The solar lobby won an increase in California’s net metering requirements to 5% beating back objections from utilities. The California Legislature gave final approval on February 18, 2010 to AB510 to increase the current limit from 2.5% to 5% of peak demand. Governor Schwarzenegger is expected to sign it.
Net metering is a key component of California’s strategy to encourage home owners and businesses to install solar panels to supply their own energy needs and sell the excess back to the power grid. But net metering also applies to wind and hybrid combinations of renewable projects under 1 megawatt. Current net metering payments to customers are at the applicable utility’s retail rates for the excess electricity.
California has a policy goal of a million solar roofs and supports that goal with state rebates in addition to the Federal investment tax credits available. Progress toward the solar goal is closely monitored by the California Public Utilities Commission and the California Energy Commission. 
Among the three California investor owned utilities, Pacific Gas & Electric (PCG) is nearest the 2.5% of aggregate customer peak demand cap generating more than 173 MW from solar with 80MW more waiting for approval of rebates. Southern California Edison (EIX) and Sempra’s San Diego Gas & Electric (SRE) together have signed up about 130MW of solar but their pace of development has been growing. All three utilities were expected to reach the 2.5% cap in 2011.
PCG had opposed expansion of net metering arguing it was an additional subsidy of solar customers that would have to be paid unfairly by remaining customers. When it was clear that growth in solar installations was also creating jobs thus winning the argument, PG&E offered a 3.5% compromise last Fall. Smelling gold the solar lobby pressed its case and persistence paid off.
When is a Goal No Longer a Goal? When You Achieve It!
Solar vendors and advocates were howling for an increase in net metering to expand installations. Most feared the three IOU’s would reach the 2.5% cap under the current law and thus not being obligated to pay net metering payments would stall market penetration. PCG is closest to reaching the cap since solar development activities for Northern California outpace Southern California so PCG was on the hot seat.
PCG argued against further subsidies of solar customers at the expense of non-solar customers, it also said that more solar installations could be achieved if SCE and SRE worked harder to reach the existing 2.5% net metering cap BEFORE advocated sought to raise it further.
You can imagine how well that plea fared in Sacramento with the potent combination of environmental groups and solar vendors working together especially when legislators were reminded that once the net metering cap of 2.5% is reached the utilities did not have to make further payments to customers and all solar power delivered to the grid beyond onsite consumption was considered “donated” by the customer, PG&E saw the handwriting on the wall.
How Net Metering Works in California
Net energy metering is one of the selling points for solar systems in California because each of the investor owned utilities has a billing arrangement that credits solar customers for the power they contribute to the grid and thus they pay only for the net electricity supplied by the grid beyond what the solar system produces at the same retail rate at which they are charged by the utility. This allows solar customers to recover a part of their investment in the solar system. Even with net metering payback periods for a typical solar system can be years.
Once the 2.5% net metering cap is reached, solar system owners would no longer receive net energy metering payments. Once their solar production reached their consumption levels the excess solar power produced would be “donated” to the grid. This was the rub that turned into a boil which AB510 lanced to relieve the potential pain of a million solar rooftop owners screaming at the Legislature.