The residential solar mandate for new homes approved Wednesday by the state Energy Commission will make reaching California’s climate goals possibly more difficult and definitely more expensive.
Such requirements are the most extreme tool for energy and environmental regulators, going beyond tax incentives, education programs and renewable standards for utilities. These mandates eliminate consumer choice and assume it is the best solution for all homes everywhere, with limited exceptions.
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Not only is residential rooftop solar not the obvious best option for “green” electricity, there is evidence that it is among the most expensive. According to business consulting firm Lazard, the net cost of energy from residential rooftop solar is twice that of solar panels on commercial and industrial roofs and as much as 10 times costlier than large solar farms.
Even at the utility-scale cost of 5 to 6 cents a kilowatt hour, there is growing concern that the massive commitment to solar in California is creating such a glut of mid-day electricity that prices during the day are plunging, and sometimes below zero. We are literally paying people to consume electricity during some midday hours.
Electricity system operators say they will increasingly have to curtail these large, inexpensive, solar producers because we have too much mid-day power. The Energy Commission mandate will pile even more expensive power onto that excess. Costs for society will go up, and the value received will go down.
The Energy Commission justifies its mandate in part though the logic that the electricity bill savings for most households will outweigh the roughly $10,000 in additional construction costs. The problem with this, as economists have argued for decades, is that electricity prices are messed up. Retail prices do not vary enough by time of day, even though costs do. Those costs don’t go down when a house installs solar. Instead, it shifts that burden onto non-solar homes.
Therefore, much of the “savings” is taken from customers who don’t install solar to pay those who do. Overall savings to customers don’t exist.
Residential rooftop solar may have a role to play in the power grid of the future, but it is far from clear that it is the best policy option for most, let alone all, new homes.
The Energy Commission is undermining consumer choice, just as U.S. Energy Secretary Rick Perry is doing by considering exercising emergency powers to essentially require that some customers continue to buy electricity from coal and nuclear plants.
Both efforts represent a dogmatic mindset and are likely to do more harm than good. With its history of innovative policymaking, California can do better.