Use of electric vehicles associated with fewer asthma-related ER visits on a local level, study shows

Tesla Q2 2020 earnings highlight resilient electric vehicles as production and deliveries outpace legacy automakers, while Gigafactory Austin advances, solar installations slump, and energy storage, Megapack, and free cash flow expand despite COVID-19 disruptions.

Key Points

Tesla posted a fourth consecutive profit, strong cash, EV resilience, solar slump, and rising energy storage.

✅ Fourth straight profit and $418M free cash flow

✅ EV output and deliveries fell just 5% year over year

✅ Solar hit record low; storage rose 61% to 419 MWh

Tesla survived the throes of the coronavirus pandemic relatively unscathed, chalking up its fourth sequential quarterly profit for the first time on Wednesday.

On the energy front, however, things were much more complicated: Tesla reported its worst-ever quarter for solar installations but huge growth in its battery business, amid expectations for cheaper, more powerful batteries expected in coming years. CEO Elon Musk nevertheless predicted the energy business will one day rival its car division in scale.

But today, Tesla's bottom line is all about electric vehicles, and the temporary halt of activity at Tesla's Fremont factory due to local health orders didn’t put much of a dent in vehicle production and delivery. Both figures declined 5 percent compared to the same quarter in 2019. In contrast, Q2 vehicle sales at legacy carmakers Ford, GM and Fiat Chrysler declined by one-third or more year-over-year, even as the U.S. EV market share dipped in early 2024 for context.

The costs of factory closures and a $101 million CEO award milestone for Elon Musk didn’t stop Tesla from achieving $418 million in free cash flow, a major improvement over the prior quarter. Cash and cash equivalents grew by $535 million to $8.6 billion during the quarter.

Musk praised his employees for “exceptional execution.” 

“There were so many challenges, too numerous to name, but they got it done,” he said on an investor call Wednesday.

Musk also confirmed that Tesla will build a new Gigafactory in Austin, Texas, five minutes from the airport. The 2,000-acre campus will abut the Colorado River and is “basically going to be an ecological paradise,” he said. The new Texas factory will build the Cybertruck, Semi, Model 3 and Model Y for the Eastern half of North America. Fremont, California will produce the S and X, and make Model 3 and Model Y for the West, in a state where EVs exceed 20% of sales according to recent data.

Return of the Tesla solar slump

This was the first entire quarter affected by the coronavirus response, which threw the rooftop solar industry into turmoil by cutting off in-person sales. Other installers scrambled to shift to digital-first sales strategies, but Tesla had already done so months before lockdowns were imposed.

Q2, then, offers a test case on whether Tesla’s pivot to passive online sales made it better able to deal with stay-at-home orders than its peers. The other publicly traded solar installers have not yet reported their Q2 performance, but Tesla delivered its worst-ever quarterly solar figures: Installations totaled just 27 megawatts. That’s a 7 percent decline from Q2 2019, its previous worst quarter ever for solar.

Musk did not address that weak performance in his remarks to investors, opting instead to highlight the company’s late-June decision to offer the cheapest solar pricing in the country. “We’re the company to go to,” he said of rooftop solar. “It’s only going to get better later this year.”

But the sales slump indicates Tesla’s online sales model could not withstand a historically tough season for residential solar.

"Every single residential installer in the country is going to have a bad Q2 because of the initial impacts of COVID on the market," said Austin Perea, senior solar analyst at Wood Mackenzie. "It's hard to disaggregate the impacts of COVID from their own individual strategies."

Tesla's 23 percent decline in quarter-over-quarter solar installations was not as bad as the expected Q2 decline across the rooftop solar industry, Perea added.

On the vehicle side, Tesla’s sales declined less than did those of major automakers. It’s possible that the same pattern will hold for solar; a less severe drop than those seen by Sunrun or Vivint could be claimed as a victory of sorts. But this quarter made clear that Q2 2019 was not the bottom for Tesla’s solar operation, which once led the residential market as SolarCity but significantly diminished since Tesla acquired it in 2016.

Tesla currently stands in third place for residential solar installers. But No. 1 installer Sunrun said this month that it will acquire No. 2 installer Vivint Solar, making Tesla the second-largest installer by default. That major consolidation in the rooftop solar market went unremarked upon in Tesla's investor call.

Solar and energy storage revenue currently equate to just 7 percent of the company's automotive revenue. But Musk reiterated his prediction that this won’t always be the case. “Long term, Tesla Energy will be roughly the same size as Tesla Automotive,” he said on Wednesday's call.

The grid storage business offered more reason for optimism: Capacity deployed grew 61 percent from the first quarter, rising to 419 megawatt-hours. The prepackaged, large-format Megapack product turned its first profit that quarter.

"Difficult to predict" performance in the second half of 2020
Tesla withdrew its financial guidance last quarter in light of the upheaval across the global economy. It refrained from setting new guidance now.

“Although we have successfully ramped vehicle production back to prior levels, it remains difficult to predict whether there will be further operational interruptions or how global consumer sentiment will evolve, given risks to the EV boom noted by analysts, in the second half of 2020,” the earnings report notes.

The company asserted it will still deliver 500,000 vehicles this year regardless of externalities, a goal that aligns with broader EV sales momentum in 2024 trends. It already has sufficient production capacity installed to reach that, Tesla said. But with 179,387 cars delivered so far, Tesla faces an uphill climb to ship more cars in the second half.

Wall Street maintained its buoyant confidence in Tesla's share price, despite rising competition in China noted by rivals. It closed at $1,592 before the earnings announcement, rising to $1,661 in after-hours trading.

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Hydrogen vs Battery-Electric Vehicles compare FCEV and BEV tech for range, charging and refueling, zero-emissions, infrastructure in Canada, highlighting urban commuting, heavy-duty use, fast 5-minute fills, 30-minute fast charging, and renewable hydrogen from surplus wind.

Key Points

Hydrogen FCEVs suit long range and heavy-duty use; BEVs excel in urban commutes with overnight charging.

✅ FCEVs refuel in about 5 minutes; ideal for long range and heavy duty.

✅ BEVs fit urban commuting with home or night charging; fewer stops.

✅ Hydrogen enables energy storage from surplus wind and hydro power.

We’re constantly hearing that battery-electric cars are the future, as automakers pursue Canada-U.S. collaboration on EVs across the industry, so I was surprised to see that companies like Toyota, Honda and Hyundai are making hydrogen fuel-cell cars. Which technology is better? Could hydrogen still win? – Pete, Kingston

They’re both in their electric youth, relatively speaking, but the ultimate winner in the race between hydrogen and battery electric will likely be both.

“It’s not really a competition – they’ll both co-exist and there will also be plug-in hydrogen hybrids,” said Walter Merida, director of the Clean Energy Research Centre at the University of British Columbia. “Battery-electric vehicles [BEVs] are better for an urban environment where you have time to recharge and fuel-cell electric vehicles [FCEVs] are better-suited for long range and heavy duty.”

Last year, there were 9,840 BEVs sold in Canada, up from 5,130 the year before. If you include plug-in hybrids, the number sold in 2017 grows to 18,560, though many buyers now face EV shortages and wait times amid high gasoline prices.

And how many hydrogen vehicles were sold in Canada last year?

#google#

None – although Hyundai leased out about a half-dozen hydrogen Tucsons in British Columbia for $599 a month, which included fuel from Powertech labs in Surrey.

In January, Toyota announced it will be selling the Mirai in Quebec later this year. And Hyundai said it will offer about 25 Nexos for sale.

“It’s chicken or egg,” said Michael Fowler, a professor of chemical engineering at the University of Waterloo. “Car manufacturers won’t release cars into the market unless there’s a refuelling station and companies won’t build a refuelling station unless there are cars to fuel.”

Right now, there are no retail hydrogen refuelling stations in Canada. While there are plans under way to add stations in B.C., Ontario and Quebec, we’re still behind Japan, Europe and California, though experts outline how Canada can capitalize on the U.S. EV pivot to accelerate progress.

“In 2007, Ontario had a hydrogen strategy and they were starting to develop hydrogen vehicles and they dropped that in favour of the Green Energy Act and it was a complete disaster,” Fowler said. “The reality is the government of the day listened to the wrong people.”

It’s tough to pinpoint a single reason why governments focused on building charging stations instead of hydrogen stations, Merida said.

“It’s ironic, you know – the fuel cell was invented in Vancouver. Geoffrey Ballard was one of the pioneers of this technology,” Merida said. “And for a while, Canada was a global leader, but eventually government programs were discontinued and that was very disruptive to the sector.”

HYDROGEN FOR THE MASSES?

While we tend to think of BEVs when we think of electric cars, fuel-cell vehicles are electric, too; the hydrogen passes through a fuel cell stack, where it mixes with oxygen from the atmosphere to produce an electric current.

That current powers electric motors to drive the wheels and extra energy goes to a battery pack that’s used to boost acceleration (it’s also charged by regenerative braking).

Except for water that drips out of the hydrogen car, they’re both zero-emission on the road.

But a big advantage for hydrogen is that, if you can find a station, you can pull up to a pump and fill up in five minutes or less – the same way we do now at nearly 12,000 gas stations.

Compare that with fast-charging stations that can charge a battery to 80 per cent in 30 minutes – each station only handles one car at a time. What if you get there and it’s busy – or broken? And right now, there are only 139 of them in Canada.

And at slower, Level 2 stations, cars have to be plugged in for hours to recharge.

In a 2018 KPMG survey of auto executives, 55 per cent said that moves to switch entirely to pure battery-electric vehicles will fail because there won’t be enough charging stations, and some critics argue the 2035 EV mandate is delusional given infrastructure constraints.

“Ontario just invested $20-million in public charging stations and that’s going to service 100 or 200 cars a day,” Fowler said. “If you were to invest that in hydrogen stations, you’d be able to service thousands of cars a day.”

And when you do charge at a station, you might not be using clean power, as 18% of Canada’s 2019 electricity came from fossil fuels according to national data, Fowler said.

“At least in Ontario, in order to charge at a public station during the day, you have to rev up a natural-gas plant somewhere,” Fowler said. “So the only way you’re getting zero emissions is when you can charge at night using excess nuclear, hydro or wind that’s not being used.”

But hydrogen can be made when surplus green energy is stored, Fowler said.

“In Ontario, we have lots of wind in the spring and the fall, when we don’t need the electricity,” he said.

And eventually, you’ll be able to connect your fuel-cell vehicle to the grid and sell the power it produces, Merida said.

“The amount of power generation you have in these moving platforms is quite significant,” Merida said.

There are other strikes against battery-electric, including reduced range by 30 per cent or more in the winter and the need to upgrade infrastructure such as electrical transformers so they can handle more than just a handful of cars on each street charging at night, Fowler said.

In that KPMG survey, executives predicted a nearly equal split between BEVs, FCEVs, hybrids and gasoline engines by 2040.

“Battery-electric vehicles will serve a certain niche – they’ll be small commuter vehicles in certain cities,” Fowler said. “But for the way we use cars today – the family car, the suburban car, buses and probably trucks – it will be the fuel cell.”

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EV battery supply strategies weigh in-house cell manufacturing against supplier contracts, optimizing costs, scale, and supply-chain resilience for electric vehicles. Automakers like Tesla, GM-LG Chem, VW-Northvolt, and Ford balance gigafactories, joint ventures, and procurement risks.

Key Points

How automakers secure EV battery cells by balancing cost, scale, tech risk, and supply-chain control to meet demand.

✅ In-source cells via gigafactories, JVs, and proprietary chemistries

✅ Contract with LG Chem, Panasonic, CATL, SKI to diversify supply

✅ Manage costs, logistics, IP, and technology obsolescence risks

Auto makers, pumping billions of dollars into developing electric cars, are now facing a critical inflection point as they decide whether to get more involved with manufacturing the core batteries or buy them from others.

Batteries are one of an electric vehicle’s most expensive components, accounting for between a quarter and a third of the car’s value. Driving down their cost is key to profitability, executives say.

But whereas the internal combustion engine traditionally has been engineered and built by auto makers themselves, battery production for electric cars is dominated by Asian electronics and chemical firms, such as LG Chem Ltd. and Panasonic Corp. , and newcomers like China’s Contemporary Amperex Technology Co.

California, the U.S.’s largest car market, said last month it would end the sale of new gasoline- and diesel-powered passenger cars by 2035, putting pressure on the auto industry to accelerate its shift to electric vehicles in the coming years.

The race to lock in supplies for electric cars has auto makers taking varied paths, with growing Canada-U.S. collaboration across supply chains.

While most make the battery pack, a large metal enclosure often lining the bottom of the car, they also need the cells that are bundled together to form the core electricity storage.

Tesla several years ago opened its Gigafactory in Nevada to make batteries with Panasonic, which in the shared space would produce cells for the packs. The electric-car maker wanted to secure production specifically for its own models and lower manufacturing and logistics costs.

Now it is looking to in-source more of that production.

While Tesla will continue to buy cells from Panasonic and other suppliers, it is also working on its own cell technology and production capabilities, aiming for cheaper, more powerful batteries to ensure it can keep up with demand for its cars, said Chief Executive Elon Musk last month.

Following Tesla’s lead, General Motors Co. and South Korea’s LG Chem are putting $2.3 billion into a nearly 3-million-square-foot factory in Lordstown, Ohio, highlighting opportunities for Canada to capitalize on the U.S. EV pivot as supply chains evolve, which GM says will eventually produce enough battery cells to outfit hundreds of thousands of cars each year.

In Europe, Volkswagen AG is taking a similar path, investing about $1 billion in Swedish battery startup Northvolt AB, including some funding to build a cell-manufacturing plant in Salzgitter, Germany, as part of a joint venture, and in North America, EV assembly deals in Canada are putting it in the race as well.

Others like Ford Motor Co. and Daimler AG are steering clear of manufacturing their own cells, with executives saying they prefer contracting with specialized battery makers.

Supply-chain disruptions, including lithium shortages, have already challenged some new model launches and put projects at risk, auto makers say.

For instance, Ford and VW have agreements in place with SK Innovation to supply battery cells for future electric-vehicle models. The South Korean company is building a factory in Georgia to help meet this demand, but a fight over trade secrets has put the plant’s future in jeopardy and could disrupt new model launches, both auto makers have said in legal filings.

GM executives say the risk of relying on suppliers has pushed them to produce their own battery cells, albeit with LG Chem.

“We’ve got to be able to control our own destiny,” said Ken Morris, GM’s vice president of electric vehicles.

Bringing the manufacturing in house will give the company more control over the raw materials it purchases and the battery-cell chemistry, Mr. Morris said.

But establishing production, even in a joint venture, is a costly proposition, and it won’t necessarily ensure a timely supply of cells. There are also risks with making big investments on one battery technology because a breakthrough could make it obsolete.

Ford cites those factors in deciding against a similar investment for now.

The company sees the industry’s conventional model of contracting with independent suppliers to build parts as better suited to its battery-cell needs, Ford executive Hau Thai-Tang told analysts in August.

“We have the competitive tension with dealing with multiple suppliers, which allows us to drive the cost down,” Mr. Thai-Tang said, adding that the company expects to pay prices for cells in line with GM and Tesla.

Meanwhile, Ford can leave the capital-intensive task of conducting the research and setting up manufacturing facilities to the battery companies, Mr. Thai-Tang said.

Germany’s Daimler has tried both strategies.

The car company made its own lithium-ion cells through a subsidiary until 2015. But the capital required to scale up was better spent elsewhere, said Ola Källenius, Daimler’s chief executive officer.

The auto maker instead signed long-term supply agreements with Asian companies like Chinese battery-maker CATL and Farasis Energy (Ganzhou) Co., which Daimler invested in last year.

The company has said it is spending roughly $23.6 billion on purchase agreements but keeping its battery research in-house.

“Let’s rather put that capital into what we do best, cars,” Mr. Källenius said.

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Electric Fleet Grid Planning aligns utilities, charging infrastructure, distribution upgrades, and substation capacity to meet megawatt loads from medium- and heavy-duty EV trucks and buses, enabling managed charging, storage, and corridor fast charging.

Key Points

A utility plan to upgrade feeders and substations for EV fleets, coordinating charging, storage, and load management.

✅ Plans distribution, substation, and transformer upgrades

✅ Supports managed charging and on-site storage

✅ Aligns utility investment with fleet adoption timelines

As more electric buses and trucks enter the market, future fleets will require a lot of electricity for charging and will challenge state power grids over time. While some utilities in California and elsewhere are planning for an increase in power demand, many have yet to do so and need to get started.

This issue is critical, because freight trucks emit more than one-quarter of all vehicle emissions. Recent product developments offer growing opportunities to electrify trucks and buses and slash their emissions (see our recent white paper). And just last week, a group of 15 states plus D.C. announced plans to fully electrify truck sales by 2050. Utilities will need to be ready to power electric fleets.

Electric truck fleets need substantial power
Power for trucks and buses is generally more of an issue than for cars because trucks typically have larger batteries and because trucks and buses are often parts of fleets with many vehicles that charge at the same location. For example, a Tesla Model 3 battery stores 54-75 kWh; a Proterra transit bus battery stores 220-660 kWh. In Amsterdam, a 100-bus transit fleet is powered by a set of slow and fast chargers that together have a peak load of 13 MW (megawatts). This is equivalent to the power used by a typical large factory. And they are thinking of expanding the fleet to 250 buses.

California utilities are finding that grid capacity is often adequate in the short term, but that upgrade needs likely will grow in the medium term.
Many other fleets also will need a lot of "juice." For example, a rough estimate of the power needed to serve a fleet of 200 delivery vans at an Amazon fulfillment center is about 4 MW. And for electric 18-wheelers, chargers may need up to 2 MW of power each; a recent proposal calls for charging stations every 100 miles along the U.S. West Coast’s I-5 corridor, highlighting concerns about EVs and the grid as each site targets a peak load of 23.5 MW.

Utilities need distribution planning
These examples show the need for more power at a given site than most utilities can provide without planning and investment. Meeting these needs often will require changes to primary and secondary power distribution systems (feeders that deliver power to distribution transformers and to end customers) and substation upgrades. For large loads, a new substation may be needed. A paper recently released by the California Electric Transportation Coalition estimates that for loads over 5 MW, distribution system and substation upgrades will be needed most of the time. According to the paper, typical utility costs are $1 million to $9 million for substation upgrades, $150,000 to $6 million for primary distribution upgrades, and $5,000 to $100,000 for secondary distribution upgrades. Similarly, Black and Veatch, in a paper on Electric Fleets, also provides some general guidance, shown in the table below, while recognizing that each site is unique.

California policy pushes utilities toward planning
In California, state agencies and a statewide effort called CALSTART have been funding demonstration projects and vehicle and charger purchases for several years to support grid stability as electrification ramps up. The California Air Resources Board voted in June to phase in zero-emission requirements for truck sales, mandating that, beginning in 2024, manufacturers must increase their zero-emission truck sales to 30-50 percent by 2030 and 40-75 percent by 2035. By 2035, more than 300,000 trucks will be zero-emission vehicles.

California utilities operate programs that work with fleet owners to install the necessary infrastructure for electric vehicle fleets. For example, Southern California Edison operates the Charge Ready Transport program for medium- and heavy-duty fleets. Normally, when customers request new or upgraded service from the utility, there are fees associated with the new upgrade. With Charge Ready, the utility generally pays these costs, and it will sometimes pay half the cost of chargers; the customer is responsible for the other half and for charger installation costs. Sites with at least two electric vehicles are eligible, but program managers report that at least five vehicles are often needed for the economics to make sense for the utility.

One way to do this is to develop and implement a phased plan, with some components sized for future planned growth and other components added as needed. Southern California Edison, for example, has 24 commitments so far, and has a five-year goal of 870 sites, with an average of 10 chargers per site. The utility notes that one charger usually can serve several vehicles and that cycling of charging, some storage, and other load management techniques through better grid coordination can reduce capacity needs (a nominal 10 MW load often can be reduced below 5 MW).

Through this program, utility representatives are regularly talking with fleet operators, and they can use these discussions to help identify needed upgrades to the utility grid. For example, California transit agencies are doing the planning to meet a California Air Resources Board mandate for 100 percent electric or fuel cell buses by 2040; utilities are talking with the agencies and their consultants as part of this process. California utilities are finding that grid capacity is often adequate in the short term, but that upgrade needs likely will grow in the medium term (seven to 10 years out). They can manage grid needs with good planning (school buses generally can be charged overnight and don’t need fast chargers), load management techniques and some energy storage to address peak needs.

Customer conversations drive planning elsewhere
We also spoke with a northeastern utility (wishing to be unnamed) that has been talking with customers about many issues, including fleets. It has used these discussions to identify a few areas where grid upgrades might be needed if fleets electrify. It is factoring these findings into a broader grid-planning effort underway that is driven by multiple needs, including fleets. Even within an integrated planning effort, this utility is struggling with the question of when to take action to prepare the electric system for fleet electrification: Should it act on state or federal policy? Should it act when the specific customer request is submitted, or is there something in between? Recognizing that any option has scheduling and cost allocation implications, it notes that there are no easy answers.

Many utilities need to start paying attention
As part of our research, we also talked with several other utilities and found that they have not yet looked at how fleets might relate to grid planning. However, several of these companies are developing plans to look into these issues in the next year. We also talked with a major truck manufacturer, also wishing to remain unnamed, that views grid limitations as a key obstacle to truck electrification. 

Based on these cases, it appears that fleet electrification can have a substantial impact on electric grids and that, while these impacts are small at present, they likely will grow over time. Fleet owners, electric utilities, and utility regulators need to start planning for these impacts now, so that grid improvements can be made steadily as electric fleets grow. Fleet and grid planning should happen in parallel, so that grid upgrades do not happen sooner or later than needed but are in place when needed, including the move toward a much bigger grid as EV adoption accelerates. These grid impacts can be managed and planned for, but the time to begin this planning is now.

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California NEM-3 Tariff ushers a successor Net Energy Metering framework, revising export compensation, TOU rates, and non-bypassable charges to balance ratepayer impacts, rooftop solar growth, and energy storage adoption across diverse communities.

Key Points

The CPUC's successor NEM policy redefining export credits and rates to sustain customer-sited solar and storage.

✅ Sets export compensation methodology beyond NEM 2.0

✅ Aligns TOU rates and non-bypassable charges with costs

✅ Encourages solar-plus-storage adoption and equity access

The California Public Utilities Commission (CPUC) has officially commenced its “NEM-3” proceeding, which will establish the successor Net Energy Metering (NEM) tariff to the “NEM 2.0” program in California. This is a highly anticipated, high-stakes proceeding that will effectively modify the rules for the NEM tariff in California, amid ongoing electricity pricing changes that affect residential rooftop solar – arguably the single most important policy mechanism for customer-sited solar over the last decade.

The CPUC’s recent order instituting rule-making (OIR) filing stated that “the major focus of this proceeding will be on the development of a successor to existing NEM 2.0 tariffs. This successor will be a mechanism for providing customer-generators with credit or compensation for electricity generated by their renewable facilities that a) balances the costs and benefits of the renewable electrical generation facility and b) allows customer-sited renewable generation to grow sustainably among different types of customers and throughout California’s diverse communities.”

This successor tariff proceeding was initiated by Assembly Bill 327, which was signed into law in October of 2013. AB 327 is best known as the legislation that directed the CPUC to create the “NEM 2.0” successor tariff, which was adopted by the CPUC in January of 2016.

The original Net Energy Metering program in California (“NEM 1.0”) effectively enabled full-retail value net metering “allowing NEM customers to be compensated for the electricity generated by an eligible customer-sited renewable resource and fed back to the utility over an entire billing period.” Under the NEM 2.0 tariff, customers were required to pay charges that aligned them more closely with non-NEM customer costs than under the original structure. The main changes adopted when the NEM 2.0 was implemented were that NEM 2.0 customer-generators must: (i) pay a one-time interconnection fee; (ii) pay non-bypassable charges on each kilowatt-hour of electricity they consume from the grid; and (iii) customers were required to transfer to a time-of-use (TOU) rate, with potential changes to electric bills for many customers.

NEM 2.0

The commencement of the NEM-3 OIR was preceded by the publishing of a 318-page Net Energy Metering 2.0 Lookback Study, which was published by Itron, Verdant Associates, and Energy and Environmental Economics. The CPUC-commissioned study had been widely anticipated and was expected to act as the starting reference point for the successor tariff proceeding. Verdant also hosted a webinar, which summarized the study’s inputs, assumptions, draft findings and results.

The study utilized several different tests to study the impact of NEM 2.0. The cost effectiveness analysis tests, which estimate costs and benefits attributed to NEM 2.0 include: (i) total resource cost test, (ii) participant cost test, (iii) ratepayer impact measure test, and (iv) program administrator test. The evaluation also included a cost of service analysis, which estimates the marginal cost borne by the utility to serve a NEM 2.0 customer.

The opening paragraph of the report’s executive summary stated that “overall, we found that NEM 2.0 participants benefit from the structure, while ratepayers see increased rates.” In every test that the author’s conducted the results generally supported this conclusion for residential customers. There were some exceptions in their findings. For example, in the cost of service analysis the report stated that “residential customers that install customer-sited renewable resources on average pay lower bills than the utility’s cost to serve them. On the other hand, nonresidential customers pay bills that are slightly higher than their cost of service after installing customer-sited renewable resources. This is largely due to nonresidential customer rates having demand charges (and other fixed fees), and the lower ratio of PV system size to customer load when compared to residential customers.”

Similar debates over solar rate design, including Massachusetts solar demand charges, highlight how demand charges and TOU decisions can affect customer economics.

NEM-3 timeline

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The preliminary schedule that the CPUC laid out in its OIR estimates that the proceeding will take roughly 15 months in total, starting with a November 2020 pre-hearing conference.

The real meat of the proceeding, where parties will present their proposals for what they believe the successor tariff should be, as the state considers revamping electricity rates to clean the grid, and really show their hand will not begin until the Spring of 2021. So we’re still a little ways away from seeing the proposals that the key parties to this proceeding, like the Investor Owned Utilities (PG&E, SCE, SDG&E), solar and storage advocates such as SEIA, CALSSA, Vote Solar, and ratepayer advocates like TURN) will submit.

While the outcome for the new successor NEM tariff is anyone’s guess at this point, some industry policy folks are starting to speculate. We think it is safe to assume that the value of exported energy will get reduced, with debates over income-based utility charges also influencing rate design. How much and the mechanism for how exports get valued remains to be seen. Based on the findings from the lookback study, it seems like the reduction in export value will be more severe than what happened when NEM 2.0 got implemented. In NEM 2.0, non-bypassable charges, which are volumetric charges that must be paid on all imported energy and cannot be netted-out by exports, only equated to roughly $0.02 to $0.03/kWh.

Given that the value of exports will almost certainly get reduced, we expect that to be bullish for energy storage as America goes electric and load shapes evolve. Energy storage attachment rates with solar are already steadily rising in California. By the time NEM-3 starts getting implemented, likely in 2022, we think storage attachment rates will likely escalate further.

We would not be surprised to see future storage attachment rates in California look like the Hawaiian market today, which are upwards of 80% for certain types of customers and applications. Two big questions on our mind are: (i) will the NEM 3.0 rules be different for different customer class: residential, CARE (e.g., low-income or disadvantaged communities), and commercial & industrial; (ii) will the CPUC introduce some sort of glidepath or phased in implementation approach?

The outcome of this proceeding will have far reaching implications on the future of customer-sited solar and energy storage in California. The NEM-3 outcome in California may likely serve as precedent for other states, as California exports its energy policies across the West, and utility territories that are expected to redesign their Net Energy Metering tariffs in the coming years.

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US Wind and Solar Outlook 2026 projects cheap renewables displacing coal and gas, with utility-scale additions, rooftop solar growth, improved grid reliability, and EV V2G integration accelerating decarbonization across the electricity market.

Key Points

An analysis forecasting wind and solar growth, displacing coal and gas as utility-scale and rooftop solar expand.

✅ Utility-scale solar installs avg 21 GW/yr through 2026.

✅ 37.7 GW wind in pipeline; 127.8 GW already online.

✅ Small-scale solar could near 100 TWh in 2026.

A recent report from the Institute for Energy Economics and Financial Analysis (IEEFA) predicts that cheap renewables in the form of wind and solar will push coal and gas out of the energy market space. Already at 9% of US generation, the report predicts that wind and solar will supply almost 30% of US electricity demand by 2026, consistent with renewables nearing one-fourth of U.S. generation projections for the near term.

“The Solar Energy Industries Association now expects utility-scale installations to average more than 21,000MW a year through 2026, following a year when U.S. solar generation rose 25% and with a peak of 25,000MW in 2023,” IEEFA writes. “Continued growth is also expected in U.S. wind generation, mirroring global trends where China's solar PV expansion outpaced all other fuels in 2016, with 37.7GW of new capacity already under construction or in advanced development, which would be added to 127.8GW in existing installed capacity.”

Meanwhile, with wind and solar growth booming, fossil fuels are declining, as renewables surpassed coal in 2022 nationwide. “Coal and natural gas are now locked into an essentially zero-sum game where increases in one fuel’s generation comes at the expense of the other. Together, they are not gaining market share, rather they are trading it back and forth, and the rapid growth in renewable generation will cut even deeper into the market share of both.”

And what of rooftop solar? Some states in Australia now have periods where the entire state grid is powered just by solar on the roofs of private citizens. As this revolution progresses in the USA, especially if a tenfold national solar push moves forward, what impact will it make on fossil fuel generators — which are expensive to build, expensive to maintain, expensive to fuel, and rely on an expensive distribution network.

“EIA estimates that this ‘small-scale solar’ produced 41.7 million MWh of power in 2020, when solar accounted for about 3% of U.S. electricity, a 19 percent increase from 2019. This growth will likely continue in the years ahead as costs continue to fall and concerns about grid reliability rise. Assuming a conservative 15 percent annual increase in small-scale solar going forward would push the sector’s generation to almost 100 million MWh in 2026.”

The Joker in the story might be the impact from electric vehicle adoption. Sales are set to surge and there’s more and more interest in V2G technology, even as wind and solar could provide 50% by 2050 in broader forecasts.

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