In Support of Solar Justice
The Net Energy Metering (NEM - rooftop solar incentives) debate in California has swelled for over a year with a final vote on a modified proposed decision expected December 15. I’ve been wondering why this particular debate has been so tumultuous, leaving people on unexpected ground while important voices are missing from the debate completely.
NEM has exposed many faulty assumptions and misaligned values baked in our utility system. Assumptions and values that may have worked well enough–for some–but are increasingly incongruent with a just livable planet.
I see two major problems confronting California energy policy: 1) historical and ongoing injustice in our energy laws, policies, and business models, which means economic benefits are accruing outside of communities who need them most, and (2) we’re not on track to meet our climate goals with fossil-based pollution harming us all and low-income communities of color the most.
In a good faith exercise, we would look to design solutions for better outcomes across all proceedings and utility policies to address these crises.
That’s not what’s happening though.
Clearing the Obfuscation – The Cost-shift Argument is a Red Herring
This debate is especially slippery because of a major red herring in the form of the “cost-shift” argument, which has led to ostensible allies “divided and conquered” instead of united together in service of solar and energy justice.
You can tell because even if the cost shift premise is true–and we know that solar has been deployed inequitably by race and income–the outcome is absurd.
Essentially the utility industry and its supporters are saying: electricity payments for solar haven’t been distributed fairly, so . . . let’s end them for everyone. This at the same time that solar is getting cheap enough that moderate and lower-income customers have a chance at adopting the technology too. Meanwhile, utilities and those who support their proposal, are not promoting just solar programs and investments that would increase access to solar for lower-wealth communities. Instead, you see, for example, consumer rights organizations supporting proposals more similar to the utilities than those that truly demand justice.
In her book Revolutionary Power, An Activist’s Guide to the Energy Transition, Shalanda Baker, currently Director of the Office of Economic Impact and Diversity at the Department of Energy for the Biden Administration, traces out how the utility industry and those with deep roots in the fossil fuel business–with support from the American Legislative Exchange Council, a conservative legislative think tank–have masterfully deployed a racially divisive playbook to slow solar adoption through using a “cost-shift” argument to gut NEM programs.
ALEC and the utility industry have seized on a debate frame with veiled references to “equity” and “fairness” that fails to apply those values to any other energy resource, such as energy efficiency, or the decades of disparate impacts from fossil generation.
California utilities are not talking about the cost shift to ratepayers for wildfire damages, gas commodity costs, or the inherent cost shift in our utility bills being based on a regressive design.
Instead, the California CPUC has designed a NEM decision that only expands the wedge by grandfathering in the wealthier white solar owners and ending the original program for the middle class.
The Logical Fallacy of the Utility NEM Playbook: An Inconsistent Application of the Cost Shift Argument
Baker outlines the 3-part utility playbook recipe as follows: (1) urge regulators to reduce the exchange rate for rooftop solar customers to align it with the wholesale or avoided cost of energy. (2) increase fixed charges (a regressive) economic burden. (3) narrow the avoided cost value further to a specific “value of solar” that excludes the social and environmental costs inherent in the technology.
This recipe negates long-term value from energy investments and any social or environmental benefits thereof and it exposes how the application of the cost shift argument is inconsistent at best.
There’s a huge historical debt to be paid from our Utility and Fossil Fuel Industry and its regulators to communities of color, lower income folks, and frontline communities for decades of health harms.
Yet no proceedings that I’m aware of narrow gas contracts to their purported technology-specific value. By the logic of the NEM proceedings, we should also stop paying for gas because it leads to inequitable distribution of premature deaths and climate disasters.
Efficiency and Economic Optimization are Not Our Gods
In addition to the “red herring” of the cost shift debate, the playbook is rife with myriad technocratic economic optimizations prioritizing efficiency as a governing value over equality. (For more on this economy-wide trend, see Thinking Like an Economist by Elizabeth Popp Berman)
What system-wide cost calculations and models exclude are environmental, health, social values, and damages owed due to past and ongoing racial inequities. They also ignore questions of who benefits and who is harmed in driving toward a seemingly neutral system-wide outcome.
Why are we even talking about “avoided costs” and “solar values”? Who set that agenda?
The notion of “avoided cost” can be traced to the federal Public Utility Regulatory Policies Act of 1978, which defines an “incremental cost of alternative electric energy,” as an amount that no rate for a “qualified small power production facility,” which includes rooftop solar, shall exceed. That’s legalese for establishing an incremental cost metric for the value of solar.
However, It’s 2022. If a metric on costs is to exist, we should instead be coming together to embed longer-term “social cost” or “reparative cost” as that metric in federal law. Basing decisions on short-term horizons is what got us in this climate mess to begin with.
Relatedly, as solar has come down the cost curve, many regulators and some advocates seem to assume the job is done and the rest should be left to the market. Still, it’s not cost but profit that drives our economy today. And solar still isn’t profitable the same way fossil fuels are. (See Brett Christophers, Fossilised Capital: Price and Profit in the Energy Transition).
I’m not arguing that we should be seeking to create the same monopoly profit structure for solar that oil and gas companies enjoy, but if government is in the business of design, it still hasn’t hit the mark. And if we are at the stage where solar is reaping windfall profits, let’s tax those profits and share them with our neighbors.
Mitigating climate burdens and equitably distributing economic benefits should take precedence over false precision around systemwide economic efficiency.
The Climate Crisis Demands More Investments, Not Less
The NEM discourse carries on as if there were no climate crisis. Yet California agencies’ own analysis shows that we need to triple the build rate of solar and wind to meet our 2045 climate goals.
Just this year, the Governor with support from the state legislature suspended environmental controls, authorized new potentially fossil resources (to be purchased by DWR via AB 205), extended the life of once-through cooling gas and nuclear power plants, and more just to keep the lights on during peak energy conditions.
If we really cared about the state’s climate goals, we’d put at least half as much energy into making fossil fuels uneconomic while increasing efforts to equitably invest in zero carbon resources– whether solar, storage, energy efficiency, or demand response.
What Justice Demands: Affordable Bills Are Only the Beginning
For the end user, this all boils down to bill affordability–though it’s odd we’re having that conversation in a solar proceeding. What, though, is leading to increases in bills? Gas commodity prices, wildfire costs, guaranteed high rates of return on equity for utilities, and more.
NEM arguments are specifically about fairness for lower-income residents, which suggests we sould be doing things like adding solar to the Energy Savings Assistance program, creating a progressive rate structure, or increasing the income limit and size of the California Alternate Rates for Energy (CARE) subsidy.
In fact, bills are just the beginning. Within the solar economic equation are even larger benefits that we should be distributing in a just way, such as access to and opportunity for high-road jobs as well as collective ownership opportunities.
A United Way Forward
None of this is to say that California isn’t making some headway on more equitable outcomes in the utility system. There are new laws and a new proceeding open around creating income-based fixed charges. Plus, many of our clean energy investments now come with carve outs for Environmental Justice communities.
At best though, these efforts are moving toward equality– they’re not accounting for past harms and they’re therefore not on track to achieve justice.
If the goal really is solar justice and affordable bills for low-income communities of color, here are some constructive policies a united front could build together:
Bill Affordability
End utility shutoffs
Increase the California Alternate Rates for Energy (CARE) subsidy to 100% of utility bill coverage from 30% and also increase the income threshold for CARE
Create progressive utility rate structures instead of maintaining the regressive status quo
Renewables and Shared Economies
Fully fund rooftop solar for lower-income residents (add it to the Energy Savings Assistance program and authorize larger budgets!)
Allocate investments for the upfront costs of community solar
Create labor standards for distributed solar and storage
Reparative Policy
Create a reparative fund at the size of the damages wrought by the utilities and fossil fuel companies and prioritize EJ communities with clean energy and resilience measures
Prioritize solar panels and storage in EJ communities and restrict it in other non-burdened communities until, at minimum, parity has been achieved (See Revolutionary Power, p. 113)
A final wonky note for any Decision-makers or advocates who are still reading. Even if nothing else happens with the proposed Decision, it should extend the previous NEM retail rates for all those making 80% of area median income or less, tribal communities, and Cal Enviro-screen designated Disadvantaged Communities, as well as for all community-owned solar indefinitely or at least until there’s parity in solar deployment and enough to meet our climate goals.
However the Decision lands, may this tangled web around NEM help us clarify what we truly need from a just utility system, together.