The fight over California community solar: ​‘It’s everyone vs. utilities’

Community solar and storage could help power California toward its goals for clean energy, grid reliability, energy equity and affordable housing — but only if regulators don’t allow the state’s biggest utilities to undermine it.

That’s the argument a sprawling coalition of solar industry groups, consumer advocates, environmental justice organizations, labor unions and the state’s homebuilding industry has been making before the California Public Utilities Commission over the past few months. 

The fight has centered around a new proposed payment structure for community solar called the Net Value Billing Tariff (NVBT), which the coalition says is crucial to revamping California’s moribund community solar market and would make community solar in the state both economical and effective. A structure for community solar payments was ordered up by AB 2316, a state law passed last year.

Now, as the state comes up on a September 26 deadline to apply for its share of $7 billion in federal community solar grants, the coalition is pressing the CPUC to lock in the NVBT program — and not allow it to be derailed by arguments from utilities Pacific Gas & Electric, San Diego Gas & Electric and Southern California Edison. 

“On community solar, it’s everyone versus the utilities,” said Brandon Smithwood, senior director of policy at community solar developer Dimension Renewable Energy.

That’s a rare level of consensus in California’s fractured solar policy landscape, where battles over the value of rooftop solar systems have pitted environmental and consumer advocates against each other. But on this issue, groups that ​“fought for years got together and worked out their differences,” Smithwood said.

The consequences of that coordination could be enormous. If the CPUC approves the NVBT, ​“California can go from practically no community solar to leading the nation in a few years,” said Derek Chernow, Western U.S. regional director for the Coalition for Community Solar Access, a trade group. 

According to analysis from CCSA, the tariff could enable about 8 gigawatts of community solar paired with batteries to be built in the state using existing grid infrastructure, putting it in contention with other leading states for community solar like Colorado, Massachusetts, Minnesota and New York. 

That’s far from the estimated 13 gigawatts of rooftop solar installed in California to date. But it’s a big jump from the less than 600 megawatts of community solar developed in California so far under a panoply of programs. 

Such an expansion would open up the benefits of solar — namely cheaper, cleaner power — to Californians who can’t install solar panels on the roofs of their homes. That includes both lower-income households and the state’s nearly 17 million renters who lack options for using solar power to reduce their utility bills. Community solar allows a large number of customers to subscribe to a share of a project’s energy output and use the revenues from that to earn credits that offset their utility bills. 

What’s different about this community solar (and battery) plan

Several things make the NVBT different from the California community solar programs that have come before, said Aaron Halimi, founder and president of Renewable Properties, a community solar developer headquartered in San Francisco. 

First, it would not come with caps on how much capacity can be built before funding dries up. Instead, it would create an open-ended set of rules for how much money project developers can expect to make over the coming decade. That’s critical for giving developers and their financial backers more confidence that it’s worth their effort to focus on the market for the long haul.

“We pivoted our entire California development pipeline for this upcoming community solar program,” Halimi noted. 

Second, the NVBT would require installation of batteries alongside community solar projects, to help the state balance an increasingly solar-saturated grid. It would do this by tying the compensation for community solar to something called the avoided-cost calculator, or ACC — a complex formula set by the CPUC that rewards projects that can deliver energy when the grid is under the greatest stress. 

In California, those moments of stress have been coming in the late afternoon and evening hours of the summer and early autumn, when solar power is fading but temperatures and air-conditioning electricity demand remain high. 

To help the grid weather these peaks, community solar projects will need batteries to make money under the NVBT. In fact, Smithwood said, ​“I’ve joked we should call it community storage plus solar,” flipping the emphasis from solar to batteries. 

This proposed structure fits in with a broader push from the CPUC to encourage the pairing of batteries with solar. The agency has already applied the ACC to how rooftop solar is rewarded, which encourages homeowners to add batteries alongside solar arrays, and it has structured its large-scale energy procurements to emphasize energy storage. 

If adopted, the NVBT could also ensure that the potential money-saving benefits of solar are not put even further out of reach for lower-income households and disadvantaged communities. Changes to rooftop-solar policy that went into effect earlier this year have already weakened the economics of rooftop solar in the state and made it harder to afford. 

AB 2316 requires that low- and moderate-income households make up at least 51 percent of a community solar project’s subscribers. The coalition behind the NVBT has pledged to structure payments to these households to ensure significant reductions to their utility bills. 

“We really need an alternative to allow anyone, regardless of their home status, to subscribe to clean energy that needs to be built in the state, and receive true benefits on their bill,” said Alexis Sutterman, energy equity program manager for the California Environmental Justice Alliance, a coalition of grassroots groups that has joined the push for community solar. 

How community solar can fill gaps in the grid and help housing affordability

A key advantage of community solar-battery projects is their flexibility: Because they’re relatively small, typically about 5 megawatts, they can be built and connected to the grid in many places that utility-scale solar can’t, Sutterman said. That could unlock options for dealing with a number of challenges California faces in achieving its climate and energy targets. 

One big challenge is the backlog of utility-scale projects trying to connect to the state’s transmission grid. Grid operators and utilities across the country can’t interconnect large-scale solar, wind and battery projects at nearly the pace they’re being planned, and California is no exception.

The CPUC has ordered California’s utilities and community energy providers to procure a massive 85 gigawatts of new clean energy capacity by 2035, more than double the generation capacity on its grid today. But already, utilities are reporting trouble meeting the CPUC’s shorter-term targets of getting 11.5 gigawatts of zero-carbon resources onto the grid by 2026.

Community solar-battery projects avoid this problem because they connect directly to the lower-voltage distribution grids that carry power to customers. Because of their smaller size, they can be sited on empty lots, warehouse rooftops and other areas closer to the customers they serve. 

This map from CCSA indicates how much community solar could be sited on open ground or on rooftops across the state (the orange and blue dots), overlaid with the parts of the state designated as disadvantaged communities being targeted for more affordable energy (the dark gray areas). 

This map also pinpoints California’s ​“peaker plants” (yellow dots) — the fossil-gas power stations the state relies on to fire up and generate power when the grid is stressed. Those peaker plants emit greenhouse gases and other pollutants, and are predominantly located in lower-income areas and communities of color that suffer higher-than-average rates of asthma and bronchitis tied to air pollution, Sutterman said. 

CEJA and the Sierra Club have been fighting for decades to close the peaker plants, including many that were due to shut down years ago under state coastal-water regulations. But rising grid-reliability challenges have led regulators to keep these coastal plants open well past planned closure deadlines. That comes at not only a public-health and environmental cost, but a financial cost, too — last month the state agreed to pay about $1.2 billion to the operators of three plants in the Los Angeles basin to keep them open through 2026. 

Community-solar backers hope that new solar-battery systems could potentially replace the need for those plants by storing solar during the day and discharging it during peak hours. Turning this idea into reality would require a number of steps, from actually building the solar-battery systems to assuring utilities, regulators and state grid operator CAISO that they’re reliably providing enough peak power. 

But this map, derived from CCSA data, indicates that the distribution grid in the LA basin would be able to absorb additional power from community solar-battery systems installed on large commercial and industrial rooftops. 

Beyond helping renters in low-income communities gain access to cheaper solar power and potentially reducing the need for polluting peaker plants, community solar could also help address sky-high housing costs in California, Smithwood said. 

State building codes require solar for new homes and low-rise buildings. But the CPUC’s recent changes reducing rooftop solar values — and a pending decision that could undermine the economics of another program for shared-solar systems at apartment buildings — could make it increasingly hard for housing developers to absorb the higher costs of adding solar because the value of that solar is falling. 

The California Energy Commission, which sets state building codes, reached a compromise with homebuilder groups to allow community solar to replace the requirement for new solar on every new home. But if the CPUC doesn’t adopt a community solar tariff that makes it cost-effective to build projects, that won’t be a realistic option. 

That’s why the California Building Industry Association, a trade group that’s not often aligned with solar and environmental advocates, threw its support behind AB 2316 and the NVBT. 

California will need between 250 and 450 megawatts of community solar every year for homebuilders to meet the state’s building-code mandates through community solar projects, Chris Ochoa, CBIA’s senior counsel for codes, regulatory and legislative affairs, wrote in an August opinion piece. But without the CPUC taking action to implement a workable program, ​“there is effectively no way to do community solar in the state,” he wrote. 

The pushback from utilities 

The arguments against NVBT from California’s three big investor-owned utilities range from claims that the program would unfairly burden the majority of utility customers, to theories that the structures for connecting community solar projects to the grid and crediting them for the energy they produce may run afoul of federal law. 

NVBT supporters have roundly decried these utility critiques as misrepresentations of the facts or misreadings of the law. 

Many of the utility arguments stem from their contention that community solar projects shouldn’t be treated the same way as rooftop solar, batteries, electric-vehicle chargers and other distributed energy resources connected to the low-voltage distribution grid. Instead, they say, these projects should be treated more like larger-scale generators that have to follow different rules overseen by the Federal Energy Regulatory Commission. 

But this argument is belied by a long record of the CPUC treating community solar projects as distributed energy resources under state regulatory purview, not as assets under FERC’s jurisdiction, Smithwood noted. 

It also conflicts with how community solar programs have worked in the more than 20 states where they exist, some for more than a decade. These programs have yet to be successfully challenged on the grounds that they should be regulated by FERC, Halimi said. 

Utilities have also argued that community solar-battery projects should not be paid using the avoided-cost calculator. But as Chernow noted, the CPUC ​“has already said in numerous dockets that the ACC is the appropriate way” to calculate the value of distributed energy resources. 

In fact, utilities argued strongly for the ACC as the proper measure of value in last year’s net-metering proceeding and the ongoing shared solar proceeding, Smithwood said. Arguing against its use for community solar is ​“basically saying, ​‘The ACC works for people who own their own home, or a very narrow set of renters — but it doesn’t work for anyone else,’” he said. 

Nor are the alternatives put forth by utilities consistent with AB 2316’s requirement that the CPUC come up with a community solar program that can actually work. Instead, the utilities’ proposals would almost certainly prevent any projects from being cost-effective in the future, The Utility Reform Network, which represents the interests of utility customers, noted in its CPUC comments.

The problem with these utility arguments isn’t just that they’re wrongheaded, critics say. They’ve also led the CPUC to spend months collecting testimony and stakeholder comments to rebut them — and those are months the state can ill afford if it wants to have a compelling proposal to win a share of the $7 billion in federal funds from the ​“Solar for All” program created by last year’s Inflation Reduction Act. 

Being able to get a portion of that money could help make more-challenging community solar projects pencil out financially, Halimi said. One example is warehouse rooftop solar projects that could relieve grid stress and reduce reliance on peaker plants in the LA basin, which are more expensive to build than solar farms on open land. 

Federal funding could also help structure projects in ways that drive even greater bill savings for low-income customers that subscribe to them, said Lauren Kubiak, senior scientist in the Climate & Clean Energy Program at the Natural Resources Defense Council. 

The Solar for All program asks applicants to deliver ​“meaningful benefits” to low-income and disadvantaged communities, including energy bill savings of at least 20 percent for participating households, she said. ​“We’ve been advocating that the bill savings to low-income customers should be higher than the bill savings to general market participants,” Kubiak said — ​“and the bill savings are higher with the Solar for All funding.” 

The U.S. Environmental Protection Agency opened up applications for this program in June, and the deadline to apply is in late September. Having a clear-cut community solar program in place could determine whether a state’s application is competitive against others, Smithwood said. 

“We have over 43 states, plus Washington, D.C., plus Puerto Rico, chasing this $7 billion,” he said. ​“California is going to have to work for it. Now’s the critical time.”