California ready to pull the plug on rooftop solar system subsidies

Two homes, each merrily twinkling with holiday lights.

The one with no solar panels and the escalating electric bill? It’s subsidizing the one with solar panels and the low electric bill, California officials say — and they hope to change that next month.

Right now, rooftop solar owners like Raj Pandey of Irvine get some 40 cents per kilowatt hour for electricity they send to the grid for neighbors to use. That credit would plummet to about 5 cents per kilowatt hour under a proposal heading to the California Public Utilities Commission on Jan. 27.

Pandey’s monthly charge for grid connection and overhead also would soar, to an average $57 from about $10.

“The biggest mistake of this is the massive de-incentivizing of solar rooftop and battery, which is just a great model for tackling a big climate problem,” said Pandey, whose long-term plans to invest in battery storage and an electric vehicle have grown more complicated.

“Given the push toward clean energy, it just doesn’t make a ton of sense to me.”

Jim Degner of Los Angeles was shocked to learn he’s projected to pay an extra $900 a year under the proposal. “It will take twice as long to recover the cost of solar — 20 years,” he said by email. “If battery backup is included (another $10K-15K), then the system will never be economical. Good-bye solar!”

That’s precisely what some solar proponents fear. Laura Deehan, state director for the Environment California Research & Policy Center, said the proposal “is the equivalent of tying cement blocks to our ankles as we race to transition away from fossil fuels.”

California has a goal of 100% clean energy by 2045, and rooftop solar will play a critical part in reaching that, she said. “We need to make sure any changes to rooftop solar incentives don’t jeopardize the sustained growth of solar. Unfortunately, this proposal would be disastrous. When you weaken the incentives, even just a little, there can be a really dramatic reduction in consumer investment.”

Other solar fans say those fears are overblown, and the changes are a simple issue of fairness.

Cost shift

Remember those two homes with the twinkling lights?

The one without solar is paying $115 to $245 more per year to subsidize the one with solar, according to a joint filing by California’s three big utilities, Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric. Left unchecked, that subsidy would grow to $385 to $550 per year by 2030.

It amounts to robbing the poor to pay the rich, critics argue. And that’s what these changes attempt to address.

“The CPUC’s proposed decision recognizes we can grow rooftop solar in California while taking steps to reduce inflated subsidies that have put an unfair cost burden on renters, seniors, disadvantaged communities and other working Californians who don’t have the ability or means to install rooftop solar systems,” said Kathy Fairbanks, a spokeswoman for Affordable Clean Energy for All, in a statement.

“The solar industry will tell you the ‘sky is falling,’ but what they won’t say is that the cost of rooftop solar has dropped 70% while the subsidies have continued to increase over the past 25 years. They won’t say that current … subsidies make rooftop solar the most expensive source of clean energy – 8 times costlier than the market value of solar energy.”

The proposed changes would not eliminate the cost shift, but take steps toward modernizing it so the price of maintaining the electric grid and other mandated programs is more equitably shared. “It’s time to update this 25-year-old program so we can more affordably accomplish our clean energy goals,” Fairbanks said.

The PUC’s public advocate — a quasi-independent, in-house Solomon the Wise, charged with protecting consumers — agrees.

“California ratepayers are currently paying too much toward incentives for (rooftop solar) generation,” it said in a filing. The cost of those incentives “unfairly raises electricity rates for those customers without (rooftop solar) generation. These nonparticipating customers are paying unreasonable amounts of money … to subsidize the customers who can afford to install (them).”

A new rate system should foster sustainable growth for solar in a way that equitably benefits all customers, the public advocate said. The proposal before the PUC would credit solar owners for what their power is really worth on the market — a fraction of the full retail rate they now receive — and would increase what they pay to use the grid itself.

The ultimate goal is a future where rooftop solar is paired with battery storage systems, so the electricity created by day can be used after dark. That would reduce or eliminate the need for dirtier, fossil fuel powered plants to fire up at night.

Promoting “greater adoption of customer-sited storage, which will help California decrease its dependency on fossil fuels during the early evening hours, when the sun is down and energy demand is high,” is behind the proposal, the PUC said. It includes a bill credit to ensure customers can pay for a solar- plus-storage energy system in 10 years or less through electric bill savings, it said.

Caught in the fray

About 1.2 million households in California have rooftop solar systems. That’s just 11% of PG&E’s residential customers, 8% of Edison’s, and 15% of SDG&E’s.

The rate system in place today was designed to jump-start the solar rooftop industry 25 years ago and was wildly successful, filings with the PUC say. The goal of 1 million solar rooftops seemed a distant dream, but it is now reality. The California solar industry employs 75,000 workers and has invested $70 billion in the state’s economy.

“The thing about rooftop solar is it’s local, and each installation reduces needs for investment in power plants and transmission lines,” said Jenn Engstrom, state director for the California Public Interest Research Group.

Studies have found that California avoided paying billions to build more plants and transmission lines thanks to rooftop solar, and proponents of the current system say those savings haven’t been fairly included in cost-benefit calculations. “Solar energy helps save money overall,” Engstrom said.

The proposal also goes too far by reducing the amount of time that rooftop owners are “grandfathered” in on their rate plans. That could upend the cost-benefit calculations they made when buying a system, which can cost some $18,000 to $40,000.

While reformers argue that the mature industry no longer needs subsidies and accuse the solar industry of resisting change to protect its profits, defenders argue that earning retail rates for generated power is only fair and accuse the utilities of trying to destroy rooftop solar to protect their own profits.

Solar owners are caught in the fray.

“The whole point is, we’re outputting energy to the grid, and that is coming from something we paid for,” said Pandey of Irvine. “We’re supplying energy to people based on what we did ourselves. The more that happens everywhere, the better off we’ll be. The solution is to, perhaps, charge people less for energy they get from solar users, verses charging more to solar users.”

Folks can register their thoughts with decision-makers by commenting at https://bit.ly/3sAm21d. PUC meetings are webcast at http://www.adminmonitor.com/ca/cpuc/.