If you’re a Bay Area homeowner considering solar energy, understanding PG&E’s avoided cost rates is crucial. These rates play a significant role in determining the value of the solar power you generate and share with the grid.
While the specifics can vary, there are some key aspects of avoided cost rates that all solar customers in the PG&E service area should be aware of. This guide will focus specifically on how these rates impact residential solar customers in the Bay Area.
What Are Avoided Cost Rates?
In simple terms, avoided cost rates reflect the expenses an electric utility avoids by not needing to generate or purchase additional power. These rates were established under the Public Utility Regulatory Policies Act of 1978 (PURPA) and represent the minimum amount a utility must pay an independent power producer, like a solar-powered home.
For instance, if your solar panels produce excess energy and you sell it back to PG&E, you’re compensated at an avoided cost rate. This rate would equate to the cost PG&E would incur to generate or buy that same quantity of electricity from another source.
How Do Avoided Cost Rates Affect Net Metering with PG&E?
Net metering for solar customers under PG&E can vary, but usually, avoided cost rates come into play at the end of your billing cycle. Most net metering arrangements allow you to carry over excess credits month-to-month; however, after 12 months, any remaining credits are typically cashed out at the avoided cost rate. This process is often referred to as the “true-up” statement.
Say your solar system generates 12,000 kWh in a year, but your household only uses 11,500 kWh. The surplus of 500 kWh is settled at avoided cost rates on your final utility bill for the year.
The Shift from Net Metering to Net Billing
PG&E’s approach to solar energy has shifted with the introduction of the Net Billing Tariff (NEM 3.0), transitioning from traditional net energy metering to a net billing model. Under this system, the value of your solar exports is calculated based on PG&E’s avoided cost rates.
This change has significantly reduced the compensation for solar exports compared to previous policies. For new solar customers in the Bay Area, this means understanding how these rates affect your overall solar savings is more critical than ever.
Current PG&E Avoided Cost Rates
Avoided cost rates can fluctuate based on various factors, including time of day, fuel prices, and operational costs. In general, these rates are lower than retail electricity rates, often ranging between $0.04 – $0.05/kWh. With California’s high electricity prices, these rates may seem minimal, but they play a significant role in calculating your solar return on investment.
Factors That Can Impact PG&E Avoided Cost Rates
- Timing: Solar energy is often more valuable when demand peaks, typically weekday afternoons and evenings, particularly during summer. PG&E customers are required to shift to a time-of-use rate plan and these higher value times are defined as peak hours
- Fuel Prices: Current fuel prices for electricity generation heavily impact avoided cost values.
- Operational Costs: Expenses like grid infrastructure, transmission losses, and utility overhead will also affect these rates.
Strategies to Maximize Solar Savings
Given the limited incentive to export solar energy at avoided cost rates, many Bay Area homeowners are incorporating battery storage systems. For PG&E customers, particularly those new to solar under the Net Billing Tariff (NEM 3.0), investing in battery storage can enhance savings. By storing excess energy, you can increase your independence from the grid and maximize your solar investment.
Conclusion
For California PG&E customers, understanding avoided cost rates is essential for assessing the full value of solar energy. These rates are the baseline compensation for the energy your system contributes to the grid and play a critical role in your overall savings calculation.
If you’re a new solar adopter or considering a battery storage system to enhance your savings, it’s crucial to stay informed about PG&E’s policies and potential changes in solar compensation models.
By optimizing your solar setup and keeping abreast of PG&E’s evolving framework, you can take full advantage of your investment in solar energy. Fill out the form below to connect with a Solar Technologies Energy Consultant and evaluate your solar options.