President Biden signing the Inflation Reduction Act into law this week marks what will be the largest investment in clean energy the world has ever seen. Here’s how it affects your federal solar tax credit.
Previously, the incentive was fixed at 26% for 2022 and scheduled to step down to 22% in 2023, disappearing entirely in 2024. Two of the most impactful provisions of the bill is a long-term extension of the solar tax credit AND a boost to 30 percent! The tax credit will be extended 10 years, firmly set at 30% and runs through Dec 31, 2032. It will drop to 26% in 2033, then 22% in 2034 and expires 2035.
What happens if you already installed solar on your home this year expecting to receive a 26 percent? No problem, you’re golden. The new law is retroactive to Jan 1st, 2022. You qualify for the 30%. Great news!
Let me know if you have any questions or consult your tax preparer. Have a bright weekend.
Yesterday, the California Public Utilities Commission (CPUC) announced it will delay a final vote on Net Metering 3.0.
This is promising news for existing solar homes and those considering going solar in the near future. In an email sent by the CPUC’s new president Alice Reynolds, the commissioners have “requested more time to analyze the record and consider revisions to the proposed decision based on party comments”. The email states all 5 commissioners wish to hear more about the pros and cons of NEM 3.0 before making a final decision.
Since announcing disastrous changes to Net Metering in early December, the CPUC has come under public fire for considering a proposal that is unequivocally an all-out attack on rooftop solar backed by the utilities. Clearly, Gavin Newsom and the CPUC are feeling the heat as PG&E solar customers, climate advocates and the entire CA solar industry have called out their BS. Newsom recently conceded “more work needs to be done” with net metering rules and “changes need to be made”.
I’m still flabbergasted by the phony special interest groups that lie and argue in favor of the CPUC’s original proposed decision, but we'll save that drama for later. Today is a good day.
Mike Kleeman, Solar Earth Nugget
California’s legacy as the undisputed world champion of solar is in jeopardy. PG&E and the CPUC are hoping to soon deliver a knockout blow to rooftop solar. On Dec 13 2021, the California Public Utilities Commission (CPUC) issued its long-anticipated proposal for the transition from Net Metering 2.0 to a new solar “Net Billing Tariff” program. The CPUC claims this new program, or NEM 3.0 as we call it, is an ‘improved version of solar net billing’. A final vote by the commission is expected to take place later this month.
UPDATE 1/28/22 - THE CPUC removed the Net Energy Metering proposal from its agenda this week, pushing it back to a possible vote on 2/10 or 2/24. This news is promising!
This It’s my opinion and that of the entire CA solar industry, this proposal in its current form will significantly hamper the growth of rooftop solar moving forward. I'll highlight 3 MAJOR CHANGES that could affect your home and who is to blame.
1. GRID PARTICIPATION CHARGES
Solar homes currently pay around $10 a month for “minimum electric delivery charges” which is a fair convenience fee that’s agreeable to most of us. NEM 3.0 abolishes the fee and replaces it with a more punitive ‘grid participation charge’ of $8.00 per kW. What’s that amount to? Last year the average solar system size my clients invested in was 9 kW, about 25 panels. $8.00/kW equates to a giant monthly Grid Participation Charge of $72.00 moving forward under the new Net Billing Tariff.
2. SHARP REDUCTION TO ENERGY CREDITS
Net Energy Metering (NEM) was first adopted by California in 1996 as way to encourage private investment in renewable energy and has since provided the opportunity for many thousands of homeowners to go solar. Under the existing Net Energy Metering program, NEM 1 and 2.0 customers receive an average of 26-28 cents for every solar kilowatt-hour (kWh) sent back to the grid when panels overproduce. The surplus energy not only feeds the grid with power but helps offset the cost of importing power from PG&E at night when the sun goes down. NEM 3.0 drastically slashes the energy credits by as much as 80%. Solar homes might receive as little as 5-6 cents per kWh.
3. ASSAULT ON EXISTING SOLAR HOMES
Already have solar and thought you were exempt from this onslaught by the utilities? I did, but apparently, we’ve been lied to. Alarmingly, this proposal suggests the CPUC has sole discretion to retroactively alter NEM 1and 2.0 agreements. The 20-year grandfather clause you were promised with PG&E the day you went solar; the CPUC would like to reduce it to 8 years but are willing to settle for 15. Their reasoning suggests Net Metering in its current form unfairly harms those utility customers that don’t have the means or desire to invest in solar. Basically, net metering is inequitable because credits earned from your home’s solar energy forces PG&E to raise its rates on other customers. They know it’s BS and I doubt they actually push this one across the finish line without major litigation, but if the CPUC is unsuccessful with this preposterous ask they do have a sly ‘backup’ plan. That plan would include luring NEM 2.0 customers into unwittingly ripping up their existing agreements and this is how they hope to trick us - Existing NEM 2.0 customers will be presented an option to upgrade their home with backup battery storage (which automatically triggers voluntarily enrollment into NEM 3.0) and by doing so will receive a small cash rebate paid out over 4-8 years. It’s a deft move by the utility to get existing solar customers to opt in to NEM 3.0, but don’t be gaslighted. I’m willing to bet when those minimal rebates are finalized and set it stone, they’ll amount to chump change compared to the years of dollars lost from reduced net metering credits and imposed grid participation charges.
HOW DID THIS HAPPEN AND WHO IS TO BLAME?
Where previous governors Arnold Schwarzenegger and Jerry Brown were champions of rooftop solar, Gavin Newsom has inarguably been the complete opposite. For years the utilities have been trying to curtail the adoption of roof top solar and it appears with Newsom’s assistance, the CPUC may finally grant PG&E’s wish. It doesn’t make sense to gut Net Metering in California and implement what will be the country’s largest tax on solar, but if we take a closer look at Newsom’s relationship with one of his largest campaign donors it’s clear how we got in this mess. Going back to his days as a San Francisco supervisor, PG&E has contributed more than $10 million to his political campaigns. I can’t think of another corporation that has benefited more from having Newsom serve as Governor. PG&E is also a major sponsor and contributor to his wife’s nonprofit and his sister’s organization. Newsom has a long history of bestowing gifts upon PG&E. It was just 3 days after he celebrated his gubernatorial victory in 2018 when PG&E killed 84 people in the tragic Camp Fire. Luckily for PG&E and its impending bankruptcy they had a white knight in Newsom. He subsequently initiates the “California Wildfire Fund”; concocted not by state legislators but instead the governor’s personal consultants and attorney team. The fund is a $21 billion safety net for PG&E to recover costs and settlements that may arise from future wildfires - even if those catastrophes are found to be the fault of the utility! A bailout that shields PG&E entirely and guess who is tapped to pay for this fund? PG&E customers. As continuous favors are inexplicably doled out to PG&E it only reinforces my belief that Newsom is never going to change his tune on rooftop solar. If the utilities want to kill it, he’s going to do everything within his power to aid and abet PG&E.
The question now is to what degree will this Net Billing Tariff impact new and existing solar homes? At this stage nothing has been finalized, so I don’t have all the answers yet, but we’ll know more when the final decision is voted on by the CPUC around January 27.
UPDATE 1/28/22 - THE CPUC has not yet made a decision and a final vote is expected to take place on 2/10 or 2/24. I anticipate NEM 3.0 will be implemented by early summer of this year. It’s all in the hands of five CPUC commissioners who have final say. Unfortunately, those five are NOT publicly elected officials. Take a wild guess at who appoints them. Newsom.
Despite the stunning growth of solar in California there still remains a ton of misconceptions floating around and they’re not just spread by your friends and neighbors. Surprisingly there’s still misinformed and unscrupulous solar advisors that contribute to spreading those same myths. Drives me crazy. Let’s debunk those rumors right here, right now.
1. SOLAR MAKES MORE POWER WHEN IT’S HOT OUTSIDE
Makes sense, right? A blazing summer day with the sun shining brightly. Let’s go back to high school though for a minute. Remember, the law of thermodynamics tells us that the hotter an electrical device gets the lower its power output will be. Once the temperature outside reaches 86 degrees a solar panel’s efficiency actually begins to drop.
2. I WON’T LIVE IN MY HOUSE LONG ENOUGH TO RECOUP MY INVESTMENT
This may be true in some states but definitely not California. A decade ago, many people thought having solar on your home made it less marketable when you go to sell. That’s not the case anymore considering the majority of homes in your neighborhood will likely have solar within the next 5-10 years. Probably not a good idea to be one of the few homes that don’t have solar. Multiple studies by Lawrence Berkeley National Lab and The Appraisal Institute have demonstrated CA solar homes sell at a premium over non-solar homes. Anticipate fetching between 3-5% more for your home when it comes time to sell.
3. SOLAR PANELS REQUIRE MAINTENANCE
Solar panels require almost zero maintenance. The myth here is that over time the panels become so dirty that the grime inhibits the solar panel’s efficiency, thus annual cleanings may be required. True there will be some accumulated dust and grime but most of it washes away after a few rains. Therefore, annual cleanings don’t normally pay for themselves knowing that a solar company will charge $300 or more to wash off your panels. Now if you have a ground mount solar system in a field or live near farmland, that’s a different story.
4. SOLAR MAKES SENSE ON SOUTH-FACING ROOFS ONLY
It is true that panels oriented south will generate the highest annual power yield, but to suggest an east or west facing roof is unacceptable is simply false. Panels facing east or west experience just a 10-14% drop in power output compared to a panel pointed due south. When you consider PG&E’s Time of Use (TOU) rates which are significantly higher during mid to late afternoon hours, panels pointed west actually become quite valuable. In some cases, it may even make sense to place panels on a north facing roof. Although a 38-43% drop in power output seems unreasonable, for some homes it may still pencil out financially.
5. HOA’s RULE SUPREME OVER YOUR SOLAR
The California Solar Rights Act, specifically civil code 714 and 714.1 prevents Homeowners’ Associations from interfering with your solar project. They can’t ban solar for aesthetics or require relocation of your solar panels to a less conspicuous place on you roof. I do though suggest playing nice with them. Submit your HOA’s architectural committee solar application as a courtesy.
6. SOLAR WILL INCREASE YOUR PROPERTY TAXES
Not in California. Governor Jerry Brown in 2014 extended the state’s solar property tax exemption through 2024. It’s widely believed the exemption will be extended an additional 10 years come 2025. Most home projects, like an inground pool will increase the value of your home which then prompts the county to re-assess its value and subsequently jack up your property taxes. Lucky for us, solar home improvements in our beloved Golden State are exempt.
7. TECHNOLOGICAL IMPROVEMENTS MAY RENDER MY SOLAR PANELS OBSOLETE
The first practical solar panel reached an all-time high of 6% module efficiency in 1954. By 2007 when I first entered the solar industry it had reached 14%. A decade later a max of 19% efficiency. The science behind boosting silicon cell efficiencies does in fact have a ceiling so there’s never going to be an explosive breakthrough that say doubles the efficiency of the latest solar panel. When you consider that a solar system is likely to pay for itself in just 6 - 7 years and its useful life is 30+ years it doesn’t make sense to wait for the latest, greatest, most expensive solar panel to hit the market.
8. SOLAR WILL POWER MY HOME IN THE EVENT OF A BLACKOUT
This is true ONLY if you have a backup battery storage system in conjunction with your solar panels. So, if the grid goes down so does your solar. The reason being if during a power outage your solar was to send surplus electricity back to the grid it could fatally shock a worker repairing the lines. A grid-tied solar system includes a secure power supply feature that automatically turns off solar production during a blackout. When the grid goes back up, your solar panels will follow suit turning back on in a few minutes.
9. BATTERY BACKUP STORAGE WILL FULLY POWER MY HOME DURING A BLACKOUT
Unfortunately, this is one myth that’s far too often peddled by shady solar advisors. Adding a battery backup solution will not power 100% of your home during a blackout. Think more along the lines of 50%. Popular battery storage systems from brands like LG and Tesla only store between 9 – 14 kWh of backup power before needing to be recharged. Batteries are also limited by their ability to generate a maximum 5,000 watts of continuous power so during a power outage you’ll be able to keep some of the lights on, feed backup power to your refrigerator and few other appliances but not your entire home.
On January 22nd, President Trump decided to approve the U.S. International Trade Commission’s (ITC) recommendation to impose tariffs on imported solar panels. A new 30% tariff went into effect February 7th and piggybacks the last two tariffs initiated by the Obama administration. The case for imposing more tariffs was launched a few years ago by US solar companies SolarWorld and Suniva which by no coincidence filed for Chapter 11 bankruptcy and insolvency proceedings in 2017. The ITC found that those and other US solar manufacturers have been negatively impacted by solar imports from Asia. Although to a large degree this is true, I also believe US manufacturers need to clean up their own mess. Too many companies for years have been unable to turn a profit from manufacturing solar equipment in the US. Remember the 2011 Solyndra debacle? Striving to make the latest, greatest most efficient solar panel in the world every year comes at a steep price.
Solar panels imported primarily from China and S. Korea will bear the brunt of the new tariffs as those countries account for more than 40% of solar panels that are purchased within the US. The tariffs will start at 30% this year and decrease 5 percentage points per year ultimately terminating in 2022. Utility and commercial scale solar projects will be hit the hardest by the tariff, but I think the residential solar market will feel far less of an impact. Equipment costs on a home project are a lower percentage of the total project cost than say that of a large scale solar farm. However, as a result of the tariff I do anticipate CA residential solar prices to increase an average of $1,100 per home as soon as March 1st.
Of course US based solar manufacturers like Solar World are thrilled. Juergen Stein, CEO of SolarWorld, enthusiastically responded to the tariff, “SolarWorld appreciates the hard work of President Trump and his recognition of the importance of solar manufacturing to America’s economic and national security.”
Economic and national security? That’s funny to me because manufacturing accounts for only 15% of the nearly 300,000 solar jobs in the US. The tariff actually does the rest of us harm. On top of that, Trump has decided to exempt some countries from the tariff. Pakistan for example, which harbors more terrorists than any country in the world, is exempt. How fast did they respond to this news? They’re inviting China-based solar manufacturer Trina to set up shop immediately.
I do suspect as news of this tariff trickles down that more of my clients will be asking, “Does it make sense now to invest in American Made Solar products for my home?” My answer is “No, unless you feel compelled to buy American and you’re fully aware of the risks.” Historically, choosing domestic brand solar panels over imported ones has cost my clients an average of $2,200 more per project. Hey, we’re proud Americans and I applaud those homeowners that spend a little more to buy ‘Made in America’. Too often though, homeowners are completely unaware of the financial stability of those US made manufacturers they decide to invest in. I’ve always recommended to my clients before their purchase to do a little research on solar equipment companies they are considering like Enphase, SolarWorld, SunPower, and Suniva. In addition, review those solar installers that champion US made brands knowing full well that the equipment they are selling may not be around much longer if it’s from a manufacturer in the red. Here's just one example:
What happens when what you thought was a 25 year solar equipment warranty is from a brand you invested in that goes belly up? Your solar installer isn’t on the hook, you are! Too many US manufacturers have been unable to furnish even one single quarterly profit to shareholders and it’s not solely a result of lower priced competing imports from Asia.
I suspect the tariff will enable those companies to make some gains temporarily but by no means do I think this is a game changer. Long term, I fear for these US manufacturers and homeowners that willingly invest in them. A 25 year solar panel warranty is worth zero if it’s written on paper printed by a company that’s no longer in business. I hope the Trump tariff serves as a life preserver for a few of those US solar companies without consequences for the rest of us. I fear though the end result will be a temporary boost in the short term for a few companies but overall we’ll realize slower job growth within the US solar sector. SEIA predicts the new tariff could result in 23,000 less solar jobs in 2018. Luckily, at West Coast Solar we’ve secured a large inventory of solar panels ahead of the tariff and our clients won’t be affected by price increases until hopefully April 2018. I do have another question. Will this tariff spark an even broader trade war with China?
The sun has set on the original net metering program (NEM). The end of 2016 also brought an end to NEM 1.0 and we’re now moving into NEM 2.0 territory. Existing NEM 1.0 homeowners will remain on their original net metering program. Those customers are grandfathered into NEM 1.0 for 20 years from the date of their solar installation. New solar customers will be grandfathered into NEM 2.0 for the next 20 years.
NEM 1.0 was very easy to understand. When your solar is producing more power in kilowatt-hours (kWh) than your home can consume during the day, you deposit those kWh with PG&E. When the sun goes down, you then withdraw as a credit from the grid those excess kWh your solar has produced. Under NEM 1.0 you were able to deposit/withdraw kWh on an even 1:1 basis. That’s now changing a little bit under NEM 2.0. There are 3 major differences to note under the new NEM 2.0 program:
1. Non-bypassable charges (NBC’s)
This is a little tricky to explain, but think of it like this: Pretend PG&E is a bank much like Wells Fargo. Let’s say today your home didn’t consume all the solar power it made, so you banked some extra kWh into your savings account with PG&E. A rainy day comes along which is going to reduce your solar production considerably. Thankfully you have some extra kWh saved so you withdraw them from the bank. Under NEM 1.0, PG&E let you make those withdrawals on a 1:1 basis with no surcharge (or ATM fee as we’d call it). The NBC’s are in essence a tiny fee that PG&E is going to charge for every kWh you withdraw from the ATM. I know what you’re thinking, that’s BS. But there’s not much we can do about it. The fee is set at a rate of 2.3 cents per kWh. So how’s that going to look? My average client produces over 10,000 kWh of solar power a year; roughly 50% of those kWh are deposited onto the grid and banked for future withdrawals. The result is that the NBC’s under NEM 2.0 will add about $115 to my average client’s annual true-up bill.
2. One-time solar interconnection fee
There was no NEM application or interconnection fee associated with NEM 1.0. However, PG&E will now get to charge its solar customers a one-time application fee of $145. The new fee can either be paid directly by the homeowner or by the homeowner’s solar contractor. At West Coast Solar, we will be covering the cost of the interconnection fee for our customers.
3. Mandatory adoption of Time-Of-Use (TOU) rates
No more Tiered rate plans. New solar customers will have to choose from one of three rate plans post solar.
That’s pretty much it. TOU peak periods are set in stone for the next 5 years. If you have an existing system and plan to expand down the road, be careful. Adding more than 10% power to the solar system you have in place now will force your home to graduate from NEM 1.0 to 2.0.
Powering your home with solar involves two significant pieces of equipment: Solar Panels which produce electricity in the form of direct current (DC); and an Inverter which converts the DC electricity made by the solar panels into alternating current (AC) which is the type of electricity needed to power your home.
There's 3 types of inverter options available to homeowners today: A central inverter which was the only type of proven inverter readily available to the residential market before 2011. A solar breakthrough was realized around that time when Enphase microinverters came along and offered so many advantages over traditional central inverters. Then a few years ago, a third option started to make some real noise, and I like to call it a 'hybrid' option as it combines the benefits of both central inverters and microinverters. That option is the SolarEdge power optimizer.
So what's the difference between microinverters and power optimizers?
Enphase microinverters (about the size of an iPad) are mounted under each solar panel on the roof and directly converts the solar panel's DC current into AC current. Power Optimizers are similar to microinverters in that they also are mounted under each panel and perform maximum power point tracking, but they do not convert DC electricity into AC on the roof. The SolarEdge power optimizers go a step further, essentially ‘optimizing’ the voltage and current running through the solar panels to harvest the maximum level of power out of each panel and sends that power to a central inverter which does the hard work of converting the optimized DC current into AC electricity.
Both products are similar and offer significant advantages over using a central string inverter:
So which should you choose for your home? Both are great options and I recommend choosing one or the other over using just a central inverter. But I can specifically think of 3 Reasons you should choose Power Optimizers over Microinverters: Reliability. Higher Energy Production. Lower Cost.
One advantage power optimizers have over microinverters is the issue of HEAT. The DC to AC conversion within a microinverter dissipates heat. We all know the hotter anything gets, the less efficient it becomes. Power optimizers have an advantage over microinverters since the heat generated at the conversion process is done at the central inverter which is usually located inside a garage or outside on a wall near your main electrical panel out of the direct sunlight. The inverter part of your solar is the nuts and bolts component, the ‘moving parts’ of your solar system. Having that moving part of your solar system multiplied for every solar panel on your roof I believe makes your solar system less reliable. Power optimizers need only half the amount of 'moving parts' inside a microinverter. Multiple microinverters tasked with DC to AC conversion year after year and more specifically during summer heat waves I think results in a higher risk of failure. Thankfully both the Enphase and SolarEdge product warranties are quite long at 25 years.
A disadvantage with microinverters is their risk of ‘power clipping’. Enphase’s largest sized residential microinverter is its M250 model which refers to its ability to produce a maximum 250w AC output from each solar panel when connected to the microinverter. Unfortunately this limits your choice of brand, type and size of the solar panel you can effectively pair with an Enphase system. Want a 72 cell solar panel? Sorry, not compatible. Choose a solar panel with an output greater than 250w AC, and you run the risk of clipping the top off your solar panel’s production at 250w AC. On the pairing recommendation of Enphase's website it denotes that the M250 can be paired with solar panels with ratings up 310w DC.
(UPDATE 1/5/2017 Enphase now denotes the M250 can be paried with solar panels rated up to 350w. This in my opinion is highly inadvisable)
Unfortunately, this is a bit of an overstatement. I’ve installed a handful of solar systems using Enphase M250’s with solar panels sized between 285w- 300w DC that have been negatively been affected by power clipping.
So far in my career I've installed slightly more Enphase systems than SolarEdge, and both are exceptional upgrades to the stand alone central inverter. I can count on two hands how many SolarEdge systems I’ve had issues with that involved some form of maintenance or replacement. The majority of those involved replacing the inverter only, and had nothing to do with the power optimizers. That’s why I love the extended 25 year warranty SolarEdge provides for its central inverter to mirror its 25 year power optimizer warranty. On the flip side of that coin I’ve had 3 times the amount of service calls involving Enphase, all of which required troubleshooting the Enphase monitoring system or replacing faulty microinverters. And let me tell you, it’s a lot easier to replace a defective wall mounted central inverter at ground level than it is to replace a microinverter on the roof. Why does it seem that every time a microinverter goes out it happens to be smack dab in the middle of the solar array? It’s never a microinverter on the perimeter, so we have to temporarily lift and set aside 4-6 panels just so we can reach the one panel in the middle with the faulty microinverter. Frustrating!
2. HIGHER ENERGY PRODUCTION
Currently, the peak efficiency of an Enphase microinverter is 96.5%. The peak efficiency of SolarEdge power optimizers is 99.5%. Remember though, the SolarEdge system is a hybrid that adds the central inverter component. That central inverter operates at 97.6% efficiency. So with a little math we find that a 99.5% peak power optimizer efficiency multiplied by 97.6% central inverter efficiency equals a peak efficiency of 97.1% with SolarEdge compared to 96.5% with Enphase. That may not seem like a big difference at first glance, but it adds up day by day, year over year. Truth be told, there are those that state Enphase may produce a higher energy yield over SolarEdge, but they’ll never back it up with an accurate apples to apples comparison. Here's a side by side case study that proves just how much SolarEdge Power Optimizers will outproduce Enphase Microinverters.
When a solar panel is shaded from a tree, chimney or a cloud in the sky during the course of a day, its voltage drops. At night, the voltage drops to zero obviously until the sun comes up the next day. To capture power produced by a solar panel, your system is limited by the minimum voltage required by the inverter. The lower the minimum voltage, the greater the amount of energy that can be harvested. A central inverter usually requires a minimum system voltage over of 125v. An Enphase microinverter requires a minimum voltage of 22v. The SolarEdge power optimizers start tracking at only 5v. This means they’ll produce more power in shaded conditions and kick on earlier in the morning thus producing more power as the sun comes up.
3. LOWER COST
I know it’s hard to believe. “So what you’re telling me Mike is that power optimizers are more reliable and produce more power than microinverters but cost less?” In a word: YES. A microinverter system is comprised of sophisticated monitoring parts, components and AC trunk cabling not required by SolarEdge. However there is no central inverter to install like with the SolarEdge system, true. On the surface, adding a central inverter to the system sounds like it should cost so much more but it doesn’t. A microinverter is about 2 ½ to 3 times the cost of a power optimizer, and remember it has twice the amount of ‘moving parts’. It’s pretty much like taking a central inverter and dividing it up into 24 smaller inverters over an entire solar system. That’s not cheap. Although the SolarEdge solution requires adding the cost of a central inverter, when you add up all of the microinverter equipment, cabling, monitoring, warranties and the labor to install the Enphase system, the upfront cost to a homeowner is still about 10% more than SolarEdge.
So there you have it: Better reliability, more energy produced and a lower cost. When it came down to deciding which upgrade I wanted for my home’s solar system, the choice was easy. I have SolarEdge and you should too.