A Step Backward for Rooftop Solar in California?

California is eliminating a substantial subsidy for people who add solar panels to their homes and businesses. The new policy will reduce the amount of money that utilities are required to pay to homeowners who pump surplus electricity back into the grid. There’s now concern that the decision will hurt the solar industry in California, and potentially other states that may follow California’s lead. State regulators say the old policy is outdated, and the new one paves the way to the future.   Hi, I'm Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review.   The five-member California Public Utilities Commission voted unanimously in favor of the proposal. They say it will promote grid reliability and distribute the cost of maintaining the grid more equitably, while incentivizing the use of rooftop solar with battery storage. CPUC Commissioner Clifford Rechtschaffen says: “The decision strikes the right balance between many competing priorities and advances our overarching goals of ensuring California meets its climate and clean energy goals equitable.” (1)   New Policy Reduces Solar Incentives   There are currently 1.5 million homes, businesses, and other utility customers with rooftop solar. They will see no changes under the updated policy. CPUC officials call it the modernized version of the Net Metering Energy solar tariff or NEM. The original Net Metering rules were adopted way back in 1995. But starting next April, the new policy will go into effect and reduce the amount that utilities pay solar customers for excess electricity by as much as 75%.   Commissioners say the lower rates reflect the true value of solar electricity which is produced during the day when electricity is cheaper. Electricity becomes more expensive in the evening when the sun isn’t shining and people come home and turn on their appliances. They say the cost of electricity in the evening can be 20 times what it is during the day, and puts tremendous strain on the grid.   Debate Over the Impact of the New Policy   The debate over the change to the solar cost structure has played out for a couple of years. Solar advocates say the new policy will discourage many people from installing solar because it will be that much more expensive. Woody Hastings at “The Climate Center” says: “California needs more solar power, not less.”    Executive Director of California Solar & Storage Association, Bernadette Del Chiaro, says: “For the solar industry, it will result in business closures and the loss of green jobs. For middle class and working class neighborhoods… it puts clean energy further out of reach.” (2)   Energy research firm Wood Mackenzie released a report earlier this year that says the changes will lead to a 50% reduction in California’s solar market by 2024. They could also impact California's transition to 100% renewable energy by 2045. (3)   On the other hand, the group Affordable Clean Energy for All, which is funded by California utilities, says that the current system is outdated, and that millions of non-solar customers are paying an unfair amount for grid maintenance. Advocates for low-income families who can’t afford solar also say it’s time that solar customers pay their fair share for their use of the grid.    State officials at the public advocate’s office put a positive spin on the new policy. They say it shows that California has succeeded in its goal to expand the use of solar power. Matt Baker says: “We have outgrown the subsidies for a solar-only system and now it’s time to pivot to solar plus storage.”    CPUC Encourages Solar Plus Battery Storage   The new policy encourages the installation of a battery to store extra power so grid energy isn’t needed when the sun goes down. That could help reduce the strain on the grid during peak hours, especially during hot summer afternoons and evenings when people turn up their air conditioners.   Battery storage will also allow solar customers with extra energy to pump solar power into the grid when rates are higher, increasing the value of the electricity they produce. The CPUC says there will be a big difference between peak and off-peak rates.    The policy also raises the maximum size allowed for a rooftop solar system to 150% of a customer’s energy use. With an oversized system, there would be more potential for excess energy production in the near term. Over the long term, a larger system will accommodate the expanded use of solar for electric vehicles and other appliances.   Customers with battery storage can also earn energy credits. Low-income families and disadvantaged communities that install solar with a storage system would qualify for an even larger share of those credits.   New Policy Energy Savings   The CPUC says the average residential solar customer will save about $100 a month under the new rules, and about $136 a month with a battery storage system. They say the savings will make it possible to pay off a new system in just 9 years or less.   The new policy is also a better deal than one the CPUC had previously introduced. That policy offered a lower amount for excess energy rates, and also imposed new monthly fees for rooftop solar customers.    But the best deal is for existing customers. Like Proposition 13 did many years ago to lock in lower property tax rates for homeowners, those with solar systems in place right now, don’t have anything to worry about. There will be no changes to the way they are compensated for surplus energy. That also applies to people in the process of getting their system installed by the April deadline. If that's you, check for details on submitting a net metering interconnection application to your power company, which is reportedly the way you lock in the old net metering policy.   For new customers, solar power will get a little more expensive, but according to the CPUC, will still save you money.   Check for links to stories about this decision in the show notes at newsforinvestors.com. You can also join RealWealth for free while you are there for access to all our real estate news and educational material on real estate investing. Please remember to subscribe to our podcast and leave a review!   Thanks for listening!   Links:   1 - https://www.cpuc.ca.gov/news-and-updates/all-news/cpuc-modernizes-solar-tariff-to-support-reliability-and-decarbonization   2 - https://calmatters.org/environment/2022/12/california-solar-rules-overhauled/   3 - https://www.cnbc.com/2022/12/15/california-lowers-solar-energy-incentives-for-homeowners.html