Calif. solar installers call on Newsom in battle with utilities

With California's big three investor-owned utilities — Pacific Gas and Electric Co., Southern California Edison Co. and San Diego Gas & Electric Co. — seeking deep cuts in payments for solar generation at homes and businesses, the nation's largest rooftop solar companies are calling on Gov. Gavin Newsom for assistance.

"It comes down to Gov. Newsom ... to have to step in and say, 'We are going to have a strong solar market,'" Brad Heavner, policy director at the California Solar and Storage Association, said in a recent interview.

"He's done plenty for [Pacific Gas and Electric, or PG&E], bailing them out of bankruptcy and helping them through this difficult time that they got themselves into, and his willingness to step in and save rooftop solar for the customers, for the people of California, would go a long way to [building] the grid in the future," said Bernadette Del Chiaro, executive director of the trade association.

The group represents about 600 businesses that supply solar and batteries to homes and businesses, including Sunrun Inc., SunPower Corp. and Tesla Inc.

"If it goes anywhere close to where the utilities want it to go, it will kill the market," said Del Chiaro, the solar industry's long-time top advocate.

Newsom's office did not immediately reply to a request for comment on efforts to replace or significantly restructure the state's current net energy metering policy, under which owners of rooftop solar arrays can export excess power at retail rates. A proceeding to consider alternatives is underway at the California Public Utilities Commission, with a decision expected later this year.

Pushback on cost

Utilities have pitched a plan that would slash payments to be more in line with the lower prices of large-scale solar farms and would apply new charges for solar customers to use the grid. Another proposal, from ratepayer advocacy group The Utility Reform Network, would create a system of upfront payments funded from sources other than California ratepayers, such as the state's cap-and-trade program.

They and other parties in the proceeding, including the PUC's Public Advocates Office, say the existing program is outdated, benefits mostly wealthy Californians and shifts roughly $2.8 billion per year to nonsolar utility customers, contributing to high electric rates that jeopardize the state's clean energy transition.

"If nothing changes, this amount will grow to $4.7 billion more each year, or more than $300 per customer," according to utility-backed group Affordable Clean Energy for All. "While the cost of solar technology has fallen more than 70% since the program began 25 years ago, the [net metering] subsidy paid by customers without solar continues to increase."

Utilities and other groups seeking to rein in the program nevertheless maintain they want to see distributed solar continue to thrive.

The solar industry does not buy that.

"They pay lip service to the need to maintain the solar market, but they're not genuine about that," Heavner said. "Their proposals would ruin the market. They're saying it won't; they're not being truthful."

Opponents of net metering fail to account for the benefits of distributed solar, such as reducing demand for grid power and reducing the need for costly transmission lines, the industry representatives said. For instance, the California ISO in 2018 cited increased home solar generation, energy efficiency and revised demand forecasts for its decision to cancel 18 proposed transmission projects in Pacific Gas and Electric territory and two in San Diego Gas & Electric's domain, saving $2.6 billion.

Moreover, utility calls to drastically cut solar payments come as they plan to invest much larger sums on grid upgrades, also backed by ratepayers, the solar advocates charged. In February, California's three large investor-owned utilities proposed spending $21.7 billion over three years on hardening their electric grids, cutting back vegetation and other measures to fight wildfires. Many of those fires have been caused by utility negligence and forced the $58 billion bankruptcy restructuring of PG&E Corp. and its operating arm.

"They're trying to scapegoat solar as the reason why rates are going through the roof on California consumers, and it's not true," Del Chiaro said. "This is not a good time to be putting in place drastic changes. Quite possibly, it is the worst time."

Solar 'stepping stone'

California's solar installers have faced rising costs for photovoltaic panels in recent years due to import tariffs that former President Donald Trump imposed in 2018. That caused average installed costs for distributed solar projects to rise in 2020, according to installer data provided to the California PUC. Moreover, federal tax credits for homeowners and businesses to install rooftop solar dropped to 26% of project cost in 2020, down from 30%, and are scheduled to fall further in coming years despite Congress' recent two-year reprieve on reductions.

Despite those headwinds, more low- to middle-income residents are purchasing solar than ever before, according to Del Chiaro, who added that half of new solar projects today are in "low- and middle-income communities."

Ultimately, California's net metering policy is the foundation not only for solar but also for distributed battery storage that offers customers a backup power option and can be harnessed for grid reliability in "virtual power plants," she said. "If we were to do away with net metering today, we would not have the foundation for building the virtual power plants of tomorrow."