California PUC Begins Implementation of Statewide Shared Renewables Program

Last week marked a milestone for California’s first statewide shared renewables program, which intends to give renters and others a chance to go solar for the first time. The California Public Utilities Commission (CPUC) approved a decision beginning the implementation of 2013’s SB 43, the state law that requires California’s three big investor-owned utilities – PG&E, SCE, and SDG&E – to develop new shared renewables programs totaling up to 600 megawatts (MW). The goal is to give energy customers the opportunity to subscribe to an off-site renewable energy project and get utility bill credit for their portion of the energy produced. While last week’s decision lays out the initial program design, the Commissioners called the effort a work in progress and said they want to adjust the structure as needed to ensure program success.

This has been an unusually complex task for the CPUC, with the three utilities all proposing different program structures and a legislative requirement that all related costs and benefits be allocated to participating customers only. We see a number of positive elements to celebrate in the CPUC’s decision last week, but also some problems that we are worried may seriously hamper the success of these new programs.

One of the pluses is additionality. All the new clean energy generation spurred by the programs will be in addition to the state’s existing programs, including programs like net metering that help customers generate clean power on their own property, and the state’s renewables portfolio standard. The utilities will sign long-term contracts with developers for generation from new solar arrays and other clean energy sources of 500 kW to 20 MW in size, and they must sign contracts for at least 110 MW collectively (50 MW for PG&E, 50 MW for SCE, and 10.5 MW for SDG&E) in 2015. New clean energy generation in California means more jobs, in addition to the public health and environmental benefits that accrue to everyone.

A second key plus is the focus on customer choice. Each utility must provide customers with access to a variety of choices under two program offerings. The Green Tariff program element will allow customers to purchase energy from a pool of renewable projects selected by the utilities. The Enhanced Community Renewables (ECR) program element will allow clean energy developers to market their projects directly to customers, who can choose to subscribe to a project with the characteristics they like — say, a solar array that a family can view on their morning drive to the local elementary school — while still remaining a customer of the utility. As we’ve argued throughout the proceeding, more customer choice means more participation, so we’re very glad the Commission required all three utilities to offer an ECR element.

The biggest downside of the CPUC decision, however, is unfair and unaffordable pricing. SB 43 listed various categories of credits and charges that need to be included in subscribers’ bills. The CPUC had to decide what value gets assigned to each category, and to determine whether the credits and changes will be mostly fixed and predictable, or whether would they change year to year. Unfortunately, the CPUC accepted the utilities’ flawed pricing proposal, which doesn’t convey to subscribers the full, long-term value of the shared renewable generation on their bills, and also allows the bill credits and charges to fluctuate significantly year to year for a given subscriber. The utilities themselves have estimated that under the approved pricing method, residential customers would pay 15% – 35% more to participate, at least in the near-term.

Now some staunch solar supporters may be willing to pay up to a third more to go 100% renewable, but these programs are supposed to significantly expand customer access to clean energy, and that kind of additional cost simply won’t be affordable for many apartment dwellers, low-income customers, and others. Since smaller-scale wholesale solar is not yet quite as cheap as fossil-fueled power, a small premium to participate may be warranted in the program’s early years, but the Commission’s approved pricing scheme adds unfair costs and means customers won’t be able to predict how much they might save by participating in the program over the long-term.

While last week’s decision was a key step, the new programs are not ready to launch yet. The three utilities must file advice letters at the CPUC in May, laying out many of the program details, which will need to be approved before the programs begin. Further, the Commission has explicitly left the door open to program improvements; this month, a new phase of the proceeding will launch where changes will be considered as the programs get up and running. Shared renewables offers so much promise as a way of expanding the benefits of renewables to more Californians, and that’s a vital element for an equitable clean energy future. Solar energy developers who want to offer projects via the new programs must be fully engaged in the ongoing Commission process if they want a workable new way to offer customers more solar. And the Commission must listen carefully and make changes as needed to ensure that California’s shared renewables programs can successfully deliver on their enormous potential.