Inside California’s world-leading solar and battery shift

Thanks in part to its successful net-metering programme, California comfortably leads the world in solar integration.

All solar technologies — including grid-scale and rooftop PV systems, as well as concentrated solar plants — accounted for 28% of the state’s electrical output in the 12-months to end-September 2023, according to data collated by Stanford University Professor Mark Z. Jacobson.

For context, Chile ranks a distant second on the solar penetration rankings, with a 20% share of the mix in 2023, according to Ember data. Greece is third, at 19%.

California’s success is partly due to its generous net-metering scheme, which incentivises homes and businesses to install rooftop solar panels by giving them credits for any excess electricity they inject into the grid. Until recently, utilities bought energy from customers for roughly the same price that they sold it to them.

The net-metering programme was first launched in the late 1990s. While uptake was limited in the early years because solar systems weren’t yet affordable, the market has boomed over the past decade.

Rooftop solar alone now accounts for 11.3% of the Golden State’s electrical output, according to Jacobson’s data.

And that share will continue to rise, despite a recent paring back of incentives. Since 2020, all new homes are effectively required, by law, to have solar systems. California builds roughly 110,000 new homes a year.

Yes, but: The surge in behind-the-meter installations means demand for electricity from the grid now declines sharply towards the middle of the day, before ramping up again in the evening as the sun goes down. At times, solar meets over 90% of California’s electricity needs.

To help smooth the daily electricity demand curve, the state recently overhauled its net-metering incentives to encourage homes and businesses to pair their solar systems with batteries.

The usual credits for solar-only systems were slashed. Since there’s now less to gain from feeding power into the grid, it makes more sense for a household to store its excess energy for use in the evening period, when power prices tend to be highest.

The new rules also significantly raise credits for feeding back into the grid when demand is high — typically in the hours after the sun has set.

While watering down the net-metering programme sparked a marked slowdown in rooftop solar installations, the new regulatory framework appears to be achieving its objectives.

According to household solar and battery company Sunrun, more than 85% of new solar customers now opt for batteries as well.

“California has a law to go to 100% renewables by 2045, and 60% by 2030, so the Public Utilities Commission and others felt it was necessary to ramp up batteries to replace fossil gas to get there,” Jacobson says.

The government’s Energy Information Administration (EIA) projects that renewables will account for 52% of California’s electricity generation in 2024. Low-carbon nuclear plants will hold an 8% share.

A big battery boom: While households are increasingly helping to shave peak demand, their contribution is overshadowed by big batteries.

On May 7, 2024, grid-scale batteries delivered 7.2GW of instantaneous output at one point during the evening peak, reducing the need for gas. Graph: The California Independent System Operator.

California had 10GW of mostly grid-scale storage capacity as of May 2024. And some seriously large facilities are nearing completion, which will help to reduce the state’s reliance on polluting gas-fired power plants during evening peak periods.

The 460MW Menifee Power Bank, for instance, is being built at the site of the former Inland Empire Energy Center gas plant in Riverside, California.

The rapid advance of grid-scale batteries is being partly fuelled by incentives in the federal government’s Inflation Reduction Act (IRA).

Previously, batteries had to be co-located with solar to qualify for tax credits. Under the IRA, they can qualify on a stand-alone basis.

While it’s early days still, California is already reaping the benefits of its gas-to-battery shift.

According to the system operator, its ancillary service costs were down 45% in the third quarter of 2023, compared to a year before.

“Costs fell due to replacement of spinning reserves with lower-cost non-spinning reserves, less stressed conditions, and increased participation of battery-storage resources, which provide a substantial portion of [California’s] area ancillary services,” it said in a recent market update.

That will help to keep end-user electricity prices in check. California, the world’s fifth-largest economy, has above-average retail electricity tariffs partly because of its lofty transmission costs, which have been pushed up by utilities’ hefty wildfire expenses.

Meanwhile, every other US state that gets more than half of its electricity from renewables has below-average tariffs.

The road ahead: California’s Public Utilities Commission expects 56GW of new clean energy capacity to be added to its grid by 2035, including 4.5GW of offshore wind. 

As a result, the use of natural gas plants will slump 71% by 2035, and 90% by 2039.