California is the top state for solar installations, with nearly 20% of its electricity already supplied by solar and an ambitious new law mandating 100% carbon-free energy by 2045. For California businesses, this means that renewable energy will continue to be a long-term business consideration for companies of all size.
Many of these programs are limited, so we’ve created a new California Policy Guide (organized by urgency level) to help corporate energy buyers make informed decisions about their company’s energy portfolio. Download the policy guide here.
1. Net Energy Metering
Net energy metering (NEM) is a billing arrangement that allows businesses with solar installations to receive utility bill credit equivalent to their retail rate for any solar energy they feed into the grid in excess of what they consume onsite. Companies that are served by a Community Choice Aggregator (CCA) may be eligible to receive NEM compensation for solar generation at rates that are above retail.
Net metering essentially allows the utility meter to “spin backwards,” banking the excess energy generated each day and enabling the solar customer to sell the excess energy back to the utility at their retail rate. Over the course of a year, NEM ensures that solar customers only pay for the net amount of electricity pulled from the grid, beyond the amount of electricity generated by their solar system.
While the NEM program is uncapped, the California Public Utilities Commission (CPUC) plans to revisit and revise the NEM tariff in the next few years, so now is the time to consider a solar investment. Regardless of any changes to NEM that the CPUC adopts in the future, energy users that install solar now will have their current arrangement protected for 20 years.
2. Investment Tax Credit
Companies with tax liability should consider the Investment Tax Credit (ITC) to help finance solar and energy storage. The ITC allows businesses to deduct a portion of the cost of a commercial solar system from their federal income taxes. Additionally, energy storage projects that are charged by at least 75% solar energy are ITC-eligible.
There is no cap on its value, but the ITC rate is set to decline next year.
Currently, the ITC is set at 30% of system cost for solar projects that have commenced construction by the end of 2019. In order to receive the 30% credit, construction must begin in 2019 and/or 5% of the project costs must be incurred during 2019.
The ITC will decline to 26% for projects that commence construction in 2020, to 22% in 2021, and to 10% thereafter.
3. SELF-GENERATION INCENTIVE PROGRAM
The Self-Generation Incentive Program (SGIP) provides incentives for energy storage (a term of art for large batteries connected to software). Energy storage helps commercial energy users save money on their utility bills. First, it reduces costly demand charges by discharging energy behind the energy user’s meter as electricity use begins to spike. Second, it helps align solar customers’ energy use with the new time-of-use rates, which shift the peak periods, when electricity is costliest, to later in the day when solar production is low. With a battery-paired solar system, a commercial energy user can generate electricity in the middle of the day, store it until the late afternoon peak period, and draw from it then when drawing on the grid is most expensive. SGIP offers a lucrative incentive that declines in value as funds are awarded, so don’t wait to talk with Borrego’s Energy Storage Division about installing a battery onsite.
The CPUC’s Self-Generation Incentive Program (SGIP) provides incentives to businesses that install qualifying equipment for storing energy on the customer’s side of the meter. In addition to enabling commercial energy users to save money, SGIP helps California meet its ambitious environmental goals and transforms the market for energy storage technology. It also enables commercial energy users to save money, provides grid services, helps California meet its ambitious environmental goals, and transforms the market for developing more energy storage technology. SGIP is a declining incentive program, meaning that as funds are awarded, the value of the incentive decreases.
The incentive is set up in stages with each subsequent stage offering a smaller incentive. As one stage becomes subscribed, the program moves into the next stage, so there’s urgency in applying for the incentive sooner rather than later to get the most value. It is first come-first-served, so there is reason to evaluate an energy storage project today. See the current incentive levels for PG&E, SDG&E and SCE here.
4. SOLAR- AND STORAGE-FRIENDLY TARIFFS
California utilities have additional rate tariffs that benefit solar and energy storage customers. Option R, for example, features lower demand charges and higher charges for energy usage. Though a higher energy cost (dollar per kilowatt-hour) might not sound appealing, this rate actually works in a solar customer’s favor because it reduces demand charges which are typically a significant portion of their electrical bill. And the credits earned by exporting solar energy to the grid can be used to offset energy charges, but not demand charges. Option R lowers costly demand charges and provides more opportunity for customers to offset electricity usage via solar credits. For customers served by SCE, this rate is known as Option E.
Commercial energy users in PG&E territory will soon have a limited opportunity to take service on Option S, a storage-friendly pilot rate. Option S is modeled after Option R but features a daily peak demand charge instead of a monthly one. By assessing peak demand on a daily basis, Option S creates a better value proposition for energy storage, as the battery can generate savings from peak reduction every single day, versus once a month. Since Option S is a capped pilot, customers interested in this program should speak with a qualified energy storage project developer soon to see if this program is right for their company.
5. NET ENERGY METER AGGREGATION
Meter Aggregation, also known as NEM-A, is a great tool for California farms with contiguous parcels of land and for corporate campuses with multiple facilities. NEM-A allows commercial energy users to install solar on one property and use the NEM credits it generates to offset electricity usage on contiguous properties. NEM-A offers economies of scale, allowing companies to build larger systems that can offset the electricity use of multiple meters.