California Expands its Rules for Feed-In Tariffs and Net Metering

October 21, 2009

California is seeking to encourage utility customers to feed power into the grid from their renewable energy systems with two legislative bills signed on October 11 by Governor Arnold Schwarzenegger. The first bill expands California's "feed-in tariff," under which large utilities have to pay their customers for the power they produce and "feed in" to the grid, at standard rates or "tariffs" that are adjusted to account for the time when the power is produced. Power produced during times of peak demand earns the highest rate. The new law doubles the maximum system size from the current 1.5 megawatts to 3 megawatts and requires long-term agreements that will be in effect for 10 to 20 years. It also increases the statewide cap for such feed-in tariff agreements to 750 megawatts, up from 500 megawatts. Utilities buying power under the feed-in tariff will be able to take credit for the renewable energy under the state's Renewable Portfolio Standard (RPS), which requires utilities to draw on renewable energy for one third of their power needs by 2020. See the feed-in tariff bill and the summary from DSIRE, the Database of State Incentives for Renewables & Efficiency.

Utility customers that are not interested in such long-term agreements, or who want to take advantage of incentives that are prohibited under the feed-in tariff, are more likely to opt for "net metering," which allows customers to carry forward a credit on any month when they generate more power than they use. Currently, any credit for net power generation is lost at the end of the year, but the state's new net metering law will give customers the option of either rolling over credits from year to year or selling the excess power to their utility at a predetermined rate. In turn, the utility can take credit for that power under the state's RPS. The new law goes into effect on January 2011, after the California Public Utilities Commission sets the compensation rates. Both laws are aimed at helping utilities meet the RPS while encouraging utility customers to install renewable energy systems. See the net metering bill and the summary from DSIRE.