: a nominal “non-bypassable” charge, essentially a tax or toll, that totals ~$100/year; and, a requirement to enroll in a time-of-use rate plan.)

We were recently briefed by sages at the California Solar + Storage Association regarding the timing and key, to-be-negotiated levers of what’s next (Net-Metering 3.0). Important tenets:

- It’s anticipated the sausage-making process (CPUC deliberations) will continue through 2021, with a formulated program finalized in early 2022. Thereafter, it will take three-to-six months to initiate the program. Any prospective solar owner who has submitted Phase 1 of their PG&E Net-Metering application (by that date) will be grandfathered in to the current (Net-Metering 2.0) rules. Good news.

- Reprise: Anyone who has gone solar or goes solar prior to commencement of the new program is safe (i.e., you’re enrolled in Net-Metering 1.0 or 2.0); PG&E cannot retroactively change the rules or accounting treatment.

- It is likely solar-tied storage (batteries) will be part of the new program … again, details TBD. Could be good, could be penal.

- There are three key imperatives, or consumer protections, our industry is keenly focused on: Do not touch behind-the-meter (solar generation less consumption) electricity; no solar-specific fixed charges (ala SMUD and other utilities); and, any change/new program must be gradually implemented.

One note: There is no urgency, through our lens, to go solar. Unfortunately, several homeowners each week relay they were told (by one or more solar companies) that they had to go solar by (insert a fictitious date) for (insert an erroneous reason). Don’t buy it; take your time, do your due diligence.

As always, feel free to contact us if you’d like to learn more about the above and/or if you’d like us to help you evaluate whether solar makes sense.

Purchased a home and want to add solar panels? Five considerations to ponder

This week, we have been engaged by three new homeowners to help them evaluate solar. Thereby, we begin with a simple, open-ended question: Why solar, why now? Responses vary, but generally their motive is twofold: Why not, since I just bought my home; and, PG&E’s rates are only going to go up. While we agree with the latter, we believe the former warrants consideration.

Before adding solar to your recently purchased home, here are five considerations:

1. The condition of your roof. Since new homebuyers have recently had their roof inspected, they have an objective evaluation regarding the condition and remaining life of their roof. In simple terms, if your roof has less than 10 years of remaining/warrantied life, you do not want to install solar (on such roof planes); if your roof has 10+ years, you’re in good shape.

2. Historical/future electricity use. Since new homeowners have limited (or zero) electricity use data, we recommend one of four approaches (to forecast future use and accurately size and model their prospective solar system):

• Live in your home for 12 months and, thereby, quantify how much electricity you will use.

• Wait until you have occupied your home for six months -- particularly 1-2 months of summer use, when electricity demand peaks. (Thereby, we can model 12 months of electricity demand based on your use pattern and comparable homes).

• Employ comparable homes’ electricity use (based on their vintage, neighborhood, size, occupancy, etcetera) to model your home’s future electricity use. Fortunately, we have several hundred data sets — electricity use patterns for homes in all neighborhoods in our community — to approximate future use.

• If it’s not too late, request 12 months of PG&E data from the home seller. Oftentimes, this is a futile effort, but it’s worth trying.

3. Home improvements. Stating the obvious: Many new homeowners improve their homes. Adding a pool and/or hot tub will increase your electricity use, as would replacing your furnace with an electric heat pump (an increasingly common practice for Repower homeowners). Conversely, replacing windows, adding insulation, or installing a variable speed pool pump reduces your electricity use. In all cases, we model the impact vis-a-vis solar system sizing.

4. Electric vehicle. If you own — or intend to purchase, in the next 12-24 months — an eV, you’d  want to factor future charging of your car into the sizing of your solar system. We find that eVs travel 4 miles per kWh of electricity. The math is simple: Take the number of miles/year you anticipate driving and multiply it by the percentage of charging you believe will be done at home (versus your workplace, public chargers, etc.). Then, divide the number by 4 to quantify additional electricity use (in kWh). For example, if you intend to drive 10,000 miles per year and charge your car 80% of the time at home (fueling 8,000 miles), you will consume 2,000 kWh of electricity.

5. Your electrical panel. Though adding solar does not increase your electrical demand, we need to ensure your electrical panel has sufficient capacity (or space) to accommodate the solar inverter. Furthermore, we will evaluate non-solar changes to your electrical demand — car charger, spa, swimming pool, heat pump, etcetera — to determine your panel’s amenability. (We perform load calculations and review your future electricity use with the city or county to ensure solar will work.)

 Net-net, going solar is simple, but there are a few nuances worthy of consideration … particularly if you recently purchased a home. Feel free to contact us to learn more and receive a free solar assessment.

Is there urgency to go solar? The times they are a-changin'

Over the past few years, we have stressed — STRESSED — to property owners that there is NO urgency to go solar. Here’s a blog post elaborating our perspective on the lack of urgency, and the importance of doing your homework, when evaluating solar.

To quote Bobby Dylan, the times they are a-changin’.

Retrospective

We posited there was no urgency to go solar based on the three-to-four year windows (until expiration) of the 30% federal tax credit and PG&E’s Net-Metering program. Furthermore, solar panel prices eased a bit over the past few years, while PG&E’s rates continued to inflate (22% in 2016; another 8.5% increase this year). The tax credit is locked in, PG&E’s net-metering is galvanized, and the economics of going solar are improving. Take your time, we counseled.

Contemporary perspective

Regardless of your partisanship, solar is in the political cross hairs. Drill baby drill. Climate change is a hoax. Coal is our future. Political chestnuts and hyperbole voiced to rouse the base, but defying logic and economics: Solar is the fastest growing industry in the U.S. (adding jobs at 20x the rate of the economy), and solar has created more jobs than any industry in the country over the past 4-5 years. Furthermore, it’s quite libertarian to enable property owners to create their own energy, hence the bi-partisan extension of the federal tax credit at the end of 2015.

Over the past few months, domestic politics and the macro economy have defied logic and contemporary history:

1. Demand for Tier 1 (investment-grade) solar panels has exploded in China and India, thus constraining supply in the United States (and thereby slighting increasing solar panel prices for the first time).

2. On Friday, the US International Trade Agency (ITC) ruled in favor of two US-based, now insolvent solar panel manufacturers, Suniva and Solar World, agreeing their businesses were harmed due to the supply of lower cost, internationally-manufactured solar panels. The companies are seeking a 40-cent per watt tariff and a floor price of 78 cents per watt on imported solar modules. (In today’s market, such taxes would increase the cost of solar panels by 50-65%, with no viable US-made alternative.) President Trump is expected to issue a final ruling by year’s end. In the interim, large-scale solar project developers are hoarding supply of solar panels, thus increasing the cost (demand > supply) of solar modules for the entire industry.

3. Daily, there are rumblings that a Republican-inspired tax or budget bill will axe the clean energy tax credit, thus dis-incentivizing those who want to transition to clean energy. (Fact: The oil and gas industry receives more than 10X the tax credits/incentives as the clean energy industry. Another fact: Facts don’t matter.)

What to do? We cannot control the macro economy, the president’s actions, or congressional politicking. Instead, we are controlling what we can by securing as many high-quality solar panels as possible, in wake of what’s going on. Prices may increase, tax credits may perish, but solar in PG&E territory will continue to generate attractive, risk-adjusted investment returns. Property owners will continue to transition away from carbon while insulating themselves against future electricity rate increases, most likely with a greater urgency now.

Dylan, circa 1963:

The line it is drawn

The curse it is cast

The slow one now

Will later be fast

As the present now

Will later be past

The order is rapidly fadin’

And the first one now will later be last

For the times they are a-changin’

PG&E just raised its rates (again!); what’s going on and what can I do?

Effective March 1, PG&E condensed the tiers of its E-1 residential rate schedule (the tariff most homeowners employ). And, again, electricity rates went up, this time by ~8%. What’s the story and what can I do, if anything?

First, a little background. Every few years, PG&E submits a three-year budget to the California Public Utilities Corp (CPUC), aka, their “rate case”. Therein, they propose myriad rate schedules for commercial, agricultural, residential and other customer groups. The CPUC eventually approves PG&E’s budget, but that’s not the end; over the ensuing three-year period, rate schedules are modified (read: rates are increased) to reflect contemporary PG&E expenses. Over the past two years, PG&E’s residential rates have increased ~43%. Ouch.

Like it or not, inflationary pressures on PG&E’s rates are somewhat just:

• Replacement of aged infrastructure (e.g., natural gas lines; updated the grid);
• Retirement of idled assets (e.g., “peaker” power plants; Diablo Canyon);
• Reduction in generation of inexpensive hydro electricity (due to the drought);
• AB 32 and the Renewable Portfolio Standard (RPS); and,
• Long-term power purchase contracts.

And, living here, we have no choice but to love the one we’re with, at least until Valley Clean Energy Alliance (VCEA) launches. (Side note: PG&E has commenced its fear-and-smear campaign regarding VCEA and community choice energy … it’s gonna get ugly.)

Homeowners have four rate schedules to choose from:

• E1 (the most common rate): Electricity is priced based on tiers (monthly usage).
• EV: Time-of-use pricing for electric vehicle owners.
• E-TOU (A): Time-of-use pricing, with “peak” periods from 3:00-8:00 p.m., Monday through Friday.
• E-TOU (B): Also time-of-use, with peak pricing from 4:00-9:00 p.m.

So, what’s a homeowner to do? Here are a few simple ways to reduce your utility costs:

1. Go to PG&E’s website, log in to your (or create an) account and select “Compare Rate Plans” in the right column. Based on the time and volume of your electricity use, PG&E — such kind souls! — will quantify your costs under the above scenarios and suggest the least expensive rate schedule. More than likely, one of the time-of-use plans will reduce your bill.

2. Change your behavior. No, not your comfort (or the way you live), but your electricity use. Simple things like doing laundry in the morning, on weekends, or after 9:00 p.m. will lower your costs. So too, if you have a pool, will changing the time your pump runs; start it at 11:00 p.m. And, in the summer cool your home in the morning and early afternoon, then turn off your AC at 3:00.

3. Replace incandescent and CFL bulbs with LEDs. This is not even low hanging fruit in the energy savings world; it’s fruit laying on the ground. 

4. If you have a swimming pool, install a variable speed pool pump. Thereby you can reduce the electricity consumed by your pool by ~70%. Davis Home Trends, Leslies and several other stores can lend a hand.

5. If you haven’t done so already, go solar and insulate yourself from future PG&E rate increases. (No duh, eh?)

And, of course, feel free to contact us or stop by. As Jackson Browne once mused, we may not have the answer, but we believe we’ve got a plan.