Carbon Incentives: The Strange World of Additionality

Just pre-Covid, the California Energy Commission granted Sacramento Municipal Utility District (SMUD) the first exemption to the state’s Title 24 mandate. Now, all new homes require rooftop solar (unless it’s cost-prohibitive) or alternative compliance via approved community-solar

SMUD ignited intense opposition–dozens of objectors stretched out CEC’s November public comment meeting well into the night–by proposing alternative compliance by modifying a decade-old solar subscription program. Solar advocates were miffed at of locking homeowners into a 20-year commitment with only marginal savings. Also, because SMUD’s Neighborhood SolarShares starts with existing solar farms—with CEC’s approval, SMUD will comply with a law designed to accelerate new solar deployment without building any new solar at all.

While preparing our own Title 24 exemption application for the RISS project east of San Francisco, I met with the CEC about SMUD’s proposal. With CEC’s explanation, and subsequent conversations with carbon accounting experts, I understand the decision. It illustrates the weirdness of “additionality”– a foundational concept for renewable energy incentives and of the explosively growing carbon offset market.

Carbon accounting expert Michael Gillenwater says additionality is “the defining characteristic of an offset, as it justifies the creation of a tradable environmental instrument that represents a real benefit that can compensate for harm occurring elsewhere.” To be considered additional, a project’s carbon benefits (abatement or reduction) must be above and beyond a baseline scenario of future emissions without the project.

In turn, that requires supportable assumptions about both “business as usual” and the (presumably) lower-carbon reality promised by the offset project, gazing a decade plus into the future.

Title 24 community-solar exemptions–like any project eligible for carbon-related incentives – must be additional. How can an old program using already-built solar be considered additional? Like so many things, it comes down to money. Also, like so many things, it’s not a black and white answer—as the Oxford Principles for Net-Zero Aligned Carbon Offsetting state: “Additionality can be difficult to determine and verify, and ultimately involves some degree of subjectivity…” However, in this case, it’s actually pretty easy.

Launched to comply with 2006 California legislation requiring utilities to implement a PV incentive programs, the aptly named SolarShares offers shares of a solar portfolio via a subscription

with fixed monthly payments partially offset by variable production-based credits. This “virtual rooftop” model emulates typical residential net-metered solar power-purchase agreements with SMUD buying each kWh of generated energy at full retail. The difference—outside of panels installed in centralized solar farms rather than on homes—is who gets the credit: specifically, the renewable energy credit. It’s typically the homeowner. But, to apply them instead toward energy compliance targets, SMUD “buys” them from SolarShares customers via reduced billing rates. In fact, SolarShares subscribers actually pay less per kwh than SMUD–the utility intentionally loses money, incurring financial pain for the gain of compliance credits. The mirror of the financial loss is the emissions reduction benefit that allowed SolarShares to be considered additional. And now, a decade later, Neighborhood SolarShares can be considered additional despite using the exact same solar generation because SMUD agreed gives up those credits.