As the country’s leader in solar power, and as its soon-to-be leader in energy storage, California is shaping up to be a battleground over policies that could shape the future growth of these linked and supporting technologies. Some of those battles are taking place in public view, in the halls of the state Capitol or the chambers of the California Public Utilities Commission.

But other battles take place more quietly, in the form of utility memos sent to California homeowners, telling them that their expensive rooftop-solar-plus-backup-battery systems are no longer eligible for the state’s generous credits for customer-generated green power.

That’s one way to describe a battle that’s been brewing in Southern California since May of this year. That’s when homeowners and contractors started learning that utility Southern California Edison has taken up the novel -- and some say inexplicable -- view that their battery-backed solar systems can’t be trusted to be actually pumping solar-generated power back onto the grid.

As SCE wrote in a July memo for solar and storage contractors (PDF), “if a renewable generator is modified so that the battery storage system is integrated into the generator, SCE cannot separately meter the energy from the renewable PV generator and the non-renewable battery.”

That means that, unless the homeowners dismantle their systems to avoid that possibility -- or undergo an expensive and time-consuming process to separately meter and verify these multiple generation resources -- they won’t be able to claim the net metering credits that make up a big portion of solar’s payback.

It’s hard to say how SCE’s new interpretation has affected battery-backed solar installations, since they make up a tiny portion of the state’s residential solar installations. But for installers facing a utility challenge that effectively destroys the business case for projects like these, it can be incredibly frustrating.

“It has astonished me, how far this has gone, how long this has gone, and how much it seems to be spreading,” Phil Undercuffler, product management and strategy director at OutBack Power, which built one of the first systems to be denied net metering under SCE’s new policy, told me in a recent interview.

What makes it even more frustrating, he said, is that his company’s residential battery backup systems “don’t try to discharge the batteries to the grid, because we want to hold the batteries in reserve for the power outage -- because that’s what makes sense.” Instead, they only discharge when the grid goes down, and never discharge onto the grid, as the IEEE 1547 regulations that hold sway in the United States require all household electricity generation systems to do.

To even contemplate using Outback’s batteries to feed the grid in lieu of solar power, “you’d have to bypass a lot of safeguards -- go outside the programming of the unit, do all kinds of jumps,” he said. “And if you did, those kilowatts are not that valuable, not in comparison to the cost of the battery, so there’s no benefit to it.”

Ben Peters, director of solar finance and policy for REC Solar, noted that “these systems have been installed since REC Solar was founded in 1997, without issue.” SCE’s argument “that customers could potentially export battery stored energy for NEM credits fundamentally doesn’t make sense,” he added.

“The credits are far less valuable then the cost of wearing down the battery, and it is not the reason people install battery backup. Furthermore, the inverter is not designed to do this,” he said. “I think SCE would find it difficult to demonstrate an actual situation where this has been done.”

Affected companies and customers took these arguments to the California Public Utilities Commission at a July 15 workshop (PDF), only to be told that the complex and changing regulatory and technical questions on the matter have to be worked out before a determination can be made.

Greentech Media has contacted the CPUC to seek clarification on how it is handling this matter, and is awaiting comment. In the meantime, the question many of the affected solar-storage installers are asking is why this is happening now.

Disputes Over Shifting Definitions of Solar, Storage

Don Liddell, general counsel of the California Energy Storage Association (CESA), an industry group representing energy storage vendors, noted that this potential complication has been on the group’s radar since early this year. That’s when CESA asked the California Energy Commission to clarify how energy storage fits into its newly revised RPS Guidebook (PDF), which sets definitions for the state’s Renewable Portfolio Standard.

“They added a whole new section on storage, and that’s a good thing,” he said in an interview earlier this month. “But shortly after that was when the reconsiderations started happening.” Utilities like SCE have “read into it an interpretation that is understandable, but I think incorrect.”

The confusion stems from how the revised RPS Guidebook defines storage in ways that indicate that combinations of renewable and non-renewable power may not qualify. For example, the proposed new guidebook reads, “If a storage device stores energy after the production of electricity, for example battery storage, then the storage device must only be capable of storing energy coming from the renewable generator.”

The RPS guidebook doesn’t deal specifically with net metering. Instead, it specifies which projects can and can’t earn RPS credits. However, it has been taken as a guide for how to interpret net metering rules -- and that has led, in turn, to a further complication, Liddell said.

That’s because “the net energy metering tariff -- the schedule itself -- has two ways to go” when it comes to qualifying a customer for the credit. “One is the straightforward, non-storage route, which is not controversial.”

“Then, there is an alternative built into that language, that refers to so-called multi-tariff applications,” he said. “That was conceived of years ago as, this is where you want to interconnect a net meter with equipment that’s partly qualifying, and partly not” -- for example, a facility that combines both solar power and fossil-fuel-fired generation at the same location.

But now, he said, SCE and other utilities are looking at battery-backed solar “and saying, OK, in essence, storage has the effect of being non-eligible under some circumstances. If it’s not properly configured, or metered technically or electronically, it can produce that outcome.”

The problem there, he said, is that certifying a multi-tariff application requires an $800 fee for the utility to consider it, “and that’s pretty inhibiting” for a residential solar system. Beyond that, “You’re launched into an alternative analysis which is case-by-case, and is not by any means streamlined. In fact, it’s quite the opposite.”

“The end result is that it costs more, and it takes much longer, and perhaps even indefinite periods of time, with no clear guidelines of what the steps need to be, and what the standards of proof need to be, for an electrical engineer to sign off on this,” he concluded.

A Sign of Broader Conflicts to Come?

This conflict over rules for a still-tiny number of battery-backed residential solar systems might seem rather inconsequential, if it weren’t for the fact that California is now in the midst of redefining both its long-term solar net metering policies, and defining its goal to become the country’s leader in energy storage.

AB 327, a state bill that passed the legislature earlier this month and is expected to be signed into law by Gov. Jerry Brown in the coming weeks, lays out a path for the state’s net metering regime to be extended for years to come. But just how this new regime will work is up to the CPUC to determine -- a process which is sure to bring utilities and the solar industry into conflict.

At the same time, earlier this month the CPUC issued its proposal for how to enact a state law that mandates the state’s big three investor-owned utilities, including SCE, add a combined 1.3 gigawatts of energy storage to the state’s grid by 2020. As with the net metering rules mandated by AB 327, however, that proposal still has to be defined by the CPUC -- and utilities, energy storage vendors and other parties have widely differing views of how that should be done.

At the same time, the CEC hasn’t yet completed the revisions to its RPS Guidebook, Peters said. That leaves him concerned that SCE may be “trying to set some precedents that could be applied to these various proceedings, that six months from now, make it more difficult to integrate energy storage” into solar projects.

SCE spokesperson Vanessa McGrady wrote in an email this month: “We do hope that simpler policies will be implemented as a result of the [CPUC] working group so that our customers will not be frustrated in this way, and so they can be credited for the energy they do produce.”

But OutBack Power’s Undercuffler described a different experience at the July CPUC meeting where these issues were first brought up.

“When we pointed out that these systems -- simple grid-tie with battery backup systems -- have existed in the state of California for over ten years in each of the investor-owned utility regions,” he said, “the response from utilities was, ‘Oh well, I guess we’ll have to go back and reexamine all those systems.’ It was almost like saber-rattling.”

In the meantime, the uncertainty over whether battery-backed solar systems will be able to receive the net metering credit -- or, in other words, whether they’ll still be economically viable for homeowners -- has impacted installers and their customers, Peters said.

One solar installer he talked to “said they’ve had at least a half-dozen jobs canceled because of this uncertainty,” he said. That’s compared to two to three such jobs per week they were selling in Southern California Edison territory before the controversy started, he said.

Undercuffler agreed that the net result has been to put a stop to solar-battery residential installations, at least until the rules are clarified.

“If you’re an installer and think, I could get caught up in a situation where I may not get approved for some period of time -- or worse yet, I may not be approved at all -- you’re not going to quote that job,” he said. “You’re either going to turn it away, or talk that customer out of backup and security for the home, and just do a grid-dependent system.”

Liddell noted that the CPUC is doubtless hard at work “trying to come up with a way to deal with the obvious policy and practical implications that are intertwined by the interconnection rules and net energy metering rules.” But with so many major policy changes on the solar and energy storage fronts, “They can only do so many things at once.”