In the golden state, the sun has long been a symbol of hope, promise, and endless possibility. Come September 2022, its role took on a literal meaning as the California legislature turned AB 2316 into law, aiming to broaden the horizons of renewable energy access, especially for those sans a rooftop to host solar systems. As a beacon of sustainable living, California has set its sights on crafting a cost-effective program serving all rate payers, a move orchestrated under the vigilant eye of the California Public Utility Commission (CPUC).
Among the horde of recommendations swirling around, the Net Value Billing Tariff (NVBT) program, championed by the Coalition for Community Solar Access (CCSA), is catching wind swiftly. This program is not just a proposal; it’s a vision of a community united under the solar banner, where developers find value in erecting community solar systems and subscribers see a clear path to bill savings. With at least 51% of every system proposed to serve Low and Moderate Income (LMI) customers, the NVBT is a nod to inclusivity. Furthermore, the enticement of a 20-25% value generated being credited back to low-income subscribers’ energy bills is a stride towards energy equity.
The intricacies of the NVBT program are laced with incentives for renewable energy project developers. The introduction of an Export Credit Rate (ECR), which pegs a fixed value to the energy exported based on the avoided cost of energy and capacity it offsets, is a smart move. It’s a dance between supply and demand, with the export rate tuning to the rhythm of generation time, aiming to address the state’s energy needs post-solar production hours.
The valuation under this program is a meticulous affair. It’s a stack of value streams encompassing Energy, Transmission & Distribution (T&D) Capacity, Generation Capacity, and Environmental Value, each evaluated during peak and off-peak hours. The value of energy, tethered to the wholesale price, ebbs and flows between a wide range of $20/MWh to $200/MWh, dictated by the demand and supply of energy.
The program’s potential value is starkly illustrated in the proposed rates for Southern California Edison, San Diego Gas & Electric, and PG&E. With a glaring energy price arbitrage difference of $900 – 1,200/MWh between off-peak and peak hours, the program nudges the energy market towards a more dynamic pricing model. The peak hours, largely falling outside the solar production window, shine a light on the indispensable role of battery storage, driving the majority of value for these projects.
The Avoided Cost Calculator (ACC), a tool devised by the CPUC, is at the heart of these calculations, embodying a common ground to value the myriad attributes of solar energy. Though not without its critics, the ACC is a linchpin in the discourse surrounding the valuation of solar energy and its place in the broader energy market.
In consultations with Rahul Verma, executive at Fractal Energy Storage Consultants and a leading expert in renewable energy and energy storage realm, we elucidate the current propositions for the net value calculations for community solar projects under the program. Rahul has been a leading expert in the field with over 10 years of experience in providence technical and financial advice to leading renewable energy and energy storage project developers across the country.
Here’s a breakdown of how this energy arbitrage difference may computed:
- Value Streams:
The valuation under the NVBT program is a confluence of different value streams including Energy, Transmission & Distribution (T&D) Capacity, Generation Capacity, and Environmental Value. Each of these streams is evaluated separately during peak and off-peak hours.
- Zonal Variations:
The value of energy, governed by the wholesale price, is subject to zonal variations and is contingent on the demand for energy and the cost and supply dynamics. This is evident in the different rates proposed for Southern California Edison, San Diego Gas & Electric, and PG&E.
- Peak and Off-Peak Hours:
The peak hours, designated from July through September, 5 hours starting 5 pm to 10 pm, are critical as they fall outside the typical solar production hours. This scenario sets the stage for battery storage to play a pivotal role in bridging the energy supply during these hours.
- Rate Breakdown:
For instance, Southern California Edison’s rate during peak hours amalgamates Energy (SP15), T&D Capacity at $589.6/MWh, Generation Capacity at $498.7/MWh, and Environmental Value at $11.5/MWh, totaling to $1099.8/MWh. In contrast, the off-peak hours rate plummets to a mere $5.6/MWh. Similar rate structures are outlined for San Diego Gas & Electric and PG&E, each with its unique rate breakdown but exhibiting a stark contrast between peak and off-peak hours.
- Arbitrage Calculation:
The energy price arbitrage difference is derived from the discrepancy in the rates during peak and off-peak hours. The substantial difference amplifies the economic incentive for employing battery storage to harness solar energy produced during the day and dispense it during the peak demand hours, thereby maximizing the financial returns.
According to Verma, “If adopted, this program will create one of the most consequential incentives in the nation that will directly bring solar energy to California’s residents.”
This energy arbitrage framework under the NVBT program is more than just a financial calculation. It’s an emblem of the economic potential harbored within the renewable energy sector. By harnessing the price differentials between peak and off-peak hours, the NVBT program beckons a promising era of energy self-sufficiency and financial viability, making the dream of a solar-powered community an attainable reality in California.
The meticulous arithmetic underpinning the energy arbitrage not only underscores the financial acumen embedded in the NVBT program but also illuminates the path towards achieving energy equity and environmental sustainability. As the CPUC delves deeper into the evaluations and the March 31, 2024, deadline looms closer, the energy arbitrage difference stands as a compelling argument in favor of the NVBT program, painting a promising picture of California’s energy future.
