California Sees Surge In Solar Installations Paired With Battery Storage

California residents are increasingly pairing battery storage with solar installations, according to the latest preliminary data from the Monthly Electric Power Industry Report. The share of new residential solar photovoltaic systems paired with batteries has surged since data collection began in October 2023. By April 2024, more than half of residential solar installations included battery storage, a significant increase from just over 20% in October 2023.

This shift towards battery storage in solar installations eligible for net metering followed changes to California’s compensation structure. Net metering compensates customers for the electricity they return to the grid by crediting their bills. In April 2023, California revised this compensation method, introducing a new structure called the net billing tariff (NBT). The NBT offers a variable compensation rate that incentivizes pairing solar installations with battery storage. Batteries allow customers to send electricity to the grid during high-demand hours, typically in the evening when solar generation is low.

As of April 2024, solar paired with battery installations represents about 9% of all residential net metering capacity in California, with over 40,000 new installations added between October 2023 and April 2024. These new installations accounted for 232 megawatts (MW) of additional battery storage capacity in the state. This increase in battery storage follows a record amount of solar capacity installed in the third quarter of 2023, which was eligible for compensation from electricity utilities.

California saw a 22% increase in residential solar capacity eligible for net metering in the third quarter of 2023 compared to the same period in 2022. Customers rushed to install capacity before the compensation structure changed, leading to this spike. Although the growth rate slowed in the fourth quarter after the new rules took effect, net metering-related capacity continued to rise. Currently, California has over 12,000 MW of installed solar capacity in residential net metering systems smaller than 1 MW.

Under the new NBT structure, the reimbursement rate varies throughout the day based on when solar electricity is generated. On average, this rate is lower than the previous net energy metering 2.0 (NEM 2.0), which credited generators at a flat retail electricity rate. After the California Public Utility Commission announced a 20-year grandfathering scheme for NEM 2.0 customers, there was a backlog of interconnection applications in the first quarter of 2023, according to an analysis by the Lawrence Berkeley National Laboratory.

Residential units account for more than 70% of the net metering installed capacity in California and about one-third of the state’s total solar capacity. Data from the third quarter of 2023 show that 83,376 new residential net metering photovoltaic systems were installed, compared to 70,152 systems under the old NEM 2.0 rule during the same period in 2022. However, it is unclear how many of these systems requested to be grandfathered under NEM 2.0. In the first quarter of 2024, an additional 46,631 systems were installed. Since January 2022, an average of 21,000 solar systems have been added each month.