California Consider Changes That Could Decimate the Rooftop Solar Market

California, which has 1.3 million home solar arrays, is considering changes to net metering. The California Public Utility Commission (CPUC)—which is appointed by Gov. Gavin Newsom, a Democrat who called for spending over $1 billion on tax incentives for developing green energy technologies—has proposed to make the economics of home solar much less attractive.

Instead of the retail rate, utilities would pay solar panel owners the “actual avoided cost,” which is a lower amount. Utilities would also collect a “grid participation charge” of $8 per kilowatt of solar-generating capacity that would pay for maintaining the grid. That would cost about $40 to $48 per month for the average residential solar panel owner.

“Net metering, as currently constructed in California, due to the extremely high retail rates that we have, is literally the most expensive strategy for promoting clean energy that we have on the table today,” Matthew Freedman, a staff attorney at the Utility Reform Network (TURN), a nonprofit that advocates for the interests of utility ratepayers in California, told Yahoo News. “Retail rates are substantially higher than the cost of new [electricity] generation.”

TURN argues that it is more efficient to invest in renewable energy at wholesale prices — for example, by building utility-scale solar farms. “We can get way better bang for the buck,” Freedman said.

The consumer advocacy group also believes that non-solar customers are getting taken advantage of, pointing to analyses that show the standard retail Californians pay for electricity is 10 percent higher because utilities are compensating for all the revenue lost from solar panel owners by charging more to everyone. Based on that, Freedman counterintuitively maintains that reducing the cost of solar subsidies is actually essential to combating climate change, because higher electricity costs make consumers less likely to switch from fossil fuels to electric cars, stoves and heating systems.

“We proposed significant reforms to the net metering program that are different from those that are contained in the proposed decision, but the general framework that is being proposed is something that we support,” Freedman said. One element of that framework, which Freedman argues will do more to help boost access to solar energy, is shifting some of the savings from ending net metering to upfront subsidies for buying solar panels to low-income households.

California’s proposal has drawn criticism from many politicians and activists

California’s proposal has drawn criticism from many politicians and activists who are concerned about climate change. Sen. Dianne Feinstein, D-Calif., sent the commission a letter warning that the proposal “may impact the state’s conservation goals as we address climate change.”

Former Gov. Arnold Schwarzenegger, a pro-environment Republican, wrote in a New York Times op-ed that the plan “should be stopped in its tracks” and that the “grid participation charge” is really “a solar tax.”

Opponents also say it’s unfair to solar consumers who expected to get the retail rate when they bought solar panels. “This is a bait and switch,” Jamie Court, a strategist for the nonprofit advocacy organization Consumer Watchdog, told the Los Angeles Times. (While the lower rates would apply to all new solar customers, existing solar customers would be allowed to keep the old rate for 15 years.)

Those who want to end net metering say that solar consumers shouldn't get away paying less for grid maintenance because they tend to skew towards wealthier homeowners. “The current Net Energy Metering program disproportionately hurts lower-income Californians who don’t own homes and can’t afford rooftop solar,” Kathy Fairbanks, a spokesperson for Affordable Clean Energy for All, a coalition that includes Pacific Gas & Electric (PG&E), the largest utility company in California, wrote in an email to Yahoo News.

That position has some support in the environmental advocacy community. The Natural Resources Defense Council, for example, has praised the plan.

Environmental organizations are closer to the solar industry’s viewpoint

But most environmental organizations are closer to the solar industry’s viewpoint, which emphasizes that solar panel owners do still pay for grid maintenance because they pay the retail rate for the electricity they use, and also that solar customers cover the costs of grid maintenance and expansion by reducing the amount of electricity needed to generate.

“We support net metering; we support rooftop solar growing in as sustained a way as possible,” Laura Deehan, state director of Environment California, an advocacy group, told Yahoo News. “What was proposed here in California would be the most backward-looking policy imaginable from our perspective. Right now, we’re racing to get to a 100 percent clean-energy future in our state as fast as possible ... and rooftop solar, paired with storage, is one of the best solutions to the current crisis that we’re in.”

Deehan also notes that distributing electricity generation across millions of existing homes, rather than building new utility-scale solar in the desert, protects natural areas and makes the grid more resilient to natural disasters, which California is especially susceptible to now because of climate change. Environment California is one of 70 groups that signed a joint letter to Newsom opposing the CPUC’s proposal.

“The proposed decision, as it is, has the potential to really decimate the rooftop solar market in California,” Katherine Ramsey, a staff attorney for the Sierra Club's environmental law program, told Yahoo News. Ramsey describes the grid participation charge as “very steep” and the proposed reimbursement rate for the energy exported by solar panel owners as “way too low and [it] way too suddenly drops.”

“What we have proposed is a gradual transition: more like a ramp as opposed to a steep cliff,” Ramsey added. “Both consumers and the solar and storage industry need time to adjust.”

Shifting subsidies towards storage will be more beneficial

The reason Ramsey raises the issue of storage is that the current challenge to a more fully solar-fueled energy grid is that solar power isn’t generated during the early evening hours when demand peaks. Freedman contends that shifting subsidies towards storage will therefore be more beneficial, while SEIA counters that utilities could try to manage demand by charging more for power at peak times.

In response to an interview request, California Public Utility Commission spokesperson Terrie Prosper sent the following statement via email: “Comments from parties on the Proposed Decision have been received for this extremely important policy matter. We have two new Commissioners, one of whom has not started yet. We will provide more information once a schedule has been determined.” And, Prosper added, “The Proposed Decision is subject to revisions based on comments.”

Newsom has said that unspecified changes need to be made to the CPUC’s proposal. On Jan. 11, 2022, he said at a press conference, “That draft plan that was recently released, I just had a chance to review, and I’ll say this about the plan: We still have some work to do.”

In response to a query from Yahoo News, a Newsom spokesperson wrote in an email, “The Governor continues to closely monitor this issue and believes that more work needs to be done. Ultimately, the California Public Utilities Commission, which is an independent constitutional commission, will make a decision on this matter.”

Article content courtesy Ben Adler, Senior Climate Editor at Yahoo News, on February 2, 2022. Image courtesy of SEIA/Wood Mackenzie Power & Renewables U.S. Solar Market Insight Report 2019 YIR.