California moves to cut homeowner subsidies for rooftop solar. Here’s who will lose out

Wading into an emotional debate about equity, climate change and grid reliability, California utility regulators Monday proposed slashing the credit given to hundreds of thousands of homeowners for the excess power they generate from their rooftop solar panels.

The staff of the California Public Utilities Commission, after more than a year of study, released a plan to significantly reduce the credit on customer bills for electricity that 1.3 million rooftop solar customers don’t need and ship to the power grid. For PG&E Corp. customers, the credit would be cut in half.

Advocates for solar energy said reducing the credits would slow the adoption of a renewable energy source that has become a key element in California’s battle against climate change.

“The only winners today are the utilities, which will make more profits at the expense of their ratepayers,” said Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association, in a prepared statement. “We urge Governor Newsom to act quickly to change this decision — at risk are 65,000 solar jobs, the security of our electricity grid, and the health of California residents and our planet.”

But the utilities commission’s staff said the current system generates an overly generous subsidy, worth a combined $3 billion a year, that helps mostly upper-income homeowners — and results in higher utility bills for non-solar households.

By contrast, the commission said the new pricing system will help California’s power grid cope with its most pressing need: the summertime demand for electricity after the sun goes down and solar generation fades. California endured two nights of rolling blackouts in August 2020 and narrowly avoided blackouts during a July heat wave.

Martha Guzman Aceves, the PUC commissioner who’s tracking the issue most closely, said the staff’s plan includes rebates for existing solar customers to purchase battery-storage units, which can cost several thousand dollars.

Aceves said the state wants the solar industry to keep growing but “it needs to evolve to what the grid really needs, and that involves storage.” The rebates would come to $3,200 apiece under the commission’s plan.

The plan affects customers of PG&E, Southern California Edison and San Diego Gas & Electric, the three major investor-owned utilities in California. SMUD, the Sacramento Municipal Utility District, earlier this year decided to reduce the value of the credits it gives rooftop solar customers.

The plan would likely scramble the economics of solar energy, which accounts for 25% of the state’s energy use in daytime. Rooftop solar costs about $20,000 to install, and the subsidized rate has helped popularize the technology.

PG&E’s solar customers, for example, currently get an average of more than 20 cents for every kilowatt hour they don’t use and deliver to the grid. The new rate would be based on a complicated “time of use” system and would amount to 10 cents or less for many PG&E customers, Aceves said.

The state’s largest utility, PG&E called the proposal “a step in the right direction to modernize California’s outdated rooftop solar program,”

California solar homes face a monthly grid charge

Not only would the subsidy fall, but solar customers would pay considerably more during those hours when they’re drawing electricity from the grid. They would also have to begin paying the utilities a “grid participation charge” to connect to the power grid.

The grid charge would phase in over four years, to an average of $40 a month for the average solar customer. Aceves said the fee is needed to help pay for programs for low-income customers.

The big utilities, as well as some consumer advocacy groups, have been pushing the state for more than a year to reduce the credit they pay solar customers for excess power. PG&E says its fee of more than 20 cents is considerably more than the true cost of solar.

PG&E officials say the subsidy gets lumped onto the backs of non-solar customers, who tend to have lower incomes, to the tune of $170 a year in higher bills.

Solar advocates, however, say the rooftop panels aren’t limited to the wealthy. A study by the Lawrence Berkeley National Laboratory said “solar adoption skews toward high-income households,” but added that 42% of installations in California in 2019 were at households with less than $100,000 in annual income.

“Solar right now is increasingly affordable for low and moderate income families,” said Bernadette Del Chiarro, head of the California Solar and Storage Association.” The commission’s plan “is going to put it out of reach for working and middle-class families.”

And she said the “grid participation charge,” which would total $480 a year for most customers, would further damage the attractiveness of solar. “It’s going to be pretty hard to make a solar system pay for itself,” she said.

The commission’s plan includes the creation of a $600 million “equity fund” to help disadvantaged families. But Del Chiarro said that won’t be nearly big enough.

Solar advocates, who’ve been staging protests at the Capitol, say a slowdown in solar installations would cripple California’s ability to meet a legislative mandate to eliminate carbon from the electricity grid by 2045 as a way of fighting climate change.

The commission plans to vote on the proposal Jan. 27.

The plan wouldn’t change solar economics overnight. Customers without solar would have another four months to install rooftop panels and qualify for the current rates, and existing customers would have a “glide path” of several years to transition to the system.

The California Legislature mandated the subsidies in 1995, when solar was in its infancy. Even as the industry has grown, attempts to tweak the credits have aroused controversy.

As protesters marched outside its headquarters, SMUD’s board of directors voted in September to reduce its credit for excess power from 12 cents to 7.4 cents. The new rate kicks in with panels installed in March.

The 37,000 Sacramento Municipal Utility District customers who already have rooftop solar will continue to collect the old rate through 2030.

This story was originally published December 13, 2021 at 1:32 PM.