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Solarcity Corp (SCTY) Gets a Boost From California Public Utility Commission [Updated]

SolarCity Corp (SCTY)

SolarCity Corp  has something to celebrate today as the California Public Utility Commission (CPUC) has approved new regulations for net metering.  Net metering is the method used to compensate residential solar power owners for electricity they generate, but do not use, and is returned to the grid.  There are 45 states offering net metering of some kind today. The fees paid to owners of solar equipment are huge incentives and they have fueled the growth in residential solar.

SolarCity Inc (NASDAQ:SCTY)

California regulators have the largest solar market in their backyards with over 450,000 rooftop solar arrays. This gives them an unusual perspective on how net metering can benefit both a state and individual solar power system owners. Their decision today will give SolarCity and other solar firms a boost as they approach property owners with a solid case for converting to solar. 

SolarCity at war with state of Nevada

SolarCity Corp  is currently at war with the State of Nevada and Governor Sandoval after that state’s Public Utilities Commission (NPUC) backed plans to retroactively raise fees for net metering customers. The plan was utility friendly as it raised the fixed charges that solar owners would pay for grid service. It infuriated solar system manufacturers and installers so much that two, SolarCity and Sunrun, announced they would no longer do business in Nevada.  That decision will result in the loss of over 1000 jobs in the state.

Experts are in disagreement regarding net-metering

Sachu Constantine serves as Director of Policy at the Center for Sustainable Energy in San Diego California. Constantine says the California system ““signals a future approach that can strike a balance between the interests of solar power owners and the legitimate costs to maintain the grid,” and that it will influence future net metering battles across the country.

On the other side of the debate, Caroline Choi, VP for Energy and Environmental Policy at utility company Southern California Edison says the commission’s decision “does not adequately address impacts to the vast majority of our customers who do not have solar, nor does it transition toward a future with fewer subsidies paid by non net-metering customers.”

Things look sunny for SolarCity in California

The decision by the CPUC could have gone the same way as Nevada but for now, things look favorable for solar owners in California and that’s great news for SolarCity.

In California, net metering requires Pacific Gas & Electric Co., Southern California Edison and San Diego Gas & Electric Co. to compensate owners of solar energy systems at the full retail rate, around 17 to 20 cents per kilowatt-hour. Utility companies claim that these fees are too high and that solar system owners are enabled to take advantage of the system by not paying their share of the infrastructure cost.

In a new provision, net-metering customers must pay a  $150 fee to help support low income and efficiency programs. 

Clearly, net metering that pays owners for energy they create but cannot use is a benefit to the system owner.  And in turn, it is a benefit to companies like SolarCity.  Although moving from traditionally generated electricity to a renewable source like solar can be a purely altruistic decision, the financial component can prevent good intended citizens from throwing the switch and committing to the conversion to renewables.

CPUC will revisit the issue in 2019

Residents of California and solar companies like SolarCity Inc can enjoy the current favorable regulations for a few years.  In 2019 the CPUC will revisit the issue and there will likely be revisions to the regs.

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