California homeowners may receive less money for installing solar panels. Here’s why
California’s utility regulator released highly anticipated proposed changes to the state’s rooftop solar program Thursday, proposing a gradual reduction of longstanding subsidies that sparked immediate criticism from both monopoly utilities and solar leaders.
Coming in response to an early version of the reforms released last December that prompted widespread backlash from solar advocates, the plan marked the latest step in years of infighting between rival camps with different visions of how to reach the state’s ambitious clean energy goals.
Months after the commission went back to the drawing board, the newly released proposal avoids charging solar users a monthly fee but does gradually reduce payments solar owners receive for selling their excess power to the grid over five years.
The Public Utilities Commission said the reforms are meant to support grid reliability and encourage long-term sustainability for the rooftop solar and battery storage industries, while making access to home solar more equitable.
“The incentives here are all for customers to adopt solar plus storage and to shift their use of solar energy to times of day when the grid needs it most,” said Daniel Buch, program manager at the California Public Utilities Commission.
California’s program known as net energy metering allows homeowners to generate their own electricity with rooftop solar panels and be paid for extra power their system feeds back to the grid. Over the last two decades, it bolstered an industry that has installed more than 1.5 million rooftop solar panels and employs more than 60,000 workers.
A vote on the proposal is anticipated as early as next month.
The dispute
At the core of the dispute between the rooftop solar industry and utilities, who purchase large-scale solar from faraway plants, is the question of who will reap the benefits of building a clean energy economy.
Monopoly utility companies including as Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric have led the charge for lower rooftop solar subsidies, alongside powerful labor unions representing their employees who have a vested interest in protecting their monopoly business model.
But influential consumer watchdog groups such as The Utility Reform Network and the state’s Public Advocates Office have also argued for reduced incentives along with the Natural Resources Defense council. They argue that costs of the program disproportionately affect those who can least afford them.
The utility commission agreed with this equity problem in its proposal, saying rooftop solar subsidies burden lower-income households without solar panels because utilities must provide the same service and meet their bottom lines when largely wealthier homeowners install solar.
Utilities estimate this “cost shift” at $245 per customer annually, a figure debated by the solar industry and climate activists. Yet research from the Lawrence Berkeley National Laboratory revealed a shrinking gap between high and low income household solar adoption.
Home solar panel owners currently receive high rates of compensation for excess power that they send back to the grid through a mechanism called “net metering”. Under the commission’s new plan, those payments will gradually fall over the course of five years — rather than four in the previous proposal — to a lower wholesale rate.
According to the California Solar and Storage Association, new solar customers would be paid a base rate of 5 cents per kilowatt-hour of electricity that they don’t use at home, sending it to the larger power grid. That could constitute a drop of as much as 30 cents.
The new rules would not affect existing solar customers who installed systems under previous versions of net energy metering, and the commission estimates an average household investment in solar panels would still pay for itself in electric bill savings in 9 years.
The CPUC’s proposal also includes $900 million in state funding for low-income residential solar and battery storage system adopters. A public hearing on the proposal is scheduled for next week.
A subsidy for wealthy?
Almost immediately, solar industry leaders and utility representatives aired sharp criticism and frustration with the changes.
Kathy Fairbanks, a spokesperson with a utility-aligned coalition called Affordable Clean Energy for All, said the absence of the monthly charge on solar owners for grid infrastructure amounts to a “failure to eliminate the growing cost burden carried by non-solar customers.”
“It is extremely disappointing,” she said, “that under this proposal, low-income families and all customers without solar will continue to pay a hidden tax on their electricity bills to subsidize rooftop solar for mostly wealthier Californians.”
Despite the removal of a monthly charge for their use of the grid, solar advocates such as President of the Environmental Working Group Ken Cook expects to see a significant drop in the money solar customers earn on their investment.
Solar executives and advocates have said any reform to net metering would impede California’s aggressive goal to produce 100% clean energy by 2045. Yet soon after the PUC released its proposed decision, shares of leading rooftop solar company Sunrun Inc. and other solar companies surged.
“The reason these utilities are going after rooftop solar has really almost nothing to do with the idea that solar customers are shifting the costs to others or freeloading off of the transmission grid,” he said. “It’s that these customers are becoming competitors. “
Other solar leaders such as Bernadette Del Chiaro, executive director of the California Solar & Storage Association, urged Gov. Newsom to make further adjustments to make rooftop solar more affordable for low- and middle-income households.
As California’s climate ambitions shift toward electrification of cars and home appliances, electricity rates are also on the rise that hit working families the hardest.
Severin Borenstein, an energy economist at UC Berkeley whose research helped quantify the transfer of costs saved by solar-powered homes to those without, is worried about the threat of those costs. He expects to see a rooftop solar “gold rush” in the coming years.
“We are hurtling towards an outcome of massive rooftop solar deployment in a way that leaves a large chunk of customers who are disproportionately poor behind and raises their rates,” he said. “And it’s just gonna be way more costly, costly for the whole system.”
This story was originally published November 10, 2022 at 3:58 PM with the headline "California homeowners may receive less money for installing solar panels. Here’s why."