California Slashes Compensation for Small-Scale Solar

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By Christian Roselund

Image: California Solar and Storage Association.

On 15 December 2022 California regulators voted to overhaul the state’s compensation structure for small-scale solar, sharply reducing financial returns for new PV system owners. Solar industry advocates warn that the Net Billing Tariff, which is known colloquially as Net Metering 3.0, will cause irreparable harm to the state’s solar market.

The primary change under the Net Billing Tariff is a shift in compensation for electricity exported to the grid by rooftop PV systems to an “avoided cost” calculation based on wholesale rates, instead of the higher retail rates typical for net metering programs. This calculation will be governed by the hour of the day and the month. For example, all rooftop solar customers in a utility’s service area will receive the same compensation per unit of electricity exported between 3 and 4 pm on weekdays in
July 2023.

Reduced Compensation

The California Public Utilities Commission (CPUC) has acknowledged the new rate paid to PV system owners will be lower than the previous export rate. California Solar and Storage Association (CALSSA), which organized protests against CPUC’s Net Billing proposal, estimates that compensation will fall by 75%.

Customers who adopt solar in the service areas of utilities Pacific Gas & Electric Company (PG&E) and Southern California Edison (SCE) during the first five years of the new program will receive an “export adder” to their avoided cost rates to ease the transition to the new system. This adder is not available in the San Diego Gas & Electric Company (SDG&E) service area, as CPUC determined that compensation will remain high enough there.

New PV systems owners will be required to adopt the Net Billing Tariff whereas existing customers will remain under the legacy net metering structure. Unlike an earlier proposal by CPUC, the Net Billing Tariff does not include a per-kW monthly charge on new PV systems. CALSSA describes the removal of this provision by CPUC as a small victory.

Tens of Thousands of Solar Jobs at Stake

CALSSA has warned that The Net Billing Tariff will result in business closures and job losses, and the record of similar changes to net metering policies in other states supports this. Dismantling of net metering policies in Hawaii and Nevada in 2015 resulted in declines in both market and reduced employment, with the number of solar jobs falling 15% in Hawaii and 22% in Nevada in 2016.

Nevada reversed course and re-instated net metering 18 months later, and state solar employment subsequently rose in 2017. Hawaii held firm and the state’s solar employment fell another 22% in 2017, with the longer-term impact unfolding as a shift in the market to solar plus storage.

CALSSA concerns are noteworthy, with Solar Jobs Census reporting California’s solar industry represented 75,712 of the United States’ 255,037 solar jobs in 2021. Consequently, if California experiences a proportional number of job losses to those in Hawaii or Nevada in 2016, this would affect more than 10,000 workers.

As was the case in the previous “Net Metering 2.0” decision, customers who install a PV system will be required to adopt time-of-use (TOU) rates for the electricity they consume. The combination of TOU rates and a shift to avoided cost incentivizes PV system owners to either self-consume the electricity their PV systems generate, or to export it during evening hours when demand is highest. These use cases are best enabled by pairing battery storage with PV systems.

CPUC anticipates NEM 3.0 will drive an increase in solar plus storage installations, and while CALSSA agrees that it will cause customer who install PV to pair it with batteries it warns that the Net Billing Tariff could result in a reduction of the overall volume of solar-plus-storage systems deployed in California. Indeed, the organization expects the larger solar market to contract as well due to longer payback periods for solar PV systems, even those with battery storage. “With high costs, supply chain constraints, inflation and permitting and interconnection delays and challenges, it will take years before the storage market can match the solar market,” warns CALSSA.

The adoption of the Net Billing Tariff decision starts the clock on a 120-day “sunset period” during which customers can install PV systems and still apply for interconnection under the previous rules. Within one year of the decision (15 December 2023) utilities must have their systems in place to begin enrolling customers under the new rules.

Source: Decision Revising Net Energy Metering Tariff and Subtariffs (CPUC)

U.S. Battery Storage Capacity to Reach 30 Gigawatts by 2025

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By Anjali Joshi

According to the latest report by the U.S. Department of Energy’s Energy Information Administration (EIA), U.S. battery storage capacity is expected to triple in the coming three years, driven by an increase in the number of hybrid projects, especially solar and storage. An EIA inventory of active projects shows that as of October 2022, utility-scale battery storage capacity stood at 7.8 GW in the United States. Developers and power plant owners have plans to increase utility-scale battery storage to 30 GW by the end of 2025, including adding 1.4 GW of battery storage capacity in the final three months of 2022.

Source: U.S. Department of Energy

Battery storage capacity was negligible prior to 2020 but picked up the pace in the United States in 2020. EIA expects total capacity to reach 9.1 GW by the end of 2022, then double to 19 GW in 2023 and hit 28.4 GW in 2024.

The growth rate of U.S. battery storage capacity is expected to outpace the historical rate of solar capacity growth. While U.S. utility-scale solar capacity increased from less than 1 GW in 2010 to just 13.7 GW in 2015, utility-scale battery storage capacity is likely to increase from 1.5 GW in 2020 to 30 GW in 2025.

As more and more intermittent sources of energy like wind and solar are being put online, battery storage is becoming a necessity to store extra energy for later use and add stability to the grid.

The Inflation Reduction Act (IRA) has provided additional incentives to spur deployment of battery energy storage projects, including allowing the Investment Tax Credit (ITC) to be applied to standalone energy storage and extending the 30% ITC through 2032.  CEA expects both of these changes to help to drive the development of 30 GW of storage capacity by 2030.

Despite California accounting for the most utility-scale solar capacity, Texas holds the highest share of the utility-scale battery capacity which is slated to come online between 2022 and 2025. While developers plan to add 7.7 GW of solar capacity in California from 2022 to 2025, 10.5 GW of solar capacity is planned in Texas during the same period. In addition to solar, Texas currently accounts for 37.2 GW of wind power capacity, the highest in the United States. Developers plan to add another 5.3 GW of wind over the next three years, thus ramping up the need for grid-scale storage solutions in the state.

As the aggregate capacity of battery storage projects grows, so does the size of individual battery storage systems. Before 2020, the capacity of the largest battery storage project was 40 megawatts. In 2020, California’s 250-megawatt Gateway Energy Storage System marked the beginning of large-scale energy storage installations in the country. At present, the largest operating battery storage project in the United States is in Florida, the 409-megawatt Manatee Energy Storage. Developers have plans to build over 23 large-scale battery storage projects, ranging from 250 megawatt to 650 megawatt, by 2025.

Source: U.S. battery storage capacity will increase significantly by 2025 (EIA, Today in Energy)

Interior Department Holds First Pacific Coast Offshore Wind Lease Sale

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By Christian Roselund

On 7 December 2022 the U.S. Department of the Interior announced the results of its offshore wind lease sale for sites of the California coast, drawing high bids that totaled $757.1 million for five lease areas totaling 1,511 square kilometers. The five companies with high bids include RWE, Equinor, Invenergy, and an affiliate of Copenhagen Infrastructure Partners.

This is the Interior Department’s first offshore wind lease sale on the Pacific Coast. Unlike the Atlantic Coast, where turbines can be anchored to the ocean floor in shallower water, these West Coast lease areas are in deep water and will require floating wind turbine designs. The sites auctioned off have the capacity to host 4.6 gigawatts of wind turbines.

The Interior Department has noted that the $757.1 million is far more than was paid for the first sites offered on the Atlantic Coast. However, the $0.501 per square meter figure for West Coast sites is less than a quarter of the $2.21 per square meter that was raised in the sale of offshore wind leases off the coast of New York and New Jersey in February 2022. UtilityDive cites the absence of state mandates for offshore wind and secured power purchase agreements as drivers of the lower cost.

The West Coast sale included a 20% credit adder for bidders who committed to donate money to programs to support workforce training programs, the development of a domestic supply chain, or both. There is an additional 5% credit adder for bidders who committed to entering into community benefit agreements.

Source: Biden-Harris Administration Announces Winners of California Offshore Wind Energy Auction (Bureau of Ocean Energy Management)

News coverage: First West Coast offshore wind lease auction generates $757 million, lagging East Coast result (UtilityDive)

Energy Department Closes on $2.5 Billion Loan for Battery Cell Factories

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By Christian Roselund

The U.S. Department of Energy’s Loan Programs Office (LPO) has closed on a $2.5 billion loan to a joint venture of General Motors and LG to finance the construction of lithium-ion battery cell factories in Ohio, Tennessee, and Michigan. Ultium Cells plans to make large-format, pouch-type nickel manganese cobalt aluminum (NMCA) cells for electric vehicle batteries at the factories.

This will be the first time that LPO has closed a loan through its Advanced Technology Vehicles Manufacturing (ATVM) program exclusively for battery cell manufacturing. LPO provides both guarantees for private loans and direct loans, and the Inflation Reduction Act enabled LPO to make the loan to Ultium by providing $3 billion in funding.

The three new factories are expected to support 5,100 permanent operating jobs and 6,000 construction jobs. The factories will be in Lordstown, Ohio, Spring Hill, Tennessee, and
Lansing, Michigan.

As of 30 November 2022 LPO had 98 active applications for projects totaling $98.7 billion in requested loans and loan guarantees. The projects span advanced vehicles, advanced nuclear, biofuels, virtual power plants, carbon management, transmission, hydrogen and other technologies. This is the third project that LPO has closed on during the Biden Administration. The first two were a $504.4 million loan guarantee to the Advanced Clean Energy Storage project in Utah in June 2022 and a $102.1 million direct loan to graphite anode material provider Syrah Vidalia in July 2022. 

Source: U.S. Department of Energy Announces $2.5 Billion Loan to Ultium Cells for Three Domestic Battery Cell Manufacturing Facilities (U.S. Department of Energy)

Interior Department to Update Plans for Solar on Public Lands

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By Christian Roselund

On 5 December 2022 U.S. Interior Secretary Deb Haaland announced that the Bureau of Land Management (BLM) will update its guidelines for solar projects on public lands through its Solar Programmatic Environmental Impact Statement (PEIS). Additionally, the agency is initiating reviews of three proposed solar projects on public lands in Arizona totaling 1 gigawatt and has revealed a portfolio of 65 renewable energy projects on public lands across the country which total over 31 gigawatts.

The Solar PEIS was first published in 2012 and identified locations in Arizona, California, Colorado, Nevada, New Mexico and Utah that have high solar potential and limited resource conflicts. BLM states that its 2022 update to the document is driven by improved technology, new transmission, and more ambitious clean energy goals. BLM also says that the updated document is needed to identify areas in additional states, increase opportunities for renewable energy development, and develop criteria to exclude areas with high resource values from energy development.

The new PEIS will include at least one area in each of the following states: Idaho, Montana, Oregon, Washington, and Wyoming. This brings the number of states under study to 11. The BLM manages 1.001 million square kilometers of public land, most of which is in these 11 states under consideration and Alaska. As much of this land is arid lands such as grasslands, scrub, and desert, it includes vast areas with excellent natural solar potential.

BLM is accepting public comments on the scope of the analysis, potential alternatives, and identification of relevant information by 6 February 2023. Additionally, it will hold two virtual and 12 in-person public scoping meetings in all 11 of the states under study, as well as Washington D.C.

Source: Notice of Intent To Prepare a Programmatic Environmental Impact Statement To Evaluate Utility-Scale Solar Energy Planning and Amend Resource Management Plans for Renewable Energy Development (BLM, Federal Register)

Press release: Secretary Haaland Announces New Steps to Accelerate Solar Energy Development on Public Lands in the West (Department of the Interior)

First PV Modules Released under UFLPA

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By Christian Roselund

On 30 November Roth Capital reported that Customs had released a shipment of Jinko Solar’s PV modules utilizing polysilicon from Wacker Chemie from detention under the Uyghur Forced Labor Prevention Act (UFLPA). The investment banking company also stated that a second, “smaller” shipment of modules had been released, but did not provide the module maker or other details. CEA has heard from another source that this second shipment featured modules that also utilized non-China polysilicon.

CEA has confirmed with Jinko that its products have been released, and Jinko is stating that this release represents multiple shipments but did not provide more detail. This makes this the first confirmed release of PV module shipments from detention under the UFLPA in the more than five months that the law has been in effect.

Wacker Chemie makes polysilicon in the United States and Germany. CEA believes that this is a factor in the release of these modules from detention, as Customs has stated that it will be more difficult to get cells & modules with Chinese polysilicon released from detention.

UFLPA detentions began in June 2022, and during the last five months Customs has detained more than 1,000 shipments of PV cells and modules. CEA has confirmed that product from LONGi and Jinko has been detained and Reuters and other sources have stated that Trina Solar product is also detained. However, we do not know what capacity of cells and modules are in detention, as shipments vary in size and Customs has declined to provide additional information.

The overall impact of UFLPA on the U.S. solar market is hard to determine. However, in its most recent quarterly results Jinko admitted that it has shipped 2 gigawatts of PV modules that were intended for the United States to other markets due to concerns that these would be detained.

Source: CEA Research

Approval of PJM Queue Reform;
3-Year Pause on New Projects

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By Christian Roselund

On 29 November 2022 federal regulators approved a proposal by the nation’s largest grid operator to reform its interconnection approval process. Under the proposal, PJM Interconnection will move to a “first-ready, first-served” review process that groups projects in clusters for purposes of studying and allocating costs. Additionally, the Federal Energy Regulatory Commission (FERC) is allowing PJM to freeze new interconnection requests for three years and as a result the grid operator will stop accepting new requests until 2026.

PJM’s move is the latest by U.S. grid operators to reform their interconnection queue processes and follows similar reforms by the Southwest Power Pool and Midcontinent Independent System Operator. However, the three-year pause is unique to PJM and has been criticized by both clean energy advocates and commissioners at FERC, with Commissioner Allison Clements stating that she is reluctantly approving the reform.

The capacity in PJM’s queue has grown every year since 2017, reaching more than 250 gigawatts in May 2022, more than three times the capacity in 2017. This May 2022 figure represented more than 2,700 active projects, and solar, battery, and solar plus battery projects represent more than 95% of these. As this has happened the median duration between when a project applies for interconnection and when it is completed has stretched to roughly four years.

To clear out this massive backlog, PJM plans to implement a “transition phase” in early 2023 where it will prioritize half of the pending projects, including a “fast-lane” for projects that meet its criteria. PJM will also make changes to its standard interconnection processes, and FERC is requiring new language to confirm that only new service requests with no network upgrade cost allocation and no need for further studies are eligible for accelerated review.

PJM has blamed much of its backlog on speculative projects, and to crack down on these it will implement new requirements including “readiness deposits” and three decision points at which new requirements will be imposed and developers will have an opportunity to move forward or withdraw. At the third decision point, developers will be required to have site control for the project to
move forward.

Source: Order Accepting Tariff Revisions Subject to Condition (FERC)

News coverage: FERC approves PJM’s ‘first-ready, first-served’ interconnection reform plan, steps to clear backlog (UtilityDive)

Preliminary Solar Anti-Circumvention Decision Published

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By Christian Roselund

Image kees torn – MAERSK MC KINNEY MÖLLER; MARSEILLE MAERSK, CC BY-SA 2.0.

On 2 December 2022, the U.S. Department of Commerce issued its long-awaited Preliminary Determination in the anti-circumvention case covering crystalline silicon PV imports from Cambodia, Malaysia, Thailand, and Vietnam. While Commerce found circumvention of existing import duties on Chinese solar cells and modules made from them in all four nations, it also provided multiple pathways to export cells & modules to the United States without additional duties.

This decision indicates that Commerce will not significantly restrict module availability from these countries to developers in the United States. We do expect it to boost production of solar bill of materials components in Southeast Asia and other low-cost, non-China locations.

Background

In 2012, Commerce found that crystalline silicon PV manufacturers in China were both selling solar PV cells and modules into the United States at below market value and benefitting from subsidies deemed illegal under U.S. trade law. The resulting anti-dumping (AD) and countervailing duty (CVD) orders led to Chinese module makers importing large volumes of cells from Taiwan to assemble into modules to ship to the United State. A second set of duties on both cells from Taiwan and modules from China in 2014 curtailed that activity.

During the next few years, several leading Chinese solar PV manufacturers including JA Solar, Jinko, and Trina built factories in Southeast Asia to serve the U.S. market. And they were not alone; Southeast Asia was already a destination for module makers including Sunpower (now Maxeon), Panasonic, and First Solar. Over time, more manufacturers including LONGi and others moved to the region, and Southeast Asia became the largest source of modules for the U.S. market. In 2020, more than 75% of U.S. solar imports – both crystalline silicon and thin film – originated in three of the four “named countries” under investigation.

In February 2022, Auxin Solar, a small solar manufacturer in California, filed a petition alleging that manufacturers in the named countries were circumventing the 2012 duties on Chinese solar cells. The basis of the allegation is that the use of Chinese wafers, intellectual property, and bill of materials components made the process in Southeast Asia “minor or insignificant.”

Auxin’s claim has been widely disputed by U.S. clean energy trade associations including the Solar Energy Industries Association and the American Clean Power Association, which have come out against the petition. However, the company has had support from American unions and domestic manufacturer First Solar. Commerce agreed that Auxin’s claim met the minimum requirements for an investigation and launched one on April 1, 2022.

The investigation has seen several twists and turns. As has happened in other AD/CVD cases, the danger of retroactive duties from this investigation froze imports. This led to action by the Biden Administration, which in June 2022 issued an emergency proclamation that voids the application of duties under this investigation through June 2024. Additionally, Commerce has pushed back deadlines twice such that the Preliminary Determination due on 30 August 2022 was not issued until 2 December 2022.

Legal Issues and Market Impacts

The Preliminary Determination reflects many of the complexities and contradictions of this case. While there was a finding of circumvention applied by default to manufacturers in all four nations, four of the mandatory respondents were found to not be circumventing duties.

Some of these companies were found to simply not have much of a connection to Chinese solar manufacturing. Commerce looked at five different factors to determine this, including affiliations with Chinese solar companies, location of R&D spending, and whether material was imported from Chinese affiliates. For other companies, despite strong connections to China, the use of non-China materials was deemed sufficient for a finding of no circumvention. One of the significant points of argument in this case is a legal precedent that the cell is the point of substantial transformation. Clean energy trade groups have alleged that by focusing on the source

of the wafer and other materials, Auxin is attempting to shift “substantial transformation” to the
wafer level.

The Preliminary Determination limits the scope of the investigation to cells made with Chinese wafers and modules comprising three or more of six specified components (silver paste, glass, aluminum frames, EVA, backsheets, junction boxes) from China in the bill of materials. This is a favorable detail for exporters and while SEIA and ACP remain concerned about the precedent set by the “wafer-forward” implications of the ruling, the market impacts are another matter.

CEA has identified 30 gigawatts of ingot and wafer capacity that is either online or will be online in 2025 in the four named countries. Additionally, more than 20 gigawatts of three of the items in the bill of materials list (glass, encapsulants, and junction boxes) are made in Southeast Asia today. For silver paste, this widely available from South Korea and Japan. Currently, aluminum frames are the only item on the list that is solely available from China.

More centrally, for those components that are not made in SE Asia today, factories can be designed, built, and brought online before the end of President Biden’s emergency period. The result is that it should be relatively easy for solar PV manufacturers in the named countries to shift their wafer source and/or bill of materials components to continue to ship to the United States without being subject to additional duties.

The Preliminary Determination in the Big Picture of Solar Supply

The December 2 decision is preliminary, and findings could change in the Final Determination due on May 1, 2023. CEA expects some clarification around the requirements for the bill of materials, but no major changes to the scope.

We expect an increased localization of supply chains, mostly in terms of the named bill of materials components, in Southeast Asia and other low-cost nations to serve factories in the named countries. Along with this, we expect Southeast Asian factories to continue to supply most PV modules used in the U.S. solar market, at least through 2025.

Other significant trade barriers do remain that pose a more significant challenge for solar supply than the anti-circumvention investigation. Notably, there are still more than 1,000 shipments of PV cells and modules detained under UFLPA.

Source: CEA Research

DOE Announces $13 Billion for Grid Modernization, Expansion

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By Christian Roselund

The U.S. Department of Energy (DOE) has announced $13 billion in new funding for projects that modernize the U.S. electric grid to improve reliability and resilience and facilitate the expansion of the transmission network. This includes grants for grid operators, electric utilities, states, tribes, local governments, and a host of other entities. DOE describes this as the largest single direct federal investment in transmission and distribution infrastructure to date.

$10.5 billion of grants are available through the Grid Resilience Innovative Partnership (GRIP) program, including $3.8 billion for fiscal years 2022 and 2023. The full $10.5 billion includes:

  • $2.5 billion: Grid Resilience Utility and Industry Grants to fund transmission and distribution solutions to mitigate the risk of outages caused by natural disasters such as wildfires, floods, hurricanes, and other forms of extreme weather.
  • $3 billion: Smart Grid Grants to increase the flexibility, efficiency, reliability, and resilience of the power system. This includes projects that increase the capacity of the transmission system, prevent faults including those that lead to wildfires, integrating more renewable energy and electric vehicles, and other projects.
  • $5 billion: Grid Innovation Program for projects that use “innovative approaches” to transmission, storage, and distribution infrastructure to enhance grid resilience and reliability.

Additionally, DOE is making $2.5 billion available through the Transmission Facilitation Program to help new transmission projects and transmission upgrades overcome financial challenges and get online. In some states, microgrids will be funded. Under the first phase of this program, DOE is offering to sign capacity contracts such that the federal government purchases 50% of the capacity of new transmission projects to help get them built. Source: Biden-Harris Administration Announces $13 Billion To Modernize And Expand America’s Power Grid (DOE)

Regulator Warns of Blackouts during Severe Winter Weather

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By Christian Roselund

The organization that oversees electric system reliability for North America has warned of potential blackouts across large areas this winter due to the bulk power system not having enough energy – including generating capacity, imports, and in some cases fuel – during severe weather. The North American Electric Reliability Corporation’s (NERC) 2022-2023 Winter Reliability Assessment warns of “extreme weather risks” in Alberta, parts of the Midwestern and Southeastern United States, Texas, and the Atlantic  Provinces of Canada. NERC has also warned that limitations on fuel supply could cause electricity system disruptions during extreme cold weather events in New England.

While the word “climate” is never used in the report, the problems identified by NERC represent the intersection of more severe weather driven by the climate crisis and changes to the electricity system. Specifically, the organization identifies higher peak-demand projections, inadequate weatherization of power plants, fuel supply risks, and limited natural gas infrastructure as key challenges in different parts of North America.

NERC has specifically warned that there will not be enough generation under the most severe conditions in certain areas. This is expressed as reserve margins of available generation and imports that fall below zero in Texas, the Atlantic Provinces, the Midcontinent System Operator (MISO), and Alberta under “extreme conditions.” Texas is by far the worst with a potential -21.4% reserve margin under this scenario.

In February 2021, up to 4.5 million residents of Texas lost electricity in temperatures that fell as low as -19C during Winter Storm Uri. While the state has estimated that 246 residents died, an independent analysis by Buzzfeed New suggests that more than 750, including many who were medically vulnerable, were killed. Texas Governor Greg Abbott blamed the outages on wind and solar generation. However, independent analyses have shown multiple other causes, including the failure of the state’s natural gas system, including both pipelines and natural gas plants, as well as limited electrical connections to other grids, were greater contributors.

NERC notes that after Winter Storm Uri, regulators, the state’s grid operator, and generators have implemented reforms. This includes a move by Texas regulators to designate critical natural gas facilities and to inspect facilities to ensure compliance with regulators. Texas’ grid operator has also procured over 2,900 megawatts of firm fuel supplies for the winter, all of which must keep 48 hours of backup fuel on hand.

Among the areas where warnings are issued, New England stands out. The region is expected to have an above-zero reserve margin even under the most severe operating conditions. However, NERC echoes warnings by the Federal Energy Regulatory Commission and New England’s grid operator that natural gas supplies may be insufficient to satisfy demand from both heating and electricity generation under extreme weather conditions.

NERC issued similar warnings in May 2022 regarding summer reliability concerns. However, despite an assessment of “elevated risk” across the entire Western United States, Saskatchewan, Texas, and the U.S. Plains States and “high” risk for the MISO grid, there were no large-scale power outages during the summer months in these regions.

Source: 2022-2023 Winter Reliability Assessment (NERC)