In a proposed decision issued on June 14, the California Public Utilities Commission is proposing to expand Virtual Net Metering, a program currently being piloted with Multi-Family Affordable Housing, to all multi-tenant buildings. How does this work, and why is it important?
The California Center for Sustainable Energy recently put out a report (pdf) analyzing the subject that says it best:
In most tenant-occupied buildings, each tenant has a separate meter, rather than the building having a single master meter. Separate metering means that each tenant pays for the precise amount of electricity used and encourages each tenant to use energy efficiently. Separate tenant metering is thus beneficial from an energy efficiency perspective. Under current net energy metering (NEM) rules, however, a separate PV system would have to be installed behind each tenant meter for the tenants to enjoy the benefits of NEM. Virtual net metering tariffs allow a property owner to install one solar PV system and share the credits virtually among tenants. That is, the solar NEM credits are determined for the single PV system, and then those credits are distributed mathematically to each tenant’s bill at a predetermined allocation.
VNM tariffs address two major barriers to installing solar PV systems in a multi-tenant context:
1. The added cost and complexity of installing a single PV system behind each individual tenant utility meter.
The VNM tariff allows project developers to install one PV system per service delivery point(SDP), whose kilowatt-hour energy can then be shared with all meters (tenant and common area) on a property that resides behind the SDP. This reduces costs and improves the value proposition of PV installations. It is important to note, however, that in the CA IOU service territories, the VNM tariff does not currently allow for customers behind different SDPs to share a generation resource.
2. The fact that tenants cannot afford the capital expense of solar and are unlikely to stay in a unit for the estimated 25 year life of a PV system.
In almost all tenant-occupied building scenarios, tenants are unlikely to stay in a particular unit or building long enough to make it worthwhile to invest in an individual PV system. Even longer term commercial leases generally involve commitments of no more than about ten years, while solar PV systems can have life spans of more than 25 years. In an affordable housing complex, as in any residential rental situation, tenants have little assurance that they will stay in a unit for a long enough period to make investing in solar viable. VNM enables the property manager to invest in solar on behalf of what will likely be many different tenants over the life span of the PV system.
The game is not over yet: parties will provide comments and reply comments before it goes up for a vote by the Commissioners. But this is a positive step forward towards expanding the solar market in California into new areas. And we’ll have suggestions for making it stronger. But on the whole, nice job, PUC.