California Solar Customers, Industry Brace for Impact of Reduced State Incentives

Caitlin Quinn remembers seeing the first solar panels go up in Petaluma City Schools as a high school student. The panels helped “normalize” green energy and were a learning opportunity, she said.

Now, Quinn is the school district’s board president, where she is exploring opportunities to install more solar. Already, solar energy accounts for between about 40% and 70% of energy use per campus. But she’s worried that a state decision to reduce rooftop solar incentives could drive up costs and hurt the district’s efforts.

“Is it better to keep investing in solar when it saves less money or pay our teachers enough so they can afford to live in Sonoma County?” she said. “These are not decisions we want to be making.”

Starting Valentine’s Day, a controversial new rate will take effect across California, reducing the cost savings of installing solar for customers with more than one electric meter, a category that includes many schools, apartment buildings and businesses.

New customers will be credited about 80% less for the energy they produce and sell back to the grid, according to solar advocates. Additionally, most non-residential customers with more than one meter will be charged for the electricity they consume at full retail price, even during the sunny hours when their equipment is generating power. Meanwhile, the solar energy they generate is sold back to their provider at a reduced rate.

Currently, the California Public Utilities Commission assumes that electricity generated by solar homes is used on-site and doesn’t require customers to be charged.

Solar advocates said that these changes will further drive down demand for solar, putting additional strain on an industry that has suffered since a similar policy went into effect for homeowners last April. These changes could also threaten the state’s efforts to meet its goal of 100% clean power by 2045, solar advocates said.

“California is sabotaging its clean energy goals with this decision,” said Bernadette Del Chiaro, executive director of the California Solar and Storage Association.

The CPUC, on the other hand, described the changes as an effort to “modernize” solar regulations. (The regulatory agency did not respond to questions sent by KQED and instead directed the publication to two press releases [PDFs].)

The commission has in the past argued that the reduced rates better reflect the true value that solar customers provide to the grid and could temper the state’s soaring electricity bills, which are some of the highest in the country. The changes are also designed to incentivize customers to install battery storage, which could bolster grid reliability, the commission said.

Energy experts said these goals have merit: “In order to achieve our renewable goals, we need to build a lot of solar, period,” said Michael Wara, director of the climate and energy policy program at Stanford Woods Institute for the Environment. “But we need to make sure we do it in a way that’s fair and equitable for all Californians.”

Wara said the previous rates did not reflect the cost solar customers impose on the grid by using it as a “giant battery” — feeding power into it in the daytime and taking it out at night. He said the old incentives shifted costs onto customers without solar, contributing to rate increases, which disproportionately affect Californians with lower incomes.

Commission officials’ rationale has not appeased the broad coalition of groups that assembled to oppose the new regulations, which regulators unanimously approved in November and are taking effect after a 90-day grace period. Climate advocacy groups, farmers, school districts and elected officials all wrote to regulators in advance of the decision, detailing the ways the changes would hurt their ability to install solar.

Oakland Unified School District Board President Sam Davis said the district’s goal of achieving 100% clean electricity by 2030 and completing new school construction and renovation with high environmental standards is a “no-brainer.” But the new rates, he said, will make it harder to afford additional solar panels.

“It feels very hypocritical,” he said of the state’s latest policy change. “We say we’re about building a green economy and addressing climate change, but then we’re not supporting school districts’ ability to put in green infrastructure.”

The reduced incentives could also exacerbate the challenges facing California’s strained solar industry. The California Solar and Storage Association estimates that about 17,000 solar workers lost their jobs by the end of 2023 after a similar rate structure went into effect for single-meter customers in April.

These layoffs are continuing into the New Year. San Francisco-based solar company Sunrun, one of the largest solar installers in the country, laid off 88 workers in California in January, according to Worker Adjustment and Retraining Notification (WARN) Act filings. This follows the company laying off roughly 1,000 direct employees in California in the second half of 2023, according to Sunrun’s vice president of public policy, Walker Wright.

Del Chiaro said the latest decision would especially affect solar businesses that specialize in commercial installations, which she estimates constitute about a third of California’s solar industry. She anticipates that the industry will see layoffs rise again in the summer after these companies work through the backlog of projects.

“We’ve decimated that market going forward,” she said, adding that she is concerned about the impact the decision will have on the state’s climate goals.

These climate concerns were shared by the school district officials and others who have spoken out against the changes.

The CPUC aims to add about 86,000 megawatts of electric resources to the grid by 2035, which would more than double the state’s existing capacity. Of that total, the plan calls for about 39,000 megawatts of solar power and 28,000 megawatts of battery storage.

Wara, the Stanford researcher, was more reserved in his judgment. He said the state needed to set a rate structure that incentivized more storage, but it is not yet clear whether they struck the right balance between promoting increased storage and energy generation.

“It’s too soon to know,” he said.

This article was reported in partnership with Big Local News at Stanford University.