California Doubles Down on a Solar and Storage Boom

California Doubles Down on a Solar + Battery Boom

Home batteries are booming – and California is leading the way. Residential storage installations have been growing at a quarterly rate of 61% since the start of 2017, and California and Hawaii are accounting for nearly three quarters of those installations according to Wood Mackenzie Power & Renewables.

Not only that, but a survey by EnergySage indicates that nearly three quarters of home solar shoppers are considering adding batteries too, a powerful sign that this isn’t just a passing fad. The rise of solar + storage is a long-term trend that is transforming the industry, and adding batteries to your product offerings is one of the best ways for solar installers to stay ahead of the competition, grow your business, and boost your bottom line.

Residential storage is already a fast-growing part of Mosaic’s business, as we’ve expanded our industry-leading solar financing platform to cover batteries too (learn more about our solar + storage loan product here). That’s why we’re thrilled that California has also decided to make a long-term commitment to this critical clean energy technology, with a massive incentive program that could help make batteries just as ubiquitous as solar in the Golden State.

Battery Storage Incentives Will Drive Down Costs

California has led the way in residential solar for a lot of reasons, and early and consistent state policy support has been one of the most critical. As California solar industry veterans know, the California Solar Initiative (CSI) played a huge role in catalyzing the market with rebates for rooftop solar between 2007 and 2014.

The Self-Generation Incentive Program (SGIP) is playing the same role in catalyzing the home battery storage market in California, offering rebates based on system size that can cover a significant amount of up-front installation costs. For example, according to the SGIP program site, residential storage installations in Mosaic’s home utility territory (PG&E) are currently eligible for rebates of $0.35 per Wh – or $4,900 for a 14 kWh Tesla Powerwall 2 – enough to cut the cost in half in many cases.

Unsurprisingly, these rebates have been extremely popular.  According to the California Solar and Storage Association (CALSSA), SGIP has already paid out $140 million to support a total of 85 MW of battery installations and committed $190 million to support another 230 MW. With just $130 million remaining and a looming expiration date at the end of 2019, the industry was concerned that this battery boom was in danger of running out of power.

Fortunately, thanks to typically strong support for clean energy from California’s legislature and the incredible efforts of CALSSA and other industry voices, SGIP just got a major upgrade. Fresh off Governor Brown’s desk, SB 700 – authored by the Bay Area’s own Senator Scott Wiener! – will extend SGIP through the end of 2025 and add up to $800 million in program funding. While details of the program’s structure have yet to be finalized, CALSSA predicts that this could result in the installation of approximately 3 GW of batteries in homes, schools, and businesses in California by 2026. Not only that, it will help drive the cost of battery storage installations steadily down, ensuring a sustainable value proposition even after the incentives expire.

The Battery Storage Value Proposition in California

Of course, no one goes solar just to get a tax credit, and the SGIP rebate on its own isn’t reason enough to buy a home battery system. Most homeowners want to see solid economic justification to purchase a battery system, since – like solar panels – they are a significant investment!

So what’s the value proposition for residential storage? As it turns out, it’s tied closely to the evolving value proposition for residential solar. Until recently, the economics of solar in California have been based on simple net metering, with every kWh of solar generated offsetting one kWh of electricity use. It was easy for installers to communicate, easy for customers to understand, and ensured a reasonably predictable return on going solar.

However, that simple value proposition has become significantly more complex with the advent of changes to net metering known as “NEM 2.0.” California utilities are in the process of transitioning to “time of use” (TOU) electricity rates, which means that households will pay more for kilowatt-hours during hours of peak demand – say, 6 PM when everyone’s coming home from work and turning on their lights and TVs – and less for kilowatt-hours during hours of low demand, like the middle of the day.

Battery storage allows your customers to capture the sun’s energy during the middle of the day when prices are lower and use it – or sell it back to the grid – in the early evening when electricity prices are higher.

While all California residents will be transitioned to these TOU rates over the next few years, new solar customers are now being put on TOU rates immediately due to the “NEM 2.0” regulations. This means that the cost savings from solar alone are more difficult to project, since average electricity bills will now depend on a customer’s hourly usage. And, since most solar generation happens during those midday hours of low demand, customers could see a lower return on solar investments than they would have under the previous net metering rules.

Battery storage allows your customers to capture the sun’s energy during the middle of the day when prices are lower and use it – or sell it back to the grid – in the early evening when electricity prices are higher. This gives homeowners unprecedented control over their energy production and use, allowing them to maximize their returns from going solar and allowing installers to simplify the value proposition.

Partners in the Solar + Storage Revolution

Between the SGIP incentive and the transition to TOU rates, there’s a doubly solid rationale for California homeowners to invest in residential storage – and we’re proud to help our installer partners take advantage of this opportunity. With Mosaic, you can offer your customers a simple financing solution to cover both rooftop solar and a home battery system, with a single all-in monthly payment over a 10 or 20 year term. If you’re not already leveraging Mosaic’s solar + battery loan for complete home energy solutions, now is the time to start — please talk to your account manager for details, or click here to learn more!

Finally, as a member of CALSSA ourselves, we want to give a huge shout-out to their tireless effort to ensure SGIP survives, expands, and becomes even more effective at reducing the cost of storage to consumers. If you aren’t already a member of CALSSA, we strongly urge you to join and support their ongoing, critical policy work. You can become a member here or get more information by reaching out to their Membership Director, Carter Lavin.

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