According to new analysis from Wood Mackenzie (WoodMac) released on January 25, 2022, the California Public Utilities Commission’s (CPUC) proposed net energy metering (NEM) tariffs could cut the state’s residential solar market in half by 2024.[1] The current NEM was adopted in 2016 and gives customers a credit at the retail rate for energy that they provide to the grid. A recent analysis by the commission suggested that the framework has a negative effect on non-participating customers, is not cost-effective, and harms low-income ratepayers. Subsequently, the CPUC released a proposal in December 2021 that would revise the current NEM framework and replace it with a net billing tariff based on the avoided cost values of behind-the-meter resources.[2]

Although the final changes to the NEM framework are in flux, WoodMac research analyst Bryan White said that the current proposal would more than double the payback period of solar projects, increasing from five to six years under current net metering to 14-15 years, depending on the utility. Woodmac assumes that the proposed decision, if approved, will begin impacting installation in July or August of this year. If that is the case, installers will likely spend the first six months of 2022 selling systems and submitting interconnection applications under the current rates. This could lead to record capacity additions before activity drops in the second half of the year.

[1] https://www.woodmac.com/press-releases/nem-3.0-pd-will-cut-california-solar-market-in-half-by-2024/

[2] https://docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M430/K903/430903088.PDF