Incentive risk in DER: when programs change

Federal credits illustrate the first and fourth. The July 2025 tax law ended the homeowner credit after 2025 (SEIA’s summary), kept the storage credit at full value for projects starting construction through 2033, and phases it to 75% in 2034 and 50% in 2035 (Kirkland & Ellis). Storage that starts construction in 2026 must also show that at least 55% of component cost comes from suppliers that aren’t prohibited foreign entities, rising to 75% after 2029. Our Finance hub timeline maps these dates.

California’s net billing tariff (NBT), often called NEM 3.0, applies to rooftop solar that applied to connect on or after April 15, 2023. It credits exports at the utility’s hourly avoided cost instead of the retail rate. The state solar association estimated it would cut the average export credit from about 30¢ to 8¢ per kWh, a 75% reduction (as summarized by Solar.com).

Customers who applied before the deadline kept their original terms for 20 years from connection, and that set off a rush. The CPUC notes that about 137,000 systems were installed in a typical year, but more in 2022 and 2023 as customers raced the deadline. New residential connections at the three large utilities then fell 44% from 2023 to 2024, according to an analysis of utility data by Hyre Solar.

Two lessons carry over to any DER program. First, the deadline itself moves the market: LBNL found that net billing installs averaged about 8,000 a month in early 2024, lower than any month under net metering since May 2020. Second, the redesign moved value rather than eliminating it. Net billing rewards evening exports and storage, and battery attachment rose sharply. An investor holding a solar-only pipeline was hurt; one holding solar-plus-storage contracts was not.

Demand response and VPP fleets in the PJM region earn capacity payments set by annual auctions. Those prices swing more than almost any retail incentive. The 2024/25 auction cleared at $28.92 per MW-day, the lowest in PJM history; the next cleared at $269.92, and the following three hit a price cap, according to PJM’s 2028/29 auction report.

The price collar now limits the range through the 2029/30 delivery year (NRG’s auction summary). Without it, PJM estimates the 2028/29 auction would have cleared at $554.72. For a DER investor the lesson is timing: one developer’s comment to PJM noted that the first high-price signal arrived 15 months after its build decision, and the next two auctions were capped. A model that uses today’s capped price for 15 years assumes the collar, the market rules and the demand forecast all hold.

Only legacy net metering runs longer than a battery’s model life. Hawaii’s BYOD Plus commits a battery for five years, with an upfront payment and a repayment if the customer leaves early (Hawaiian Electric’s program page). Its predecessor, Battery Bonus, is closed to new customers, and a battery moving between programs doesn’t get a second upfront payment. California’s export adder runs nine years for PG&E and SCE customers who apply by the end of 2027.

The credit is the only part locked on the day the battery starts operating, about 25% of total value, and even it can be recaptured for five years. Demand-charge savings depend on the tariff staying similar; Fast DR pay depends on the program continuing. Our stranded capital page tests what happens if either one changes, and in which year.