Capstone believes the California Public Utilities Commission’s (CPUC) upcoming revision to the state’s net energy metering policy (NEM 3.0) will be a net negative to rooftop solar developers such as Sunrun Inc. (RUN), Sunnova Energy International Inc. (NOVA), and Tesla Inc. (TSLA). However, we see several other positive factors helping offset negative impacts to the rooftop solar industry from the California net metering policy changes – 1) the solar and storage mandate from the California Energy Commission (CEC) and 2) federal incentives, including an extension of the 30% solar Investment Tax Credit (ITC) for both storage and residential solar from the Build Back Better Act as passed by the House. We expect the new policy to be finalized in early 2022, with a proposed decision in early December.
Net energy metering has come under recent scrutiny in California. Its rapid growth poses challenges to utilities and non-adopters while primarily benefiting wealthier early adopters, raising concerns about a “cost shift” that has resulted in lower-income ratepayers bearing a proportionately larger share of the responsibility for the grid’s upkeep. California is the nation’s largest rooftop solar market, and states that want to update their net metering policies will likely use California’s model as their starting point. Thirty-nine states, plus Puerto Rico and the District of Columbia, have net metering policies, and seven states have other distributed generation (DG) policies.
States with Net Metering or other Distributed Generation Policy