California’s rooftop solar policies threaten progress… – Canary Media

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When California undercut its own rooftop solar market one year ago, it surrendered a crucial tool for achieving its ambitious climate goals.

For the last two decades, California set the national standard for clean energy policy. Governor Arnold Schwarzenegger, a Republican, jumpstarted the rooftop solar industry in 2006 with his Million Solar Roofs initiative, and championed binding carbon reduction goals with AB32, which guides the state to this day. Successor Jerry Brown signed into law a deadline to switch to a zero-carbon electricity system by 2045. Now the state is working to cut the fossil fuels it relies on for nearly 40 percent of its electricity, especially when the nation’s largest solar fleet goes to sleep for the night.

Solar forms the tip of the spear for California’s climate agenda; it’s the largest source of new energy construction in the state, just as it is for the nation as a whole. Until one year ago, California supported both forms of solar development: the large or utility-scale variety, which connects huge fields of panels to the utility-run grid, and small or distributed solar, which customers add to their homes and businesses to save money and supplement the grid’s clean energy supply.

Then, on April 15, 2023, Governor Gavin Newsom’s handpicked utility regulators at the California Public Utilities Commission (CPUC) officially stripped away the net-metering policy that had helped incentivize the small-scale solar buildout thus far. They replaced it with NEM 3.0, a new policy that slashed compensation for the solar power that individual customers delivered to the grid by upwards of 70 percent and pegged the much diminished rewards for that power to a novel and inscrutable metric called the avoided-cost calculator.

The calculator is so convoluted, the average customer and the average solar contractor can not easily figure out what the impact would be, whether the customer’s bill will go down,” said rate design expert Ahmad Faruqui, a vocal critic of the commission’s decision.

Since then, California’s distributed solar industry has reported plummeting sales and widespread job losses. New sales in January were the lowest for that month since 2014, said Bernadette Del Chiaro, executive director of the California Solar and Storage Association industry group (CALSSA).

In other words, California’s climate governor has overseen a reversal in fortune for the once-favored rooftop solar industry just when the state needs all the clean energy it can get.

The long term damage that we’ve sustained now is what this has done to California’s trajectory for meeting our clean energy goals, meeting our climate goals, keeping the lights on as we electrify and keeping costs down,” Del Chiaro said.

Now the rooftop market is in freefall, putting the state at risk of becoming more dependent on a centralized, utility-driven buildout that is already plagued with backlogged infrastructure upgrades and ballooning grid costs for customers.

Small-scale solar became a big climate solution

It’s true that large-scale solar has far cheaper unit prices, thanks to economies of scale. It costs less to mobilize a work crew and erect solar panels as far as the eye can see than it does to go rooftop to rooftop. Both types of solar ultimately produce an identical product: clean electricity in the hours when the sun shines. 

Monopoly utilities and their allies seized on this fact to suggest that rooftop solar subsidies are unfair to the rate-paying public: They argued that the whole customer population, including everyone who can’t access their own rooftop solar, was forced to pay solar owners more for their excess production than it was worth to the grid. By railing against this purported cost shift,” the utilities that charge among the highest rates in the country cast themselves as crusaders for the poor families struggling to pay their bills.

The wonky fight over whether rooftop solar forces unfair costs onto those without it has raged for years. Suffice it to say, running an electrical grid across varied terrain requires the socialization of any number of costs, which happens every day without protest so long as the results serve some social good. Since the Schwarzenegger era, California policymakers have agreed that lots more rooftop solar is a good thing for the state. It would create jobs and help individual households control their energy costs while pushing the whole state toward its climate goals.

The numbers bear out that theory. The national Solar Energies Industry Association shared data with Canary Media showing that utility-scale adds up to 55 percent of California’s total 45,605 megawatts of installed solar capacity, as measured by the end of 2023; rooftop, commercial and community solar, known collectively as distributed generation, make up the remaining 45 percent. All those little rooftops put together rival the might of the enormous solar fields blanketing the Central Valley and the Mojave.

The pace of deployment matters greatly, since California must install big numbers of panels every year for the next two decades to achieve carbon neutrality by 2045. It turns out, distributed solar has a consistent track record here, too. Distributed solar installers built more megawatts than their utility-scale counterparts in three of the last 10 years (2017, 2018, and 2021). In two other years (2019 and 2022), utility-scale eked out a win by less than a percentage point. In 2023, large-scale solar beat distributed solar by just 2.5 percentage points.

Crucially, solar is the main engine of California’s carbon-free energy growth. New nuclear isn’t happening, new wind has been mostly stalled for years, offshore wind in deep Pacific waters requires navigating a thicket of regulatory and technical hurdles. California’s near-term clean energy growth depends on solar, and in recent years, distributed solar has proven itself roughly coequal to utility-scale in sheer megawatts placed into service.

For a ballpark sense of just how much more work needs to be done, a California Air Resources Board study from 2022 notes that the state needs to add 72 gigawatts of utility-scale solar by 2045, and 29 gigawatts of distributed solar, to hit its clean electricity target. That would entail well more than doubling the total current installed small-scale solar capacity.

Newsom’s hand-picked utility regulators didn’t drop a proverbial anvil on a clean energy sideshow, but on one of their two headliners.

Rooftop solar is in freefall, but Newsom’s CPUC sees it differently

When California’s utility regulators voted to end net metering, they gave the industry just four months notice to prepare for the seismic shift, precluding a measured transition. That violated the principle of gradualism that should apply when the government attempts to restructure an entire industry, Faruqui said.

The results were both predictable and predicted. As customers retreated from the new uncertainty, the solar industry shed 17,000 jobs, 22 percent of its California workforce, through the end of 2023, according to estimates from CALSSA late last year (a new survey is currently underway).

The job losses have been huge and wide ranging,” Del Chiaro told Canary Media. There’s barely a company in California that hasn’t been touched by job layoffs and other cost controls.”

The Newsom administration, in contrast, insists the new solar rules aren’t a problem. The governor’s press team referred Canary Media to California Public Utilities Commission (CPUC) spokesperson Terrie Prosper, who said in an email that the new policy is effective at incentivizing solar installations.

California has done more for the solar industry than any other state in the nation by providing billions in rebates and incentives since 2006 to drive adoption,” Prosper said. Now, we’re focused on modernizing programs and policies to promote solar and battery storage, strengthen grid reliability, and curb electricity costs for all Californians.”

Prosper cited data that solar sales rose in 2023 compared to 2022. This is true: rooftop solar hit its high water mark the year net-metering died, to the tune of about 2.3 gigawatts per the SEIA data (commercial solar added another 640 megawatts). But 2023 included the three-month scramble when customers raced to buy their solar panels before the old rules went away and new, less lucrative ones kicked in. The year’s record numbers were driven by the last gasps of the old solar rules.

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