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About 60% of customers have included battery energy storage in their rooftop solar installation, up from 10% previously. However, a “sustained slowdown” in the market is expected.
California transitioned its rooftop solar policy on April 15, 2023, eliminating net energy metering (NEM) and moving to a net billing rate structure (NBT). The change essentially reduced the fee paid to customers for exporting their excess solar production to the grid by about 80%. One year later, Lawerence Berkeley National Laboratory (LBNL) has released a report assessing changes in the states rooftop solar market.
LNBL found that rooftop solar installations in California were about the same in 2023 to 2022. However, 80% of the systems installed were NEM 2.0 installations that were rushing into interconnection queues before the December 15 deadline. April 2023 to secure the most lucrative rate structure. To date, some 50,000 systems have been interconnected with the new NBT structure, adding to the 200,000 NEM systems interconnected in the same period.
Data from EnergySage, operator of the largest residential solar quote site in the U.S., is “indicative of a more sustained decline,” according to the report.
Budget requests spiked between December 2022 and April 2023, between the announcement and implementation of the NBT. Since then, the average monthly quote requests have been approximately 60% of historical levels (2019-2021).
A 40% drop in historical listing requests is a “leading indicator” of market activity and “is perhaps the clearest sign yet of a substantial and sustained market contraction,” LBNL said.
A significant contraction of the rooftop solar market is not an ideal outcome for California, a state with ambitious clean energy goals and an electricity affordability crisis. Industry association leaders have warned that California is unlikely to meet its clean energy goals without a strong contribution from the rooftop solar sector.
However, the transition to NBT has created some outcomes in California that may be desirable. The profile of an installed system has changed considerably. Before NBT, customers installed energy storage batteries on their roofs in approximately 10% of installations. Now, post-NBT installations include batteries 60% of the time.
This is important for Californias grid operators, who are trying to smooth out the mismatch between solar-generated electricity supply and grid demand. This mismatch, often represented by the “duck curve,” has been accentuated in California, causing pricing and grid maintenance problems, and creating the need for inefficient natural gas plants to meet times of high demand and low generation. .
The high hook-up rate of batteries also offers some advantages to customers. Although the total sticker price goes up with a battery-powered system, the return on investment has improved compared to a solar-only installation.
Installers report an average payback period of eight years for battery solar systems, while standalone solar systems have a longer average payback period of about 10 years. Battery storage allows customers to store their solar output and use it when grid prices are highest, rather than selling it to the grid for pennies on sunny afternoons. Solar battery owners also have the option of being compensated for exporting power during peak demand or emergencies, potentially creating a new source of income.
Customers with batteries also benefit from having backup power during grid outages, which remains the number one reason to include batteries nationwide, according to a survey of installers by SolarReviews.
“Since November 2023, residential storage installations have reached an average of about 5,000 systems per month, more than double the monthly pace of the previous three years,” the LBNL report notes.
The Berkeley Labs report notes a shift in financing options for residential solar customers. Over the past 12 months of NEM, third-party ownership rates, including leased systems and power purchase agreements, averaged 26% for standalone solar and 11% for solar and storage systems. With the NBT system, this percentage increased to 39% for off-grid solar and 52% for solar with storage. Part of this change can be attributed to rising interest rates, which create lending conditions that are more difficult for customers to digest.
Finally, the Berkeley Labs report noted increased consolidation in the California rooftop solar market. The market share of the states top five installers went from 40% during the last year of NEM to 51% during the first year of NBT.
One year later, its clear that the shift to NBT has dramatically altered Californias rooftop solar sector. However, the backlog of NEM orders to be served in 2023 has made it unclear what the full effect of this policy change will be. This sets the stage for 2024 to be a critical testing ground for the health of this industry.
These and other trends will undoubtedly become more evident over the next year, once the NEM backlog has been resolved and a “new normal” with the NBT is established,” concludes LBNL scientist Galen Barbose. |
