Inside SMUD’s decision to gut rooftop solar

SMUD significantly cut the credit solar users receive for sharing their extra energy with the community. It will affect new solar users starting March 1, 2022 and current solar users within one to ten years. It will make solar prohibitively expensive for working and middle class people in the Sacramento area. And it violates a longstanding principle to ensure a solar user’s investment for the lifetime of the solar system – twenty years.

Background on net metering

Net metering lets solar users share their extra solar energy with the community for a bill credit. SMUD currently credits solar users at the retail rate. This means SMUD buys that extra solar energy for the same price it sells it to the community. This makes sense, since SMUD didn’t have to pay to make that energy, and pays very little to transport it.

The retail rate varies depending on the month and time of day:

Summer (June 1 – September 30)

    • Midnight to noon: 12.77 cents per kilowatt hour (kWh)
    • Noon to 5pm: 17.65 cents per kWh
    • 5pm to 8pm: 31.05 cents per kWh
    • 8pm to midnight: 17.65 cents per kWh

Non-summer

    • Midnight to 5pm: 10.82 cent per kWh
    • 5pm to 8pm: 14.94 cents per kWh
    • 8pm to midnight: 10.82 cent per kWh

What SMUD decided

SMUD will slash the credit for solar users’ extra energy to a flat 7.4 cents per kWh, effective March 1, 2022.

How SMUD’s proposal would impact residents who already have solar panels

You will be forced onto this new rate if you add a battery or additional panels that increase your solar generation by more than 1kW or 10 percent (whichever is greater). If you sell your home, the new owner will be forced onto SMUD’s reduced credit. This will likely reduce the sales value of your home.

If you do none of these, you will be forced onto the lower net metering credit in January 2031. SMUD’s proposal violates a longstanding California principle of guaranteeing that solar users receive the same net metering credit for the lifetime of their solar system – twenty years. Solar users make a significant investment that has important community and societal benefits. They are owed the courtesy of a predictable return on investment. SMUD’s proposal ruins that predictability.

How this will impact residents considering going solar

For those planning to pay for their solar panels with cash, it will take approximately 14 years for the investment to pencil out, according to the association that represents solar companies, CALSSA. For those who plan to finance their solar system, the reduced energy bill savings will be lower than a new loan payment.

In both cases, solar will be uneconomical for the average working and middle class family.

How SMUD justifies their decision

SMUD points to a flawed 2020 study that concluded that the value of rooftop solar is much smaller than the existing credit. See this article outlining the three main problems with the study.

SMUD’s study is also contradicted by mounting evidence showing that rooftop solar reduces the cost of the electricity grid, can cut Californians’ energy bills by $120 billion over the next thirty years, and reduces global warming pollution by an additional 4 million metric tons.

It’s not surprising that SMUD’s study was so off-base. It was conducted by E3, a consulting firm that is routinely paid by utilities across the nation. List of E3’s clients.

What about solar-powered batteries?

SMUD staff also defend their decision by saying they will provide a new incentive to get a solar-powered battery. But the proposed battery incentive is laughably small — an average of $842 which is nowhere close to making up for a gutted solar credit.

To be clear, solar batteries are great. They power homes with clean energy when the sun or grid goes down. They can supply your home with power between 5:00 and 8:00 p.m. when electricity rates are the highest.

But the cost of batteries is very high right now. The subsidies offered by SMUD are insufficient to offset the high costs. In the first year of the program, and then declining annually, the subsidies would be $500 with no strings attached or $2,500+ if you’re willing to let SMUD control 75 percent of your battery.

Wait, there’s more

In addition to blowing a hole in the foundation of rooftop solar, SMUD is leaving a number of rooftop solar obstacles in place, and adding one more to the pile.

Shortchanging solar for renters and small businesses

In addition to slashing the net metering credit, SMUD is keeping in place several obstacles that prevent working class people, renters and businesses from getting the benefits of solar panels.

One example is “virtual net energy metering” (VNEM). VNEM allows multi-tenant buildings (e.g., apartments, shopping centers) to go solar. Under VNEM, a single rooftop solar energy system on the property generates energy. Savings from the energy production are virtually credited to the tenants’ bills.

SMUD allows multifamily properties that are designated as low-income to use VNEM, but does not allow other multifamily properties (many of which have tenants who are low income) and multi-tenant commercial properties from using VNEM (Even PG&E allows this).

Arbitrary limits on the number of solar panels you can install remain

SMUD limits the size of a home’s solar system based on the electricity consumption of the home. SMUD prohibits customers from installing larger solar energy systems to meet the home’s future electricity needs.

This makes no sense. Many customers who install solar are often also planning to increase their electricity consumption, usually by purchasing an electric vehicle, switching from gas appliances to electric, or starting a family. Those customers usually do not have the funds on hand to go solar and buy an EV simultaneously.

$500 to $1,000 just to connect your solar to the grid

SMUD is also adding  a high one-time fees on properties going solar: $475 for small (<10kW) solar systems on homes, $900 for large (>10kW) solar systems on homes, and $2,500-$5,000 for solar systems for businesses and non-profits.

SMUD claims that the fees are to cover the costs of connecting the solar system to the grid. But even PG&E’s connection fee is just $145. Something seems fishy about that.

Hubris at work

Hubris may also be part of the problem as well. Prior to the SMUD Board’s final decision, a small group of SMUD staff met with several local, family-owned solar companies prior to making . The companies showed how SMUD’s proposal would likely cause mass layoffs. SMUD staff’s response was to suggest these companies get into a different line of business.

What’s next?

For now, the deed is done in Sacramento. Our job now is to save California solar for the rest of the state. PG&E and the other private utilities are lobbying state energy regulators at the CPUC to go even further than SMUD, slapping solar users with new monthly fees, while making deep cuts to the solar surplus energy credit. Learn more and take action

How to contact SMUD officials

  • Paul Lau, General Manager: Paul.Lau@smud.org
  • Brandon Rose, Ward 1: brandondrose@hotmail.com
  • Nancy Bui-Thompson, Ward 2: Nancy.Bui-Thompson@smud.org
  • Gregg Fishman, Ward 3: gbfishman@gmail.com
  • Rosanna Herber, Ward 4: Rosanna.Herber@smud.org
  • Rob Kerth, Ward 5: rob@kerth.us
  • Dave Tamayo, Ward 6: davetamayo2@gmail.com
  • Heidi Sanborn, Ward 7: Heidi.Sanborn@smud.org