In this conversation, Kerim Baran of SolarAcademy and Adam Gerza of Energy Toolbase dig into the impact of the historic passage of The Inflation Reduction Act on the residential and commercial solar and energy storage markets. They also discuss its impact on NEM policies in California and beyond and discuss the main trends in NEM right now. Brian Hayden of HeatSpring contributes a summary of the conversation at the end.

Kerim and Adam discuss the following: What were the gridlock issues prior to this Act passing and what changed? What are the implications of this for Solar + Storage markets? Which segments will be affected the most and how: utility, commercial, resi? What does this mean for the rest of 2022 and beyond? What are the major issues with NEM policies? CA NEM 3.0 status, key issues, resolution timelines? NEM 3.0 implications for the rest of the US and the world? What is next: status of NEM policies. Below is the video.

Below is the video transcription.

Kerim Baran of SolarAcademy: This is Kerim Baran with SolarAcademy. We have today with us Brian Hayden of HeatSpring. Thanks Brian, for prompting this session. It was actually you asking me about the implications of the Inflation Reduction Act for the solar industry and the various pockets of solar markets and what that means.

The first name that came to my mind was Adam Gerza of Energy Toolbase. As folks in the solar industry would know, Energy Toolbase is one of the established solar software players in the market that has been critical in calculating the value of solar for solar projects at the residential and commercial space for close to a decade now probably. And they are also intimately familiar with local state level and federal incentives and policy around solar across the nation. So I invited Adam to join us. Adam, thank you very much for being here. And let’s just start talking about the Inflation Reduction Act and what that means for solar in the US and worldwide.

Adam Gerza of Energy Toolbase: Thanks for having me.

Kerim: Yeah. So, what do you think, Adam? Look, this is a great milestone, obviously, for the solar industry and climate issues. What’s your overall take? Can you summarize for us what this means going forward? 

Adam: It’s hard to overstate how just huge this is on so many levels. And also, you know, obviously just the way it all came together. I think a lot of folks were really, really pleasantly surprised when the news broke. Just a couple of weeks ago a lot of policy insiders were reporting that this bill was left for dead and got the midterms right around the corner. So it went from extreme pessimism to, “my God, this is happening.” Yesterday it was signed into law, which is just an incredible three weeks. 

As it relates to solar and storage, where we spend all of our time thinking. Again, just for context, Energy Toolbase, we really primarily operate behind the meter in residential and commercial settings. This obviously has huge implications for every segment of the market. Resi, C&I, front of the meter. The tax credits obviously touch all of those segments. But it’s just massive on every level. Obviously for us, the big pieces, the tax credit extension and certainty. We’re doing a lot of research and analysis on some of these adders, which I think we’ll get into and what it means for economics.

And then also, of course, certainly we’re doing lots of thinking and just really, really excited for the standalone storage tax credit, which is, you know, for solar and for storage it was really an extension of what we previously had. At the 30% level, which is incredible. 

Kerim: Previously, what was that? I mean, we were already starting to go down. We had a nice 30% investment tax credit for all solar assets for the last decade or so plus actually, probably. And then it started going down on a schedule of 26, 22, 20 and 10 was the plan. And we had already gone down to 26 and now with this new law we are back up to 30 for not only all solar assets but also for storage, not only coupled with solar but also independent storage. Correct?

Adam: Bingo. It was a 26% stepping down next year to a 22% and in 2024 stepping down to a 10%. So we were looking into this cliff, frankly, is the best way to call it. And now here we are with just 10 year certainty at that 30% level. 

Kerim: Is it 10 year certainty though? Because I have read some things that talk about this concept of production tax credit versus investment tax credit and how the investment tax credit could over time shift into some production indexed tax credit as well. So, are we definitely getting the ITC extended for 10 more years at 30% or do we have the option to choose for a production tax credit? If that adds up to being more than the ITC, I guess, is that the question?

Adam: Both. That we definitely have with certainty have a 10 year extension of the 30% investment tax credit going through 2032. Just crazy to say out loud, like my God. And then it steps down in 20303. It’s even hard to think about a step down 11 years from now. So we have absolute certainty on the 10 year ITC extension at 30% and then another really, really critical provision in the bill allows solar to claim a production tax credit in lieu of the investment tax credit. So you can elect to take a PTC instead of an ITC. 

The PTC, by the way, is what’s driven the wind industry for at least a decade.

Kerim: It’s kind of like a feed and tariff type tax credit though, right? Something like that, I guess. 

Adam: Yeah, that’s correct. That’s probably a good analogy cause it’s value for production. And there’s step downs with inflation. We’re still wrapping our heads around it. Like if you really dig into the language, there is inflation adjusted. I’ve read some analysis from really respected law firms that seem to think that for large solar projects, they’re going to be better off electing to go the PTC route instead of the ITC route.

It’ll depend, of course, on your cost basis and how much production you’re getting. But that may become very common. We haven’t fully understood it yet on our side. 

Kerim: Got it. And that applies to both solar and storage as well, or I guess?

Adam: I’m almost certain on this and I want to kind of have disclaimers in places where I’m not really, really black and white rock solid, but I’m almost certain that it applies only to solar. I don’t think there’s any PTC.

Kerim: Where there’s production, not storage necessarily.

Adam: Correct. On the PTC. 

Kerim: Yeah. Makes sense. And then I’ve also read and heard some things around direct pay. Especially, I think it applies to nonprofit sector maybe, and maybe other pockets of solar too, which is a different kind of benefit than the ITC, because ITC really applies to your tax. It’s almost as good as cash because it lowers your tax obligation. So cash coupon that you can use with the federal government. But then there’s direct pay, which is actually, you’re getting paid cash for solar, but only doesn’t apply to residential or commercial, but applies to nonprofits. Is that, is that right? 

Adam: We’ve been digging in depth on that language and a lot of folks are writing and publishing opinions on who’s eligible. So one of the provisions of direct pay, which is a huge, important, critical piece of this bill, that differed from the original language is my understanding from the Build Back Better bill last year, where a lot of this language came from they more narrowly defined who qualifies for direct pay.

I’m just looking at some of the summaries, the SEIA summary and some of these law firm summaries. It’s much narrower who would qualify for direct pay. The big category is state and local government. So they are certainly eligible and again, direct pay. You said it correctly, Kerim. It is not a tax credit. It is effectively a direct payment from treasury similar to those 1603 grants from a few years ago that fund some old OGs, remember. It’s very lucrative. 

Besides state and local government, they listed by name a few other categories. Indian tribal governments and then co-ops, basically a corporation operating on a cooperative basis, engaged in furnishing electricity to persons and rural areas. So what does that mean? That means there is a huge swath of nonprofit entities, tax exempt entities, like churches and let’s say schools that based on my read of the language and a lot of the analysis I’m seeing are not eligible for direct pay. 

Kerim: So the churches are still not eligible for direct pay. 

Adam: The language seems to say that pretty clearly. And I would leave that to lawyers to rule on. You can’t be mad. We just gotta all be so grateful that this bill got to the finish line.

But I think if there was one piece that some folks would say, boy, I just wish they would’ve done, was if they would have extended or broadened the direct pay language to any tax exempt, nonprofit organization. And, um, it’s much a narrower.

Kerim: Yeah. But also direct pay is something that could be abused easily. Maybe that was the thinking behind that, who knows. Makes sense. Great. There’s also a lot of other credits, like manufacturing credits and credits for other new tech around climate issues. Can you summarize, can you tell us a little bit about what you know there and what you’ve read about what’s coming?

Adam: Yes. And this is really current. We actually literally just – I’ll give a quick plug. We literally just updated all of these incentives in our database in Energy Toolbase cause we’re already getting calls to say, “Hey, do you have that adder listed?” While we’re on the topic of the tax credit, which is again where most of our focus is, there were three adders, each of up to 10%. 

So you have the low-income community adder and you’ve got to satisfy the letter of the law language to qualify for a low-income community. I think it’s based on census track income levels. So that’s a 10% adder. If you can satisfy that. You’ve got the 10% domestic content adder which is effectively saying for solar and/or storage equipment you have to meet pretty stringent requirements. That it is manufactured in the US. 

Kerim: I think 40% content has to be domestic. 

Adam: Yes. And I think they even had a step-down schedule. So we’re talking 10 years here. I think the percentage of domestic content requirement phases down or phases up over time.

Kerim: I think it phases up.

Adam: I think you’re right. Sorry. That would make sense. Right? 

Kerim: Right.

Adam: Yeah. Give manufacturers a chance to build out. I think you’re absolutely right on that. Yeah. 

Kerim: So that adds another 10%. And I think there was another 10%.

Adam: There is the other, the third one, which is an interesting one. And this probably was an old Joe Manchin slip. And this one is this, they’re calling them energy communities adder.

Kerim: And basically what this is saying is so you build all these assets in a coal town or something. 

Adam: Bingo. And they have very specific language there. If a coal plant closed in 1999 or later.

Kerim: No. I mean, technically a whole project could be built with 60% ITC and you also get still the good old accelerated depreciation benefits, which is close to another 20-30%. You’re basically getting the whole asset for free. 

Ada: I think it’d be really, really hard to find projects that satisfy all three of those.

Kerim: But still it is an amazing.

Adam: No doubt, no doubt. And these adders and they’re going to get leveraged for sure. I think the low-income community one, especially for us, we’re already doing thinking around territories where disqualifies. But it’s really, really important mentioning those three. 

Kerim: Great. Yeah, well, anything else on this new build that we need to share with the folks in solar? Especially folks in residential and commercial in the long tail of the solar industry?

Adam: Yeah. Most of our focus has really been on the tax credit side cause that’s what developers and our customers are applying for. The other big piece was that prevailing wage and apprenticeship requirement language. So basically this only applies to projects megawatt and above. My understanding both for solar and storage. So if you’re doing megawatt solar or megawatt and above storage you absolutely are going to be satisfying these prevailing wage and apprenticeship requirements. If you don’t, you’re effectively looking at a 6% ITC.

Kerim: Versus 30%.

Adam: Versus 35 X higher. So I just can’t think of any scenarios where you’re not going to satisfy those requirements. And that’s obviously a, call it what you will, but that is a labor provision that came into the bill. And that’s a big piece of it. And I think folks will be thinking about that, especially that are building the bigger projects. Let’s say we talked about direct pay. Transferability is a big deal. This is getting a lot of coverage, you know, the ability for entities to transfer their tax credits to a third party. I think that certainly is for PPA and tax equity folks. You could probably find a better guest than me to speak to.

Kerim: Yeah. I was thinking Lee Barkin from CollectiveSun would probably be the right person to discuss that with. 

Adam: Definitely. Definitely. So that was one is definitely worth mentioning. And the other one that we’re certainly highlighting is the extended carry back and extended carry forward. So it previously had been the ITC language in place for quite some time. It was a one year carry back. And it was a 20-year carry forward. Say you get your 30% tax credit, say you don’t have enough tax liability in that tax year to monetize that entire tax credit, you could continue to carry it forward for 20 years subsequently until you exhausted it.

They improved both the back and the forward. So the new language is a three year carry back and a 22 year carry forward. I think the three year carry back is the really interesting one. My interpretation of that is if you had a tax bill up to three years ago that you paid out. Frankly incredible.

Kerim: Or do you get money back? I guess you get money back. 

Adam: I think it would effectively be a refund. Yeah and again, get a tax lawyer to give an opinion on this, but I think there’s no other way to interpret that language then if you’re getting your payment that you already made back.

Kerim: Right. Right. 

Adam: So that’s another big one. And then there’s, of course, domestic manufacturing credits. We haven’t looked at that as much. I know that’s getting talked about. 

Kerim: There are many, many cents on a provide basis that you get as credit on. Domestic modules, inverters and various other equipments, I believe. And then there’s also some credits related to heat pumps and other new tech that helps lower emissions, but I’m not too sure on the details of that. That probably doesn’t really apply to your business as much.

Adam: Yeah. I read it at a high level and I know it just going to help electrification. Even in residential homes. I know linear generators, which is kind of a little niche category, but maybe a growing one explicitly was deemed eligible. So there are some other technologies that were really explicitly said, “Hey, these are also eligible,” which is probably going to be a pretty big tailwind for those folks. 

Kerim: Well, thank you for all this wealth of information, Adam. One other thing I want talk about is these federal policies are great at the nationwide to move solar nationally, but ultimately where rubber hits the road is locally and locally all solar is still dependent on local net metering policies by states or utilities. And as you know, we deal with thousands of different utility companies in this country and each one, each state at the very least has its own net metering policies. Sometimes they might differ within the state too. You probably know that better. 

And here in California, especially Southern California, we are deeply familiar with net metering 1.0, net metering 2.0 and now net metering 3.0 is being worked on and will probably roll out soon. What can you tell us a little bit about that side of the equation and what is to come? How did net metering rules change from 1.0 to 2.0. And then what might we, with 3.0 in California, and what are the implications of that for the country and beyond?

Adam: A lot of questions there and these are all open questions. NEM is something I followed very closely now my 14 year career. I’ve been around a little while, especially the last several years. I certainly have watched NEM policies in different states pretty closely and precedent is getting set with each decision. Certainly NEM 3.0 in California is the big one. Everybody’s top of mind. We’re still in this. It’s really interesting. The timing of this Inflation Reduction Act and its 10 year ITC extension. And there is kind of chatter in policy circles: will this have some impact on the Californian NEM 3.0 proceeding?

Given that we’re still waiting on this revised final decision, remember we got the initial proposed decision. I think it was back in December. 

Kerim: What was that? $60 a month or something.

Adam: It was really vigorously rejected within the solar community. Just people marching in the streets with how destructive that would’ve been for the industry. Where that original PD landed they effectively went back to the drawing board and said, “Okay, we’re going to rework this. And here we are in the middle of August and we’re still waiting to see that revised final.

And the question is does this 10 year ITC extension play into the NEM 3.0 decision and if you’re asking my personal opinion, I would be surprised if it doesn’t. The CPUC is obviously following the news of the day and seeing this it could, maybe around the edges, change what they land on that final decision.

Just NEM broadly, like you said, it’s just very bespoke. You’re seeing all sorts of different decisions in different states, even down into different utility territories. The general trends 

Kerim: This is the major issue for solar in the US, the way I see it. Australia has 30 plus percent solar already and as a nation, what are we averaging? 2-3% maybe of rooftops of homes have gone solar, less than that? And there are some pockets, like in Hawaii, we have 30%. California is above 10%, but there are many states that are in the low single digit solar penetration numbers. And that is mainly because the power holders, or should I call them hoarders  – utility companies are just not willing to progress and make and pass these new net metering or solar friendly net metering policies when they could easily do that.

These federal policies are great, but still some things need to shift to advance faster into the solar world. Utilities are, I can understand they’re probably scared of the change to come, but there are ways to make these changes that also benefit them and have them still keep their role of connecting all the power generating sources to the consumers. 

So on that note, can you tell us a little bit about like what will change? What changed from net metering 1.0 to 2.0 in California and what might change in 3.0?

Adam: Yeah. NEM 1.0 to NEM 2.0. The big changes were mandating solar customers to move to a time-of-use based rate. So that was one change. And then this introduction of this non-bypassable charge concept was the other big piece – NBCs. The really simple way to think about it is if you have solar and you’re exporting production to the grid, a non-bypassable charge effectively haircuts the rate versus the retail rate.

So let’s just say your retail rate in a certain time-of-use window is 25 cents a kilowatt hour. If the non-bypassable charge, they’re roughly about 2.5 to 3 cents, it’s kind of like where they add up to. So when you export solar to the grid and that’s what NEM is all about, how are those credits valued? Well, in an NBC framework, really quickly you’re basically getting a 2.5 cent haircut. So instead of that production getting valued at 25 cents a kilowatt hour, it’d be getting valued at 22.5 cents a kilowatt hour.

Kerim: Which is still a good solar friendly policy.

Adam: For sure. 

Kerim: And I do understand the utilities’ concern that when solar becomes 10, 20, 30% of the grid, it can cause all sorts of issues for the utility companies. So they have justified concerns there as well. And in the net metering 1.0 world, it was very, very consumer friendly. When I put solar on my home in San Diego, you know, we got full retail rate at the highest rate we were paying ever. And that was great. And now it’s time-of-use based and you’re getting the credit at the time you’re producing. Which is still good at least in Southern California.

What are the issues being discussed for net metering 3.0 in California? And how does this play out in other states? Are they looking at California? Are they looking at other or do they come up with their own creative ways to deal with this? Do you see dozens of different ways this plays out or are there one or two, three major ways that they structure these policies?

Adam: You’re seeing dozens of different ways that are in methodologies and structures that are getting proposed in some cases implemented. Absolutely. It’s kind of a patchwork out there. I would say, just to kind of have for context, you mentioned it earlier. I mean, certainly like when you’re introducing successor NEM tariffs, right, and you’re transitioning away from these full retail value NEM structures. The places they usually happen first and the biggest ones are markets that had higher penetrations. You mentioned that Hawaii is the perfect classic example, economically, it’s just the biggest no-brainer of all time.

Kerim: A one and a half year payback.

Adam: I mean literally at the retail rates of their paying. So you just saw massive solar deployments and as a percentage.

Kerim: And now batteries too.

Adam: Absolutely. Because they were the first to really implement sharp or painful successor NEM tariffs. Like I call it NEM 2.0 or however you refer to it. But when they changed the rules, it was they went from effectively full retail to, in some cases, almost zero whereby they have a few different tariffs out there. It’s kind of nuanced, but there are some tariffs where if you export to grid that production is worth zero. Or very close to zero.

Kerim: So they don’t need it at that time. 

Adam: Totally. And the grid is getting strained and it’s exacerbating issues. So there are some legitimate arguments for sure. And I don’t even want to give opinions on whose right and what’s fair. What we’re seeing though is certainly like a Hawaii where now that creates a very strong price signal for energy storage to pair with your solar system and prevent exports to grid and kind of capture those kilowatt hours that you would’ve otherwise gotten valued at zero. So the whole kind of successor NEM tariffs, I think like Hawaii and there were some other states where, you know, it’s, whether how justified or not, it was, it was in high penetration, it was a high penetration market.

California is certainly one of the next biggest high penetration markets. The way we’ve grown the market to which is now why we’re on the brink of a NEM 3.0 tariff. And again you’re seeing just all sorts of proposals in different states in some cases where penetrations aren’t even that high. I think that’s where I take particular issue. It’s like, come on, like, you’ve got 2% penetration on the grid and you’re trying to slash the value of exports! That’s just not equitable. 

Kerim: Yeah. Probably not even smart for their business either at this point or maybe why price it at zero? Price it at something and buy it cheaper than you would be buying it elsewhere.

Adam: Right. Right. And then you have to ask, okay, who makes the decision on these? And a lot of times these are public utility commissions. In some cases there’s very strong influence by the utilities that operate in the state and it depends on the market regulated or deregulated. It depends on a lot of things, but there are certainly some very utility friendly utility commissions out there. And I think that’s where you’ve seen some of these decisions that are in low penetration markets where they’re just gutting. 

Kerim: It’s a pity that these problems need to be solved one at a time across what, 2000 different utilities.

Adam: Yup, it is. We’ve talked about this at industry conferences for many years. I see no end in sight there. Like there’s just no way. This is just my opinion, but I just think those are the folks that make that have the decision in that market and like unwinding that or having some overarching federal standard.

Kerim: Or maybe a suggestive template that is fair. Kind of like how safe notes came about thanks to Y Combinator. I mean, before Y Combinator in the VC industry, every VC would write their own terms and every startup would try to negotiate. And then they came up with a fair template to fund and to structures, startups legally. And now many people use those. I wonder if something like that could be done in the solar industry. I just wonder for the benefit of progressing into 5%, 10%, 25% penetration.

Adam: Good in theory. I haven’t seen any real discussion or a pathway to that happening.cI think what you’re seeing is like all these national trade associations, obviously SEIA and organizations like Vote Solar and then the big national installers, the Sunburns and the Teslas of the world. They’re fighting fights on all these fronts, right. Or they’re in state legislatures and public utility commissions and all these different states fighting back, fighting for them.

Kerim: I guess what we really need is the consumers to understand this and pressure their PUCs and local utility. 

Adam: California’s done a good job of that. CALSSA, I’ll give them a big shot out. I’m on the board of CALSSA, the California Solar and Storage Association. They have a group, what is it? Solar Rights Alliance. And this is an organization made up entirely of solar system owners behind the meter, right? Homeowners, business owners that have made deployments. And that is – it’s awesome. What they’ve done there in a few years time. That is a big voice. They are now oftentimes a party in different proceedings saying, “Hey, this is our voice. We made these investments.” That’s a good point. We should be doing that nationally.

Kerim: So can you tell us a little bit about NEM 3.0? What are the top three issues and, and what might be coming soon? 

Adam: Yeah. So lots and lots of coverage on that. And there’s really good summaries out there. Again I would probably point you to CALSSA for the definitive on what was in the December PD summary. The big ones were the solar tax. I think they’ve referred to this in different names. This was applied to residential projects. I think they called it there the grid benefit charge whereby effectively you would be paying a fixed charge based on the capacity of your solar system. 

Kerim: You pay ?? For a ?? kilowatt system. 

Adam: Bingo. And they had those, I forget exactly where those rates were, but they equated to, I think you even said it like maybe like a $60 – $80 a month fixed charge.

Kerim: Just to connect to the grid.

Adam: Bingo. Just for the luxury of connecting to the grid. And that would just decimate the economics. Another point to make there is even if you add and pair in the battery, the storage system to help prevent exports, that does nothing. You’re still on the hook for that fixed charge. 

Kerim: As long as you’re connected, even if you’re taking in 10% of your consumption.

Adam: Yeah. If you’re grid-tied interconnected and you’re taking service under that new NEM 3.0 tariff. So that’s one then the other big one, of course. Like all NEM debates, wherever you are in the country, it has to do with how are they valuing exports?

The December decision and my understanding is, I’ve been following it pretty closely. I think the final decision probably will have a pretty similar framework to what was in that December decision, which is using this avoided cost calculator to derive what those export values are. It was interesting. They actually went with an hourly model . So basically depending on which of the 24 hours of the day you are exporting production back to the grid that would determine what the value of those exports are. Long story short, like lots of folks. 

Kerim: That’s how my EV charger is charging me right now for electricity that I put into the car. It’s a different rate every hour. 

Adam: Yeah. Yeah. And there’s something to be said about really granular rates that are really reflective of costs incurred. I think that seems like it might be okay if it’s priced reasonably, right? And then that’s the big rub. So like where that price is, and it’s very, very low. On average, once you kind of run a whole year of analysis, all of the analysis we were running and it was very kind of in line with where CALSSA and some other organizations were running it. We were seeing exports on average valued, maybe from like 5 to 6 cents a kilowatt hour. So that’s massive, massive haircut compared to, let’s say a retail rate of 

Kerim: If you divide the first charge, the $60 by five and quintuple the second export charge, then we’re somewhere reasonable, I think, but that’s my opinion. 

Adam: Yeah. Those two things taken together are- you can just do a NEM 2.0 run and you can do a NEM 3.0 run. You can use Energy Toolbase to do that the marginal reduction in economics is really, really large. So those were two of the big ones. There were a lot of other, I don’t wanna say smaller ones, cause they’re all important. There was another one that was really soundly rejected: the concept of changing how long NEM 2.0 customers got a grandfather for?

Kerim: Oh yeah. That used to be 20 years, right? 

Adam: That’s right. And there was a proposal and actually the length of the December CPUC decision, and they took nine months to write that decision after listening to all the party’s testimony and then reply testimony, for them to land on that was 

Kerim: Does that continue on with the house ownership? If you sell your house the new owner gets that?

Adam: I guess I don’t really have a definitive answer on that one, but I think that’s one provision I expect, I don’t wanna speak on behalf of CALSSA, but I think there’s an expectation that that gets walked back on them changing the rules there that was really, really soundly rejected. 

Kerim: Sure. So makes sense. 

Adam: And then there was this concept. I don’t wanna go too deep. There was this market transition credit concept, which is like, okay, “Hey look, we know the rug is getting pulled here.” The value proposition of solar is really gonna get hit moving from NEM 2.0 to NEM 3.0, and then they were looking to kind of soften that blow with this concept of a market transition credit, where they would give you for some period of time and they would kind of phase it back. And I think even in the revised proposed decision, they’re rethinking how they do that. 

But at least CALSSA all along has been calling for a glide path, which is, don’t make the mistake of Hawaii. Don’t go from full retail to zero overnight. My God, the data out there shows how much that industry contracted and how many jobs were lost. 

Kerim: Also what happened is a lot of people just took themselves off the grid in Hawaii, too. That can happen too. I mean, if you live in a place like Hawaii, where there’s plenty of sun and you can put enough batteries in your home and at 50 cents per kilowatt hour rate, you could probably create a self-powered home.

Adam: In my personal opinion, I think that very much comes into play in the mid to long term. I don’t even know at what point that really starts to make. 

Kerim : We won’t see that in the next few years. But when solar gets cheap enough.

Adam: Bingo.

Kerim: People could do that. Batteries get cheap enough. Solar has gotten cheap enough, actually. 

Adam: Very much. You play it forward long term. I mean if you keep reducing the value proposition they take their ball and go play another field, which is they just cut the chord and really isolate. I think for at scale is still a little ways off. 

Kerim: I still find it incredible that Australia can install solar at one third the price that the US does and they have probably 10 times more penetration – well may more than 10. I mean they’re 30, 35% penetrated, whereas we are less than 3%. So that’s just incredible. And lots still need to happen on the solar front for us to catch up. But I guess this is the reality that we live in and these complicated local, state and federal policies are what we have to live with. 

Adam: Yeah, yeah, no doubt in California. It’s fascinating. The parties – utilities on this side, solar advocates on this side. They are a mile apart on what they called for in their proposals. And I actually personally have some friends and have known folks, the CPUC for many years. And I actually have sympathy for them as an organization, cause to split the middle and both parties happy and land on an equitable decision that is fair.  It’s impossible is the right word. Whatever comes out in that revised final, there are going to be elements that both sides hate. So it’s a tricky calculus. Obviously I’m on the solar side.

Kerim: What’s the timing?

Adam: There was actually just an update yesterday from CALSSA. I think that CALSSA is calling for a final revised, proposed decision in early September, I have the email right here. I want to say it’s like the first week of September. And then everybody from there is thinking about, okay, what does that mean? There it is is. “A revised proposed decision that could come out sooner than September 29th.” I think that’s the date on the calendar.

Kerim: After SPI basically.

Adam: Yeah. And then, let’s say maybe it drops in two weeks. The one other kind of element, and this has been pretty widely reported, the CPUC has been very, very, closed-lipped on this. There have not been many leaks. And I know a lot of the insiders that have been just working on this proceeding for the last two years and are as connected as anybody meeting with staff. And I think anybody who’s making predictions about what’s gonna be in NEM 3.0 revised proposed decision is just speculating cause I think they’re keeping it very, very airtight right now. 

Kerim: I guess that’s the way it should be. Sounds good. Adam, thank you very much for this wealth of information you shared with us. I was thinking maybe what we could do in the future is state-specific net metering sessions, if you will. Maybe even incorporate local players and hear their views of what they think of their net metering policies, if we can some regional leaders to talk about it and what they like about there.

Because that way we could come to a more common template that could be the way to show the smooth path to 30% solar penetration for the country. So just some thoughts. 

Adam: Absolutely. I can think of a couple of people to refer to you that are just working so much, so deep in the weeds on these issues all over the country. That would be really, really good. I’d be curious to hear their thoughts if they think that’s realistic, but they’re just tracking and involved in intervening in these proceedings all over the country. 

Kerim: State by state, it has to be tackled, I guess. Thank you very much again for this knowledge. And I feel like we need to expose more of it via video like this, and hopefully, that will enlighten some people. Really appreciate you guys having me on. 

Brian Hayden of HeatSpring: Hey guys, would it be okay? I just wanted to really quickly summarize. I know since I know the least, I just wanted to summarize what I’m taking away as a solar installer, what my three takeaways are gonna be. And then you can tell me if I’m wrong. 

Adam: Love it.

Brian: My action items as a solar installer: 1) I need to update the financial models that I used to sell. So solar’s gotten a lot more attractive for certain customers. I need to get my sales models up to date so that I can appropriately sell and capitalize on those opportunities. And maybe Energy Toolbase is a great tool for that. But step one is understand how the economics have changed. 2) I need to start adjusting my marketing campaigns because there’s a whole bunch of customers who maybe it wasn’t going to make sense to do solar before and now it does. So I need to make sure that I’m getting in front of those customers fast. 3) Just learn more. Sounds like Adam, you’ve got a webinar coming up. SolarAcademy is going to keep featuring stuff. We do that at HeatSpring, CALSSA, whoever your local organization is cause it’s kind of a dynamic and changing landscape. Those are my three. What do you think? 

Adam: I think those are really good. I think those are going through the heads of developers in their markets. We’re even thinking about it from like, okay, the news literally got signed yesterday. What is the absolute front burner priority one? Like, who are they? You know, how are they tweaking those marketing campaigns or who were they outbounding? We just literally went from a 26 to a 30% tax credit. So maybe some of those fence deals that felt it wasn’t strong enough. Maybe you start there and say, “Hey look, we just got a 4% kicker.” We’re thinking a lot about standalone energy storage, which markets are gonna be now viable cause talk about a patchwork, there’s just all these different states and utility territories where there are some rate schedules out there and customers out there that have, let’s say, $25 per KW demand charge. We think that’s viable. And that could be in a small muni territory in Wyoming, where that was not previously in play because the standalone storage tax credit just got implemented.

So yeah, there’s lots of angles like that, Brian. I think certainly people are going to be, looking towards those low-income communities where you can get adders. Those historical energy communities. But yeah, they’re certainly thinking about the next year or two and more midterm, long-term where to find projects and rinse and repeat.

Kerim: Well, thanks a lot. Appreciate you guys. Well, thank you Brian, for initiating this and Adam, thank you for your wealth of information. 

Adam: Thanks for having me.