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Rooftop solar photovoltaic (solar PV) technology plays an important role in California’s energy future. It is not only a cleaner alternative to fossil fuels but also increases our state’s resiliency against climate change shocks by decentralizing the grid. Because of these benefits, rooftop solar has increasingly become mandated through Title 24 building code updates even as it continues to be expensive to install, making it at times a hard choice for affordable housing providers to embrace even if it reduces tenant utility bills and on-going operating costs. This year, California made significant changes to solar incentive programs for multifamily affordable housing through the enactment of Senate Bill 355 (Eggman) and new regulations concerning virtual net energy metering (VNEM), both of which the California Housing Partnership was closely involved with.
SB 355 (Eggman) updates the state’s largest and most successful program, Solar on Multifamily Affordable Housing (SOMAH), which provides incentives for installing solar PV in existing multifamily affordable housing that benefit both owners and tenants. SB 355 expands eligibility and aligns the SOMAH program with other decarbonization programs to make it easier to combine incentives and making solar PV installation feasible for more owners.
SB 355 changes the SOMAH program so that more providers can access the program and it can be layered with other decarbonization programs more easily. SOMAH income eligibility is now aligned with the Low-Income Weatherization Program (LIWP), requiring that properties serve at least 66% of households at or below 80% of Area Median Income (AMI). Additionally, deed-restricted properties owned by tribes, public housing authorities, and public housing agencies are now explicitly allowed to participate in SOMAH. SB 355 also opens the door for new construction and master-metered properties to participate for the first time. Lastly, the program is extended to 2032. The bill will take effect in January 2024 but the California Public Utilities Commission (CPUC) must update its regulations, which we expect to occur in late 2024.
The SB 355 changes in total represent a huge improvement for housing providers and tenants now able to access the benefits of SOMAH. However, regulatory advocacy is still needed to enable the participation of older master-metered properties serving special needs populations because they are not yet explicitly eligible.
Virtual net energy metering, or VNEM, describes the solar PV regulations associated with properties where apartments are individually metered, whereas master-metered properties install net-energy metering (NEM) solar systems. Individually-metered buildings have different meters for the common area and each tenant instead of one meter for the entire building. NEM was contentiously updated in December of 2022 in a way that significantly de-valued the installation of solar PV with the reasoning that solar is now much cheaper than in the past and that battery installations must be incentivized to avoid using fossil fuel generated energy in the evening peak hours. VNEM was slated for updates after NEM, and on November 16th 2023, the CPUC voted to adopt new VNEM regulations. Thanks to advocacy by the Partnership and others, the CPUC felt a lot of pressure to get a workable solution and delayed the VNEM vote three times and set two rate setting meetings, something unheard of in the past.
As expected, the new rules gutted the value of solar PV installation in line with the NEM decision last December. However, there is a vital difference between NEM and VNEM systems, namely netting. Netting is the ability to offset utility usage from the energy generated on-site before importing electricity from the grid. Netting is allowed in NEM solar PV systems such as those installed in single family homes. By cutting the price offered for excess solar energy that is exported to the grid, NEM systems are incentivized to install batteries to use solar PV energy generated at non-peak hours at peak hours on site, thus offsetting the need to pay the utility for electricity and capturing the full value of solar PV. VNEM systems have not been allowed to net the energy generated, and, therefore, the VNEM system to date has not incentivized battery installation. This was the main part of the Partnership’s advocacy: to push the CPUC to allow netting in VNEM systems so that affordable housing providers and tenants could realize the full potential of solar PV benefits.
The new regulations adopted by the CPUC include netting for VNEM systems for the first time, which is a big win. However, the regulations only allow VNEM for tenant meters and continue to exclude common area meters, depriving affordable housing providers of this long-sought benefit and incentive to install battery storage. The Partnership continues to advocate to include common areas for netting partly because without common area netting, state policy goals related to EV charging, for example, will be harder to achieve.
Netting was not the only thing changed in the new VNEM regulations. For one, the SOMAH program has been carved out of the regulations, meaning SOMAH has special treatment. Additionally, tariff adders are incorporated for low-income customers in Pacific Gas and Electric (PG&E) and Southern California Edison (SCE) territories. These adders are additional money added to the regular export price for exporting electricity to the grid. In other words, low-income customers get a better price for selling electricity to the grid. In PG&E territory, the adder is 9 cents for low-income customers while the non-low-income customer has an adder only of 2.2 cents. In SCE territory, it is 9.3 cents and 4 cents, respectively. This suite of regulatory changes, even though not ideal, are much better than the alternative proposed decision which would have made solar on multifamily unfinanceable.
For housing providers, understanding the solar landscape is critical to identifying programs to help cover the cost of solar PV and how to best to install it to benefit tenants and owners. With updates to the SOMAH program and VNEM regulations, the solar landscape will undergo a major change next year that affordable housing providers should begin planning for now and incorporate into future development plans. With this knowledge, housing providers are now better equipped to ensure that properties, tenants, and California are protected and have a more sustainable future.
For more information about these policy changes, contact Policy Advocacy Manager Andrew Dawson at Adawson@chpc.net.
For more information about how to access SOMAH and other solar PV and clean energy incentive programs, contact Sustainable Housing Program Manager Rachael Diaz at Rdiaz@chpc.net.
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