From pv magazine USA
California’s net-energy metering (NEM) policy has been a key driver of the state’s solar deployment, incentivizing adoption by allowing utility customers to sell excess power generated from rooftop solar back to the grid for a profit. With approximately 1.5 million homes and businesses participating, policies like this have made California a clean energy leader in the United States, and even the world. However, the California Public Utilities Commission recently changed the solar-friendly policy.
The approved new framework (known as NEM 3.0) is expected to slash the rate paid for solar energy sold back to the grid by 75%. This revision significantly lengthens the five- to seven-year average payoff period for installing solar and puts the growth of solar power at risk. Californians must embrace an additional clean energy technology in order to shorten payoff periods and continue the momentum behind solar: batteries.
Under the new NEM 3.0 rate structure, the value of excess solar generated during the day is diminished. But, there is a strategically designed loophole – homeowners and businesses can maintain the value of solar power generated by incorporating a battery into their system. The battery can store excess energy for later use, including hours of the day when energy demand and prices are at their highest.
This new structure will benefit the California power grid by reducing dependence on fossil fuels during peak demand periods. As a state that commonly experiences electricity supply shortages and rolling blackouts, California has the opportunity to mitigate these issues by leveraging batteries and renewables as distributed energy resources. Further, battery systems will enable California businesses to accelerate their paths to decarbonization, which regulation will mandate in the coming years.
As demand for solar-plus-storage grows, lithium-ion battery manufacturers are racing to keep pace. However, despite the urgent need for storage as electricity prices skyrocket and grid reliability nosedives, many home and business owners remain hesitant. Lithium-ion batteries have their own risks, including rising costs and fire hazards.
In 2022, the average lithium-ion battery pack price reversed its downward trend and rose 7% to $151/kWh. As of 2021, first costs (including cost of all hardware and cost of full installation) for a 10 kWh to 14 kWh residential battery system were in the range of $10,000 to $15,000 before state-specific incentives, which is cost prohibitive for the average homeowner. Lithium is also an inherently flammable material that can make batteries a liability rather than an asset.
Lithium battery fires burn hot and fast, and are difficult and dangerous to extinguish. Burning batteries also release a range of toxic gasses harmful to humans and the environment. While it’s true California needs battery storage, it will require innovation beyond lithium for mass adoption to meet the scale needed.
The next wave of clean technology adoption must take advantage of batteries that are inherently safe and affordable. Non-lithium energy storage alternatives exist, and many more are currently being developed. These new battery technologies can help California ensure that NEM 3.0 has no adverse effects on the clean energy transition, and instead kick it into high gear.
Once deployed at scale, these new battery chemistries will serve as invaluable assets to help shape the clean and resilient power grid of the future. Much like solar panels once were under previous NEM policy, batteries will respond to and be rewarded for giving energy back to the grid when it’s most needed.
Mukesh Chatter is the president, CEO and co-founder of Alsym Energy, a company that develops high-performance, low-cost batteries. He is a successful serial entrepreneur with a track record of developing advanced technology products and leading startups from launch to success. Chatter co-founded Nexabit Networks, a terabit switch/router company, and led the company as CEO until its acquisition by Lucent Technologies. After the acquisition, he served as the vice president and general manager of IP Products at Lucent. Chatter also co-managed NeoNet Capital LLC, an investment firm focused on funding out-of-the-box, innovative ideas.
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Interesting, a couple of days ago I was just thinking about the subsidies in Germany (EEG) which costs way above 20 billion € a year and people are complaining about this as the high costs of the transition to clean energy. And my thought were that these will be obsolete in the near future with lowering battery costs since 1) people can use much more of their own generated electricity and 2) they can make more money by particiapting at the energy market directly by selling the power when the price is high. And now, I just learned about NEM and that they are actually following this path already. I’m looking forward to see how this will develop.
To summarize, right now the costs are only high, because people are feeding electricity into the grid when there is already plenty available, and the guaranteed payments (EEG in Germany) pay the offset. With batteries that’s not needed anymore.
There is also the possibility for people to change their usage patterns such as using their solar electricity to run their air conditioning in the afternoon and cooling to a lower temp so that they don’t need to run their air conditioning in the evening when they’re not producing electricity. Likewise, can use electricity to heat a hot water tank to 150 degrees and use a mixing valve to provide correct temp hot water overnight. With remaining minor uses then won’t be using much electricity overnight.
The experts that continue to push the idea that all is not lost with NEM3.0 and that PV+ESS is the solution are very mistaken.
If you look closely at the CPUC Proposed Decision, export rates are terrible. The ACC Plus Adder glides down by 20% annually and is gone in 5 years. The value of ESS is based upon the increased export rates cited in Appendix A – which is just that, an example. The IOUs have not posted their new NEM3.0 rates. All we know is that they’re for example, based on TOU-D PRIME for SCE customers. So the increased export rates (still well below import rates) may only be in effect at times of peak demand (i.e. Sept period). There are no proposals for significantly higher export rates (much higher than import) to encourage ESS homeowners to support the grid at times of peak stress.
Consequently, given the IOUs opposition to PV (disguised as cost shift to the poor), it is far better for residential homeowners to install PV+ESS for self consumption. The PV inverter will not be export capable (e.g. off grid style inverter) and thus no Interconnection Agreement (and PTO) are required (perhaps only a phone call akin to the installation of a generator with transfer switch) and the ratepayer remains on the standard TOU rate. PV+ESS will offset entirely only the peak/part-peak energy usage (e.g. 3pm-12am). As there is no export, the ESS is allowed to charge from the grid, providing value even on cloudy days. Such a system will be much smaller and ROI payback will be much faster. In summary, the IOU does no favors for the ratepayer and neither shall the ratepayer do any favors for the IOU. That also ends all cost shifting talk and no future solar tax or NBCs can be imposed.
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