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California Community Solar Policy Guide for Asset Owners & Developers

Everything you need to know about California’s current community solar legislation, eligibility rules, crediting mechanism and other important market details, created by Perch’s internal policy team. We help asset owners navigate the growth of community solar in markets across the country, and as new laws are considered and passed, Perch will provide updates and perspective on how it impacts your business.

5 min read • Last updated: Dec 06, 2023

Topics covered

Community Solar in California
Proposed Net Value Billing Tariff
- Program Details
Low-Income Specifications
- Eligibility Criteria
Billing, Incentives, and Compensation
Market Analysis
- Electric utilities and their territories
Utility Territory Map

Community Solar in California

With the exception of community solar, California has often led the nation in state-level legislation and deployment of clean energy infrastructure. Despite the state’s overall solar maturity, California arrived late to the party in terms of bringing community solar online. But with the passage of AB 2316 in 2022, California is not only well poised to have a successful community solar program and may quickly run to a leading position.

California has had several sputtering attempts to jump start its community solar industry with the Green Tariff Shared Renewables Program (GTSR), the Disadvantaged Communities Green Tariff (DAC-GT), and Community Solar Green Tariff (CSGT). None of these plans could produce enough community solar megawatts (MW) to remotely meet its demand, with only about 160 MW online after several years. Collectively these programs suffered from structural issues that limit large swaths of energy customers from participating, rate volatility, operational inefficiency, and insufficient resources.

Despite these stumbling blocks, it appears likely that the fourth time may be the charm. AB 2316 laid out a clear guide and mandate for the California Public Utility Commission (CPUC) to develop a community solar program that best serves all ratepayers and enhances grid reliability, with special consideration for low-income households. California’s minimum LI participation requirements in AB 2316 was the first to be implemented at 51%, higher than any other state besides New Jersey, and one percent above the federal minimum in the Inflation Reduction Act (IRA).

The prevailing proposal the CPUC is considering, known as the Net Value Billing Tariff (NVBT), resembles New York’s “Value Stack”, and includes a requirement that all facilities be paired with a minimum of 4 hours of storage capacity. Releasing stored energy at peak evening hours during the summer months will result in the greatest payout for that energy. The NVBT proposal also includes a simplified billing option and low barriers to enrolling low-income subscribers.

The NVBT proposal appears to be moving forward with the CPUC at a decent pace to meet the expectation of projects coming online in 2024. Indeed, early estimates show California being able to clear a gigawatt of capacity in just a few years after opening. While the winds are favorable and the proposal enjoys broad coalition support, the NVBT is not past the post yet and wrinkles may yet still emerge before the program comes online.

Proposed Net Value Billing Tariff

AB 2316 requires CPUC to evaluate how, or if, each customer renewable energy subscription program meets these three goals:

Efficiently serve distinct customer groups
Minimize duplicative offerings
Promotes robust participation by low-income customers

If the existing programs do not meet these criteria, the commission is authorized to terminate or modify the program. CPUC has until July of 2024 to establish a new program.

The NVBT, proposed by the Coalition for Community Solar Access (CCSA) – contains many best practices and is designed to take advantage of the federal tax credits found in the IRA. While CPUC received other proposals from California’s Investor-Owned Utilities (IOU), they fall short of AB 2316’s requirements as they generally suggest modifying existing programs in a way that won’t meet the third criterion. Only the NVBT proposal meets the full requirements put forward in the legislation. For more information on the other proposals, refer to this presentation to CPUC.

Program Details

No program cap
Maximum project capacity of 20 MW
Projects must include a minimum 4-hour battery storage system
25-year project term length from date of commercial operation
50% of each project’s capacity must be residential and small commercial customers at subscription sizes less than 25 kW
51% of each project must consist of low-income subscribers
Subscribers must reside within the same utility service area as their subscribed project and receive a utility-consolidated bill (UCB)
Only new solar projects would qualify for the program
Unallocated credits can be banked for up to two years

One notable provision in the law is the inclusion that a prevailing wage be paid to workers, which is both necessary to achieve an additional tax credit bonus as well as the support of labor groups. The NVBT proposal is supported by environmental justice organizations, labor groups like the California Building Industries Association, SEIA, Vote Solar, the Public Advocates Office at CPUC, ratepayer advocates like The Utility Reform Network, and several others.

Low-Income Specifications

There are several low-income provisions in the NVBT that ensure consumers are protected and make the subscription experience as frictionless as possible. On top of the inclusion of UCB, there is also a prohibition of credit score screening, no termination fees, and no contract duration for subscribers.

Eligibility Criteria

A low-income customer is verified as being low-income by their participation in an approved assistance program or by residing within an underserved community.

Eligible Programs

The California Alternate Rates for Energy (CARE)
Family Electric Rate Assistance (FERA)
The CalFresh program
Federal Supplemental Nutrition Assistance Program (SNAP)
Low-income Heating Energy Assistance Program (LIHEAP)

Underserved Communities

A “low-income community” defined as census tracts with median household incomes at or below 80 percent of the statewide median income
A community within an area identified as among the 25 percent most disadvantaged areas in the state according to the California Environmental Protection Agency and as identified by the map screening tool, CalEnviroScreen.
A community located on lands belonging to a California Native American tribe, as defined in Section 21073 of the Public Resources Code.

Billing, Incentives, and Compensation

AB 2316 determines that compensation for community solar be based on the actual value of electricity at the time it is delivered to the grid. This determination helps to incentivize battery storage beyond the benefit of mitigating grid reliability challenges.

The NVBT basic tariff structure is called the Export Credit Rate (ECR) which follows a “Value Stack” structure based on the hourly value of exported electricity. The ECR makes use of the Avoided Cost Calculator (ACC) which is a tool to estimate how much utility cost is avoided for any megawatt-hour of non-utility distributed energy deployed in California. Refer to the CPUC’s ACC page for greater detail.

The Structure of the ECR Value Stack

Value Element	Source	Peak Period	Location Variation	Escalation	Peak to Off-Peak Price Ratio
Energy	Day Ahead Price and ACC Losses	N/A	By Zone	N/A	Will reflect actual prices
Variation Capacity	ACC Generation Capacity	5 pm - 9 pm PST on weekdays from July - September	By Utility	Levelized over 25 years	Zero off-peak price
Transmission & Distribution Capacity	ACC Transmission and ACC Distribution	5 pm - 9 pm PST on weekdays from July - September	By Utility and Climate Zone	Levelized over 25 years	Zero off-peak price
Environmental Value	ACC GHG Rebalancing & ACC GHG Adder	5 pm - 9 pm PST on weekdays from July - Sepetember	None	Levelized over 25 years	Average peak to off-peak avoided cost ratio

The proposal sets a 25-year bill credit term with monetary credits and allows projects to bank unsubscribed credits and allocate them to subscribers within two years of generation. Benefitting subscription accounts will be compensated monthly in dollars, and their subscription size should be determined by an accounts’ 12-month historical usage or estimate.

The proposal also offers an Environmental Justice-Low Income Market Transition Credit (EJLI-MTC) as an additional incentive for facilities that are located within disadvantaged communities and have 50% of its capacity subscribed by low-income consumers. The value of the credit would be the volumetric retail rate minus the ECR. This additional credit is intended to help reach a statewide target of 1229 MW.

Market Analysis

Few places are better suited for community solar than California. The state has a long history of solar power production and saturation of both utility and rooftop solar. With fewer utility-scale parcels and rooftop solar losing its prime position, community solar is ideal to fill the abundant interstitial space. Even more so with the sheer number of Californians that rent their home. About 45% of all Californians rent, and 70% of those renting can be considered low-income. California has the third most expensive electricity rates in the country, underscoring both a need for lower electric bills and an opportunity for community solar providers to supply it.

With a population of 39 million people, basic estimates of potential low-income rental subscribers would be over 12 million. The actual number of this subscriber segment is likely much lower because the municipal utility, Los Angeles Department of Water and Power (LADWP), is excluded from the NVBT program which is only for investor-owned utilities. The LA metropolitan area is home to some 13 million people and, according to California’s disadvantaged community screening tool, has the highest concentration of low-income residents in the state.

While disappointing that community solar will not be available to Angelenos, plenty of subscribers can be found in abundance elsewhere in the state. Projects looking to qualify for incentives for serving this customer segment should aim to be within Pacific Gas & Electric’s service area. The highest concentrations of disadvantaged communities are to be found between the capital Sacramento in the north, through the Central Valley, to Bakersfield in the south.

According to the Census Bureau, over 28% of the state speaks Spanish and another 10% speak an Asian language. Subscriber acquisition organizations with high linguistic diversity will be best positioned to succeed in the Golden State.

Provided the CPUC can keep its pace and complete the rulemaking process by the end of 2023, an industry analysis anticipates that California can bring 360 MW of community solar plus storage online by the summer of 2024, and 800 MW by the summer of 2025. This is ambitious but reachable, especially considering the state’s projected energy gap of about 3 GW in 2024 and 2025.

Most projects will likely be no more than 5 MW in the hopes of qualifying for federal tax credits, though the NVBT would allow projects as large as 20 MW. Facilities would get connected to the distribution grid rather than the larger transmission network, which may reduce the frequency of lengthy and costly interconnection queues.

Electric utilities and their territories

Pacific Gas & Electric
- 5.5 million electric customer accounts
- 70,000-square-mile service area in northern and central California
Southern California Edison
- About 5 million residential and business accounts, or about 15 million people, across 430 cities and communities
- 50,000 square-miles across central, coastal and Southern California, excluding the City of Los Angeles and some other cities
San Diego Gas & Electric
- 1.5 million electric meters
- Service area spans San Diego and southern Orange counties, about 4,100 square miles