By NICHOLAS THOMPSON
Los Alamos

Recently the rule which governs rooftop solar (E-5) was updated. There were two significant changes that drastically impact the value a homeowner or business can get from installing solar. This, in conjunction with arbitrary limits on the amount of solar allowed to be installed, will hamper residential solar deployment in Los Alamos at a time when we need as much clean energy as we can get.

Starting from the basics, solar systems generate energy during the day when it’s sunny. At night, they don’t do anything. But most people use energy throughout the day and night, and in many cases, energy use peaks just as the sun is setting. This creates a situation where people with solar systems usually produce more energy than they use during the day and consume much more energy than they generate at night. “Net Metering” is the principle that people with rooftop solar are credited for the energy they generate, offsetting the energy they use at different times of the day. With the old rules, if someone generated more energy than they used over the course of a year, they are paid out for the extra energy they produce. It’s important that this is done over the span of a year since solar production is highest in the summer months and lowest in the winter months.

So what changed? First, instead of getting paid the “retail rate” for extra energy generated, which is the rate you and I are charged for electricity, the new rules use the “wholesale” cost of energy. This is a pretty big difference, as the average wholesale rate (0.0826 $/kWh) is only 58% of the average retail rate last year (0.1413 $/kWh). It’s important to note that the difference between the wholesale rate and retail rate includes extra costs like the costs of transmission lines from the provider to town. But rooftop solar produced in Los Alamos doesn’t have to be brought in from outside of town, it’s already here.

Second, the rule changed the time period for credits. Previously, there was an annual true-up to either bill or credit solar owners for the energy they used/produced. However, with the new rule, this is done on a month by month basis. Again, it’s pretty obvious that the maximum solar production will occur during the summer months and the minimum production will occur during the winter months. When the true-up was done on a yearly basis, this wasn’t an issue because it’s averaged out over the year. But now that it’s done on a monthly basis, that will mean that solar producers who make extra power in the summer months will be given a credit of 0.0826 $/kWh, but then have to pay the full retail rate in the winter when they can’t produce enough. This is not typically how net metering is done.

I’m currently in the market for a rooftop solar system and have gotten a few quotes. These quotes are all around $3.00 per watt for a ~10 kW system (or $30,000 total). I’m pretty lucky that my roof mostly faces south, so the estimated production for a system like that is around 16.5 MWh per year. These days many solar panels have 25 year warranties (some are 30 years). There will be some degradation over time though, so for arguments sake, let’s say my hypothetical system produces an average of 14.85 MWh per year for 25 years (371 MWh total). The current retail rate in Los Alamos of $0.1413/kWh, so without rooftop solar, if electricity prices stayed perfectly flat for 25 years, I’d pay over $52,000 for that 371 MWh of electricity. Instead I can pay $30,000 up front and basically not have to worry about paying for electricity for the next few decades, easily saving me tens of thousands of dollars. Or at least that’s what the math would be under the old rules. With the new rules, any excess power I generate will be credited at the much lower wholesale rate, and solar produced in the summer will not help in the winter months (when my electricity bills are the highest).

But, if I wanted, I could just over-build my solar system so that I can match my consumption in the winter months. This would also help in the future as my electricity demand is probably going to increase as I continue to electrify my household. Except the rule E-5 also prohibits this too.

The current rule also stipulates that roof solar systems can only be sized up to the previous 12 months of energy consumption, up to a max of 10 kW DC for residential systems. 10 kW DC is a fairly large system, but will not cover houses that have fully electrified. Again, in my case, we recently installed heatpumps at our house. Just the heatpumps and normal appliances currently used more than a 10 kW system can produce in the winter months. According to PVWatts, a 10 kW system at my house would make ~1100 kWh in December, but my usage this December was over 1800 kWh (272 kWh from charging my car and 1566 kWh from everything else). Realistically, to better cover my current winter demand and future electric needs, I’d want to build a 12.5 kW DC system – too bad the current max is 10 kW. But we wouldn’t be allowed to install even a 10 kW system as my annual usage is not high enough – in 2024, my total kWh consumed was 11700, which equates to about a 7 kW DC system. 

Additionally, since the system can only be sized based on the previous 12 months of consumption, this means waiting a full year after you’ve made big changes in order to actually build a system that is properly sized for your existing needs, let alone future needs. I recently bought an electric car, so under this rule, if I want to properly size my solar system for my *current* needs, I need to wait a year before I install a bigger solar system. 

That said, it does make sense to have some limits or cutoffs in place such that people can’t build enormous solar systems and get large checks from the DPU every month.

So, if I were writing the rule, it would go something like this:

• change the maximum allowed generation per customer to 20 kW DC
• return to the annual true-up of the bill
• pay the retail rate for any energy generated up to 10% over the past 12 months consumption.
• pay the wholesale rate for any energy generated from 10% to 20% over the past 12 months consumption.
• pay zero for any energy generated above 20% of the past 12 months consumption.

For example, if someone’s rooftop solar produced 10 MWh for the year and they used 9.5 MWh, they would be paid the retail rate for the excess 0.5 MWh produced (or about $70 based on today’s retail rate). If someone produced 11 MWh and their consumption was 9.5 MWh, they would get the retail rate for the first 10% above consumption (about $134) and then the wholesale rate above that (an extra $45). If someone produced 20 MWh and only consumed 9.5, they would get the same $134 for the first 10% above consumption and $78 for the next 10% above consumption, for a total of $212, but nothing after that.

A system like this would ensure that people with roof top solar are adequately compensated for their generation if the generation is in line with their consumption, but that compensation would taper off if consumption and production were far out of line. It would also effectively cap the payments per household as well, incentivizing solar systems that match consumption and discouraging overly large systems. And it would also allow households with changing consumption to build a system that is the right size for their household and their future plans.