California’s commercial energy users have many options to reduce their utility bills by installing solar and energy storage. Here, in broad strokes, are five key California private sector solar programs to be aware of as you make informed decisions about your energy future. Many of these programs are limited, so don’t wait to consult Borrego’s project development team about your needs.
1. Net Energy Metering
Net energy metering (NEM) is a billing arrangement that allows solar customers 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. It essentially allows the utility meter to “spin backwards,” so that over the course of a year, solar customers pay only for the net amount of electricity pulled from the grid beyond the amount of electricity generated by their solar system. If you are served by a Community Choice Aggregator (CCA), you may be eligible to receive NEM compensation for solar generation at rates that are above retail.
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
The Investment Tax Credit (ITC) allows a company to deduct 30% of the cost of a solar system from its federal income taxes; there is no cap on its value. The 30% ITC applies to systems that have commenced construction by the end of 2019. It steps down to 26% in 2020, 22% in 2021, and 10% thereafter. The IRS has thus far held that energy storage that is charged at least 75% by solar is ITC-eligible as well. A company with tax liability should not wait to take advantage of this lucrative benefit before its 2020 step-down to help finance solar and energy storage.
3. SGIP Energy Storage Incentives
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.
4. Solar- and Storage-Friendly Rates
Option R is a rate tariff that features lower demand charges and higher charges for energy usage. Though a higher energy cost (dollar per kilowatt-hour) sounds like a bad thing, it actually works in a solar customer’s favor because the credits earned by exporting solar energy to the grid can be used to offset energy charges, but not demand charges. Option R creates less opportunity for a commercial energy users to incur costly demand charges and more opportunity for it to offset electricity usage via solar credits.
While energy users served by PG&E and SDG&E have unlimited access to Option R, regulators have imposed a 400 MW cap on Option R in SCE’s service territory. The solar industry has been advocating for the CPUC to lift the cap, which has very little capacity left. We anticipate a resolution of this matter in the first half of 2018.
5. Meter Aggregation
Meter Aggregation (NEM-A) is a great tool for farms with contiguous parcels of land and 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. It offers economies of scale, allowing you to build a larger system whose generation can offset the electricity use of multiple meters.
Lastly, an exciting legislative initiative led by Senator Scott Wiener could create new solar opportunities for commercial energy users that face barriers to solar adoption, either because they lease their space, have insufficient space on-site to meet their electricity demand, or have unsuitable rooftops. SB 1399 would enable commercial energy users to partner with previously developed sites — such as warehouses, parking lots, or brownfields — and redevelop those sites with clean, local renewable energy. The program would enable commercial energy users to receive utility bill credit for the offsite solar generation. We are excited about this important policy initiative and hope to see it become law this year.