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.

PG&E burns, solar rises

It goes without saying — but, here we say it — that last week was a really bad week for PG&E. Surprising? No, it was a runaway train wreck apt to happen, particularly as PG&E’s liabilities for the San Bruno gas line explosions and wildfires over the past two years amplified. A few months ago — pre-PGE bankruptcy — California PUC Chairman Michael Picker opined, “PG&E is too big to succeed.”

What’s next for PG&E? Myriad opinions have been tendered over the past week. While there’s no consensus, one thing is clear: PG&E’s rates are going to increase; we, the ratepayers, will bear part of the burden.

There’s also consensus that those of us who have solar (300,000+ net-metering customers in PG&E territory) are safe. PG&E cannot arbitrarily change current net-metering rules, as established by the PUC. Furthermore, solar/distributed generation is part of the solution, not an element of the problem. When property owners generate electricity via solar panels, energy use is centralized and the burden on the grid is mitigated. Solar is safe and secure.

Over the past week, we’ve chatted with a dozen or so prospective solar homeowners. Why solar, why now? we ask. Almost verbatim responses: Now that PG&E is going into bankruptcy and rates are destined to rise, the time seems right. (Secondarily, several homeowners have shared they view solar as a sage investment vis-a-vis volatile financial markets; solar generates a ~15% annual yield.)

While PG&E’s future is unknown, solar provides certainty for homeowners. Today, PG&E’s baseline (“Tier 1”) electricity rate is 22 cents per kWh. For Repower homeowners, the amortized cost to generate solar electricity is ~8 cents per kWh. With PG&E, you are at risk of (and have no control over) future rate increases. When you go solar, you lock in your price of electricity for 25 years.

And, the sun always rises :)

50,000 Model 3s in 90 Days: Tesla is Tipping the World

Tesla reported earnings yesterday. To the surprise of most experts (!), Elon crushed it. In three months, Tesla sold more than 80,000 electric vehicles, including 52,339 Model 3 sedans. And, they made money, registering a $312 million profit and generating more than $800 million in free cash flow. Well done.

We tweeted last month about Tesla’s extraordinary business model and outcomes:

Further amplifying the above, from yesterday’s Wired story:

At the end of the quarter, Tesla actually welcomed existing customers as volunteers to help deliver cars, as that became the new bottleneck. “I’ve never heard of a case where customers volunteered their time to help a company succeed,” said Musk. “That’s amazing. It chokes me up actually.”

Great news for Tesla, but more important, for the future of electric vehicles (and, thereby, our planet) … an American auto manufacturer is making money selling all-electric cars. Amen.

We have had the fortune of helping more than 60 electric vehicle owners (including ~15 Tesla owners) go solar. The economics of solar are good; solar + electric vehicles are outstanding.

A few anecdotes:

• Increasingly, we are installing 240A eV outlets in concert with solar systems, in advent of a future/soon-to-come electric vehicle (and its charger). Very simple, efficient and inexpensive process, particularly when bundled with the solar engineering and permit. (And, you get the 30% tax credit on your additional electrical work.)

• Refresher on the math for increasing your solar system’s size to accommodate eV charging: Simply take the total number of miles/year you anticipate driving (e.g., 12,000), multiply by the percentage of time you will charge at home (e.g., 75%), and divide the number of at-home miles by 4 (e.g., 9,000/4) to calculate the additional electricity load in kWh (in this scenario, 2,250 kWh).

• The amortized cost to generate solar electricity is ~$0.08 per kWh. Hence, your cost to drive electric is about two cents per mile. (Add in the fact that there’s no maintenance and the picture’s even rosier.)

• All electric vehicle owners should switch to PG&E’s “EV” rate schedule … the benefits are amplified if you have solar. (We model multiple PG&E rate schedules for Repower homeowners … in most all cases, switching to “EV” is the best case.)

• We’re working with a number of churches in the community, helping them go solar and install eV chargers … all churches see it as a community benefit, and thus public availability of chargers is going to increase significantly — via churches, local governments, businesses, apartments, hotels, et al — in the near future.

Want to learn more? Feel free to contact us and/or attend a Davis Electric Vehicle Association (DEVA) meeting at our office.

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.

Thinking about going solar? Five key considerations

There’s a lot of sunshine being monetized by our community. In Davis alone, one in four single family residences have solar PV systems (versus approximately 5% in PG&E territory). Such rapid adoption is driven by four factors: PG&E’s ever-escalating electricity rates, a sharp decline in the cost of solar systems, the 30% federal tax credit, and (increasingly) grand concerns about our climate and planet.

The formative stage of the Repower program involved extensive research. We assessed the quality, reliability and pricing of solar equipment; the efficacy of solar installation contractors; the pricing (through a group purchase program) of solar; the most viable financing options; and, the most systematic installation methodology. Since pulling the pieces together and enabling the Repower program, we have had the fortune of helping more homeowners in our community invest in solar than any other solar provider.

If you are pondering going solar, here are five key considerations:

1. How long do you intend to reside in your home? If your horizon is less than five years, think twice; if more than five (and given you have a de facto agreement with PG&E to purchase electricity), dig deep.

2. What is the condition (and remaining life) of your roof? Solar systems have a 25-year production warranty. Though it is possible (and common) to replace a roof with an existing solar system, if your roof’s remaining life is less than 10 years, you should consider replacing all or part (i.e., the portion under the solar panels) of your roof.

3. What are the installation contractor’s qualifications? Thereby, it’s critical to speak with local homeowners who have worked with the contractor. Furthermore, you should seek a 10-year workmanship warranty and ensure the installation contractor is financially solvent. Finally, the contractor’s experience with your type of roof is paramount.

4. Who manufacturers the solar panels and inverter(s)? The assessment herein is twofold: What is the efficacy and reliability of the products, and what is the financial solvency (i.e., strength of balance sheet) of the manufacturer, and thus the validity of their performance warranty. Bloomberg qualifies a dozen or so solar panel manufacturers as “Tier 1” or “investment grade” … make sure you’re purchasing a product from this class.

5. Who will own the system and/or how will you pay for it? Frankly, leasing a solar system — whereby your solar panels are owned by a third-party, tax equity fund — is a raw deal for homeowners. You should own your system. Many homeowners employ a home equity line of credit (HELOC) or credit union financing (Yolo Federal Credit Union) to finance their solar system. (Contact us if you would like to learn more about Property Assessed Clean Energy [PACE] financing … we helped developed the first PACE programs in Sacramento and Yolo counties.)

At the end of the day, you'd like to know the likelihood your solar system will meet or exceed its energy forecast. Most solar companies use the same forecasting tools. It's the assumptions that feed these models that vary. You should feel confident the forecast presented is reasonable and not some pie-in-the-sky result. Hence, ask solar companies the proportion of systems installed that meet or exceed the originally forecast energy generation. (You should also ask the number of systems monitored to ensure it's a meaningful proportion.)

We do not have all the answers — there is no surefire, perfect solar solution — but we do have strong opinions and extensive experience in our community. Nobody wants to get a bad deal or make a short-sighted decision; filtering through the noise of pesky solar solicitations can be migraine-inducing. To wit, feel free to contact us if you need a hand.