SMUD plans to slash rooftop solar subsidies for Sacramento customers. Here’s why

SMUD plans to reduce the credit it provides customers who feed excess power into the system from their rooftop solar panels — a move that solar advocates claim would stall the industry’s growth and hurt California’s drive for carbon-free electricity.

The proposal by the Sacramento Municipal Utility District’s staff, unveiled at a committee meeting Tuesday night, would reduce the credit by nearly 40% for new solar customers if enacted by the SMUD board of directors. These customers would also have to pay a one-time fee of $475 to connect to SMUD’s network, a first for the utility.

SMUD’s proposal comes as debate intensifies at the state level about how rooftop solar customers should be compensated for the surplus energy they create, a concept known as “net energy metering.”

California’s major utilities, including PG&E Corp., have joined with consumer advocates and others to push for a major reduction in the credit they’re required by regulators to pay. They say the credit amounts to a major subsidy for customers who tend to be higher-income, and shifts those costs onto non-solar customers. At PG&E, the cost shift translates into $170 a year in higher rates for other customers, the utility says.

The Public Utilities Commission is considering the big utilities’ proposal. Meanwhile, AB 1139, by Assemblywomen Lorena Gonzalez, D-San Diego, and Wendy Carrillo, D-Los Angeles, would force the PUC to lower the rate even more.

Officials with SMUD say they, too, want to eliminate the subsidy the Sacramento utility pays its roughly 30,000 rooftop solar customers. SMUD believes the subsidy raises costs to non-solar customers by as much as $45 a year.

“The profile of our solar customers are wealthier customers who we’ve been highly subsidizing for a while,” said Nancy Bui-Thompson, the SMUD board president, at the meeting at which the new plan was rolled out.

SMUD currently gives solar customers 12 cents a kilowatt-hour for unused solar electricity they deliver to the grid. Under the new plan, the compensation would drop to 7.4 cents, starting next January. Existing solar customers would continue to receive the old rate until 2030.

‘It’s going to hurt people going solar’

Environmentalists said the new rates would still incentivize Sacramento residents to install solar, while relieving the cost burden on other customers. That will enable SMUD to make progress on its recently adopted strategy of retiring fossil-fuel plants and going completely carbon-free by 2030.

“SMUD’s proposal really does thread the needle,” Mohit Chhabra, an energy policy analyst with the Natural Resources Defense Council, told the committee Tuesday night.

The solar industry favors continued subsidies as a necessary incentive to get residents to spend thousands of dollars on solar panels.

Reducing the compensation for excess energy “is going to hurt the market, it’s going to hurt people going solar,” said Bernadette Del Chiaro, head of the California Solar and Storage Association. “Now is not the time for Sacramento to slam the brakes on solar.”

The SMUD plan includes a “virtual” program designed to bring the benefits of solar energy to lower-income residents who typically can’t afford the panels. Spokeswoman Lindsay VanLaningham said SMUD would allow low-income tenants to receive the credits from energy produced by solar panels installed by their landlords.

In addition, SMUD is proposing to spend $25 million on incentives to persuade customers to install giant batteries in their homes to store solar power for use when the sun goes down. The loss of solar during the evening contributed to a pair of rolling blackouts in California last August — the first in nearly 20 years — and increasing the distribution of storage batteries is considered crucial for California to make the transition to an all-green grid by 2045 while avoiding more blackouts, as the Legislature has decreed.

The battery subsidies from SMUD would be as much as $2,500 — still a fraction for a product that can cost $10,000. Nonetheless, SMUD believes the subsidies will help “accelerate the market” for storage, said Eric Poff, the utility’s energy finance manager.

The SMUD board plans to vote on the plan this fall; the debate could be contentious, given the loyalties of rooftop solar customers. Two years ago the utility proposed charging these customers a monthly connection fee — $32, growing to $44 in a few years — and scrapped the plan in the face of widespread opposition.

This story was originally published May 19, 2021 at 10:46 AM.