Fairness and equity for all customers

An independent study on solar in Sacramento finds the following:

 

Maximum value of solar in 2020

7 ¢ per kWh

determined by independent study

Solar customers currently receive

12 ¢ per kWh

FROM SMUD FOR POWER FROM THEIR SYSTEMS

non-solar customers pay up to

$45  a year extra

in 2020 and the cost continues to grow

 

Our commitment to the environment and low rates has been part of our DNA for over 70 years.

As your community owned, not-for-profit electric utility, we are working to provide financially sound and environmentally progressive solutions for all our customers.

In support of our commitment, we're working to create a new rate for rooftop solar customers that allows us to continue delivering clean power at the lowest rates for all customers, while also fairly compensating solar customers for the benefits from their rooftop systems and recognizing their role as early adopters of solar. Any rate changes will be part of a public process and must ultimately be approved by the SMUD Board of Directors.

An important first step of that process is an independent, detailed study of the value of solar and solar-plus-storage in the Sacramento region. 

The results of this study show that because of SMUD’s existing rate structure, we're currently paying rooftop solar customers almost twice the actual value of solar in our area. This difference will continue to increase as more solar is installed in our region and California.

Learn about the results

What is Net Energy Metering (NEM)?

Power plant with an arrow pointing to a home, indicating that the home is using electricity from the power plant.

NEM is the SMUD rate that currently applies to customers who generate their own power, such as rooftop solar. These customers are billed for the energy they use from SMUD. The study finds that under SMUD’s current NEM rate, rooftop solar customers aren’t required to pay the full cost associated with keeping the lights on for the SMUD system.

House with an arrow pointing to a power plant, indicating that the house is selling extra energy to the power plant.

SMUD buys all excess solar energy from these customers at full retail rates, about $12 c/kWh, which the independent study indicates is higher than the actual value of solar on the market.

Two arrows pointing at each other

Rooftop solar creates benefits for SMUD and its other customers, but also creates a lot of “back and forth” interactions on our grid, resulting in more use of the grid by solar customers.

Working together to develop the right solar rate solution.

In 2019, we initiated a comprehensive stakeholder process to develop a new rate structure for our customers with rooftop solar and other self-generation systems. As part of that, we gathered technical experts representing a diverse range of views to provide input on components to be consider in an independent valuation study. The Technical Working Group met several times between mid-October and January 2020 and agreed on 24 valuation criteria to be used as the basis for a valuation study analysis.

The Value of Solar and Solar + Storage Study (VOS Study) was recently completed and is one important input into SMUD’s ultimate NEM 2.0 rate recommendation, which will be brought to the SMUD Board for consideration in 2021. 120+ public comments were received and considered prior to finalizing the report. The VOS Study results started the conversation with the SMUD Board around restructuring NEM rates and will be considered along with many other factors in our rated design process.

We’re collaborating with NEM customers and other community stakeholders to negotiate a new rate for rooftop solar customers that allows us to continue delivering clean power at the lowest rates for all customers, while also fairly compensating solar customers for the benefits from their rooftop systems.

Value in early rooftop solar adoption

We recognize and sincerely appreciate the early investment SMUD’s solar customers have made in clean energy technology to help us achieve our clean energy goals. We respect this investment and commit to developing a new NEM 2.0 rate structure recommendation that provides value to customers who invested in rooftop solar before a new rate structure is adopted. We will recommend these customers continue to receive the current NEM 1.01 compensation rate through 2030. 

  1. SMUD is using the term “NEM 1.0 Compensation” in lieu of the term Grandfathering as the term Grandfathering originated during the US Civil War era and referred to statutes enacted in the South to suppress African American voting.

What were the results of the study?

The VOS Study was conducted by an independent firm Energy + Environmental Economics to accurately value solar energy within SMUD’s service territory. Learn more about our past work

The results of this study show that because of SMUD’s existing rate structure, we're currently paying rooftop solar customers almost twice the actual value of solar in our area. This difference will continue to increase as more solar is installed in our region and California.

This means we're paying solar customers more for their solar generation than its value, and the fixed costs that non-solar customers pay within their energy usage charge will continue to grow. For the complete details of the study, we encourage you to download the study summary or full study. The study also provided an assessment of the cost impacts to non-solar customers based on the application of SMUD’s NEM rate.  

Value of solar

The study found that the current value of solar is 3-7 cents per kWh. This is about 50-75% lower than what we currently pay solar customers under our NEM rate.

Over the next 10 years, the value of solar will decline to 3-4 cents per kWh. This is primarily due to additional solar supply, including utility-scale solar, becoming available.

According to the study, as the value of solar decreases, the amount we pay rooftop solar customers continues to increase. We currently pay customers 12 cents per kWh. In 2030, that increases to 16 cents per kWh. 

Maximum value of rooftop solar generation chart. Values: 2020 - 7 cents per kilowatt hour; 2025 - 6 cents per kilowatt hour; 2030 - 4 cents per kilowatt hourMaximum value of storage plus solar with SMUD parthership chart - 2020: 13 cents per kWh, 2030: 8 cents per kWh

Why change SMUD’s current NEM rate?

SMUD’s NEM rate was initially put in place to help support the then new rooftop solar industry. It was highly effective in helping the industry mature and grow. However, the current NEM rate also creates financial challenges.

All SMUD customers pay for a significant percentage of our fixed costs through their energy usage charges. Customers with solar or other on-site generation don’t use as much energy since they're generating some of their own power and avoid paying their share of fixed costs. This isn’t our rooftop solar customers’ fault – it’s the result of how SMUD’s current NEM rate is applied to these customers.

The study found that because of SMUD’s NEM rate, our non-solar customers, including our low-income customers, are paying more than their fair share of SMUD’s fixed costs. Plus, we pay solar customers full retail rates for the extra energy they send back into the grid, which is more than its value.

According to the report, this means the under-collection of our fixed costs will increase substantially and the costs will be shifted to non-solar customers.

According to the study, currently $25 - $41 million each year is shifted to non-solar customers. That's $26 - $45 added to each non-solar customer's bill every year.

If changes aren't made to the NEM rate structure, the study determined this amount increases to $92 - $94 million by 2030, which adds $90 - $92 to non-solar customer's annual bill.

What are the next steps?

The release of the study is just the beginning. These results are informing conversations with SMUD’s Board, the rooftop solar industry, rooftop solar customers, non-solar customers, low-income advocates and other stakeholders.

As we continue this process, we want to work together with the goal of finding the right solution for all our customers, rooftop solar and non-solar customers alike. At the end of the day, any changes to the NEM rate must be approved by the SMUD Board of Directors as part of a public process.

We invite you to sign up for updates on our process. You can also read public comments about the Value of Solar and Solar + Storage Study.

Sign up for updates

Leading the way to a clean energy future

We’ve been a leader in solar power for decades and continue to lead the way.

Our commitment to clean power, including solar, is part of who we are. We're proud of the accomplishments we've made over the past 3 decades:

  • Helped grow the rooftop industry in Sacramento, investing $250 million in financial assistance for customers to adopt rooftop solar
  • The first utility in the world to bring utility-scale solar, like our Rancho Seco solar project, into our energy mix
  • SolarShares, our community solar program, was the first of its kind and today is one of the largest community solar programs in the nation
  • Partnered with developers to build the first net-zero energy community in midtown Sacramento, featuring rooftop solar and batteries
  • Our East Campus-Operations Center and our Downtown Headquarters campus generate solar power onsite to minimize the environmental impact of our operations

Our environmental commitment was recently reaffirmed by our Board of Directors when they adopted our Climate Emergency Declaration seeking carbon neutrality by 2030. The energy we provide our customers today is about 50% carbon free. Becoming 100% carbon neutral will be no easy feat, but we're up for the challenge.

Learn about our commitment

Stay informed and be heard

Complete the form below to receive updates on a new solar rate, including opportunities to provide feedback and when this topic will be discussed by our Board of Directors.

Public comments

The independent firm, Energy + Environmental Economics, accepted comments on the draft study through August 23. 

Download draft study summary

Download full draft study

View public comments

Sign up for updates

Complete the form below to receive updates on a new solar rate, including opportunities to provide feedback and when this topic will be discussed by our Board of Directors.