The Clash Between the California Solar Industry and Big Utilities

By Casey Beyer, CEO Santa Cruz Chamber of Commerce

For more than two decades, California solar energy companies, installers and customers have benefited from an incentive program known as Net Metering. What is Net Metering? It is a billing mechanism that credits solar energy system owners for the electricity they add to the grid. For example, if a residential customer has a PV system on their roof, it may generate more electricity than the home uses during daylight hours. If the home is net-metered, the electricity meter will run backward to provide a credit against what electricity is consumed at night or other periods when the home’s electricity use exceeds the system’s output. Customers are only billed for their “net” energy use. On average, only 20-40% of a solar energy system’s output ever goes into the grid, and this exported solar electricity serves nearby customers’ loads.

But the billing system is about to change if the California Public Utility Commission (CPUC) makes the shift to reduce the credit benefits from the customer back to the utility provider. CPUC wants to slash payments for rooftop solar power, saying the changes would help the state achieve 100% clean energy while keeping the lights on, preventing electricity rates from rising and encouraging people to install batteries. However, solar executives are fighting back and are furious with the changes, saying they would backfire and curtail a thriving industry.

And the hot debate that has been brewing for more than a year plus is on the precepts of this change. The proposal from Martha Guzman Aceves, one of five members of the California Public Utilities Commission, would revamp an incentive program called “net energy metering” that has helped the state become a national solar power leader with more than 1.3 million rooftop and other small-scale systems installed. Solar industry and climate change advocacy groups are lobbying Gov. Gavin Newsom and his appointees on the utilities commission to keep the program’s basic tenets unchanged.

As always there are two sides to the policy discussion. Let’s break them out for you. According to Commissioner Guzman Aceves, “Net metering needs to evolve to reflect California’s changing energy needs. The Golden State’s power grid is increasingly flooded by solar energy during the afternoon but strained on hot summer evenings when millions of people throttle up their air conditioners to cope with high temperatures made worse by the climate crisis.”

Her idea is by reducing demand for fossil fuels during net peak periods in the evening, it reduces carbon emission – her primary goal. She and her staff crafted a plan to phase out net metering that will encourage new and existing solar customers to add battery storage systems that can bank clean energy for after dark, she said. Among other provisions, a new “storage evolution fund” would offer payments for homes that already have solar panels to add storage.

Other elements of the commissioner’s proposal would prompt Californians to switch from gasoline to electric vehicles, and from natural gas furnaces and stoves to electric appliances fueled by solar and wind energy, Guzman Aceves said — key pieces of California’s war on climate change. For instance, homes and businesses that add solar panels would be allowed to build much bigger systems than are currently allowed under net metering, to support lifestyles that are increasingly powered by electricity.

Guzman Aceves’ proposed decision, which was released Monday, endorses the argument made by the state’s largest investor-owned utility companies — Southern California Edison, Pacific Gas & Electric and Sempra Energy — that net metering subsidizes richer households that can afford rooftop solar at the expense of lower-income households that can’t.

Those big utilities are pushing the policy change. They argue that since rooftop solar arrays are mostly owned by upper-income Californians, the current policy, in effect, gives them a subsidy, of as much as $3.4 billion a year, from the pockets of less affluent ratepayers. They also contend that since owners of solar panels use the grid, they should pay something to maintain it, hence the $57 monthly fee.

The companies that install personal solar systems counter that the new policy proposal would make them less affordable to middle- and low-income homeowners. They and their environmental allies also contend that changing the rules would have the overall effect of reducing solar generation and thus hamstring California’s efforts to wean itself from carbon-based energy.

Both sides have waged public relations and media campaigns to sell their messages, but so far, with the release of the draft, the utility-led faction is prevailing, which is not surprising given the CPUC’s historic slant.

According to Abigail Ross Hopper, the President and CEO of the Solar Energy Industries Association: “Only the wealthiest Californians will be able to afford rooftop solar, shutting out schools, small businesses, and the average family from our clean energy future.” “The only winners today are the utilities, which will make more profits at the expense of their ratepayers. 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.”

Let’s get a local perspective from our solar companies in the region.

Scott Laskey of Sandbar Solar states: “It’s devastating to see this proposed ruling against independently owned residential rooftop solar and storage from the CPUC. Now it’s really an opportunity for us to see where our State leadership stands on this issue. They have the voices and input to the Governor who will determine the outcome of this proposed decision.  Are they for the big utilities and their monopolistic energy delivery strategy, or in favor of a local distributed energy grid that provides resiliency and renewable energy within reach of everybody? The decision can either move California’s renewable goals and job economy forward or result in tremendous local job losses and making independently owned solar and storage cost prohibitive.”

James Allen of Allterra Solar also offered his comments: “If the current proposed decision for NEM-3 holds, solar installation companies like Allterra will be in a very tough place. Homeowners and businesses would be penalized for adding solar with monthly fees and lower credits, which makes no sense at all considering the race to fight climate change. We are working with our industry allies, elected officials, and the community to pressure the CPUC to modify the proposed decision to make it more solar friendly. There is a small window between now and the end of January to help protect the future of clean energy in California.”

An ironic twist happened this week as well. Commissioner Guzman Aceves was just appointed by the Biden Administration as the director of EPA Region 9 starting next week. She won’t be a commissioner when this decision comes before the CPUC commission.

Adding more fuel to the debate, the full CPUC is expected to vote early next year, but the battle is not over and it now shifts to Governor Newsom, who appoints its members. He’s already nominated a new chairperson, Alice Reynolds, who is now his energy advisor and will take the new position before a final vote on the policy. Politically, therefore, it is very clear that the revised Net Meter policy will only be adopted if Newsom wants it to be adopted. Setting aside the major interest groups in the conflict, it involves two sub-factions that have close ties to the governor — unions and environmentalists — although the latter are also divided into pro and con camps.

My bet is on the solar companies and their customers. If you are concerned about the future of California’s solar industry, I encourage you to comment on the proposal and view documents related to the issue here: https://calssa.org

Originally appeared in the Santa Cruz Chamber News on 12/15