The Economics of Residential Solar and Battery Storage: Analyzing the Impact of the Joint IOU Proposal for Net Metering 3.0 in California

Abstract

The California Public Utilities Commission (CPUC) is currently deciding on the structure of the next net metering program, which will determine how customers who install solar panels (and battery storage) under this new program will be compensated for excess energy that they export to the grid, and the additional fees that these solar customers will have to pay. The major investor-owned utility (IOU) companies in the state and some legislators have argued that the current net metering programs are far too generous to the customers and that they create an inequity by favoring the wealthy and causing a cost shift to the poorer non-solar customers. The IOUs have jointly proposed a set of regulations to the CPUC. In this paper, we examine the financial implications to residential customers who go solar under the new net metering program if the joint IOU proposal were to be adopted. We examine the case of a hypothetical southern California home that consumes the average amount of electricity (for that region) and estimate its electricity bills for various load profiles, assuming no solar or battery storage, with solar alone, and with solar and battery storage. For the two latter scenarios, we determine the ideal system configuration that will maximize the customer’s financial returns. In all cases, we determine that the joint IOU proposal for net metering will make residential solar panel and battery storage installations financially unattractive even in the best-case scenarios. In short, if the CPUC adopts the joint IOU proposal then residential solar installations in the state would likely come to an abrupt stop. We also analyze the economics of going off-grid (where a customer completely cuts himself off from the electrical grid) and find that it does not make sense for customers to go off-grid without being willing to cut consumption or make other compromises.