Grid Credits for California’s Home Solar Users Could Fall 75% Under New Proposal

California has more rooftop solar than any other state in the U.S., generating as much electricity through this renewable energy source as 12 nuclear power plants, according to figures reported by The New York Times.

But the current way rooftop solar is regulated causes a conundrum. Right now, homeowners who install solar panels are able to receive a substantial credit for energy they sell back to the grid. This creates an incentive to adopt solar power, which is important for meeting the state’s ambitious climate goals. But there’s a catch: the credit ends up being unfair to low-income Californians who cannot afford to install solar panels and are stuck paying for relatively more of the cost of powering the state. 

“The crux of the problem is that rooftop solar households don’t fully contribute to utility fixed costs: transmission and distribution, wildfire mitigation and compensation, energy efficiency programs, low-income subsidies and early technology investments, to name a few. So, households without rooftop solar pay higher rates to meet the revenue needs for fixed costs,”  former senior energy advisor for the U.S. Agency for International Development Robert Archer explained in a recent OpEd to the Marin Independent Journal. “This is the real ‘solar tax.’”

To address these issues, the California Public Utilities Commission (CPUC) proposed new rules Thursday for governing what is known as the Net Energy Metering (NEM) solar tariff. 

The new proposal would, according to Cal Matters:

1. Reduce the credit that solar-panel users receive for selling electricity back to the grid by as much as 75 percent, though this would not apply to people already taking advantage of the credit.
2. Encourage customers to install solar panels with a battery system.
3. Adjust rates so that customers use power at times of day which increase the reliability of the grid.
4. Provide $900 million in solar incentive payments, with $630 million going towards low-income Californians.

CPUC said that, under the new proposal, the average customer of California utilities Pacific Gas and Electric Company, Southern California Edison or San Diego Gas & Electric will save $100 a month on their electricity bill if they install solar going forward and at least $136 a month if they install solar panels and a battery. This would be enough savings for people to pay off the installation costs in nine years or less.

“The update launches the solar industry into the future so that it can support the modern grid by incentivizing solar paired with battery storage and the adoption of electric vehicles, heat pump water heaters, and other electrification appliances while making rates more affordable for Californians,” CPUC said in a press release.

The new update is a revision of a previous proposal that would have charged homeowners with new solar installations  $8 per kilowatt a month, according to Cal Matters. The solar industry and other clean energy advocates said this would have made it much harder for California to meet its goal of getting  90 percent of its energy from carbon-free sources by 2035 and 100 percent by 2045.

While the solar industry is glad the fee has been removed, it also criticized the reduction in credits. 

“If passed as is, the C.P.U.C.’s proposal would protect utility monopolies and boost their profits, while making solar less affordable and delaying the goal of 100 percent clean energy,” California Solar and Storage Association Executive Director Bernadette Del Chiaro told The New York Times. 

On the other side of the argument, pro-equity group Affordable Clean Energy for All–a coalition of 120 groups representing low-income Californians, environmentalists and labor–was equally dissatisfied. 

“It is extremely disappointing that under this proposal, low-income families and all customers without solar will continue to pay a hidden tax on their electricity bills to subsidize rooftop solar for mostly wealthier Californians,” Affordable Clean Energy For All spokesperson Kathy Fairbanks said in a press release. “The failure to finally eliminate the growing cost burden carried by non-solar customers in California is particularly troublesome given the billions of dollars in new federal clean energy subsidies that will ensure continued growth and healthy profits for large solar corporations for the next decade.”

The Inflation Reduction Act and bipartisan infrastructure law provide incentives for both large utilities building clean energy installations and tax credits for individuals installing home solar or purchasing electric cars, The New York Times noted.

Affordable Clean Energy for All cited figures stating that around 70 percent of home solar users in California are in the wealthiest 40 percent of the population. Further, Californians without home solar pay an extra $3.4 billion per year in electricity bills as a group and $245 for the average customer. At current rates, that would rise to $10.7 billion per year collectively and more than $550 per year individually by 2030. 

The new proposal will be voted on by the CPUC in December and put into effect in April if approved, according to Cal Matters. The public will be able to comment at a meeting Wednesday, November 16.