California derailed its booming rooftop solar buildout. Can it be fixed?
California state Senator Josh Becker is worried that the Golden State is undermining a pillar of its clean energy transition: distributed solar power. Though California has more large-scale solar and battery projects than just about any other state, smaller-scale energy — primarily rooftop solar — has contributed nearly as much to its energy transition to date. But over the past year, a string of utility-backed decisions from the California Public Utilities Commission have come “dangerously close to discouraging much-needed distributed energy in this state,” Becker, a Democrat, said. That’s why he — and a growing number of California politicians — are proposing legislation to reverse that trend. The first blow to distributed solar was the CPUC’s decision to alter California’s decades-old net-metering regime in ways that have slashed the value of rooftop solar for single-family homes and commercial properties. Two bills introduced this year are taking aim at that policy, which has decimated the state’s once-thriving rooftop solar industry since it went into effect a year ago today. And beyond legislative fixes, a lawsuit seeking to reverse the decision was just granted review by the California Supreme Court. But even more harmful decisions have followed, Becker said. In November, the CPUC ordered changes that will derail the economics of shared-solar programs used by apartment buildings, schools, farms, municipalities and shared commercial properties, he said — a policy he hopes to reverse with legislation he introduced last month. And then, in March, the CPUC proposed policies that would undermine a community solar plan backed by environmental justice organizations, consumer advocates, labor unions and the state’s homebuilding industry. That plan was seen by many solar industry groups as a last chance for California to throw a lifeline to its distributed solar sector, which accounts for nearly half of the state’s nation-leading solar capacity. Taken together, these decisions appear to be leading to a regulatory regime that will prevent distributed solar from continuing to play a role in meeting the state’s clean-energy goals, Becker said in an April interview. “We should be clear, that’s the message we’re sending right now,” he said. “With a community solar ruling that’s contrary to what 22 other states are doing, with a ruling that discourages schools and municipalities from being able to self-consume their own solar that they generate — I really think we have to take a step back and say, what are our goals here?” Becker is not the only one asking that question. Solar industry groups, environmental justice organizations, state and local elected officials and other entities are throwing their support behind the various legislative and legal efforts to put the state’s distributed solar industry back on track. The stakes are high, not only because California emits more planet-warming carbon dioxide than most countries, but also because of its position as the nation’s climate leader. It’s common for California climate policy to be exported to other states and even the federal level. California’s new distributed solar regulations have also made life more difficult for the solar industry writ large. They’ve crimped sales for nationwide rooftop solar providers such as Sunrun, Sunnova and SunPower in what’s been by far the country’s biggest rooftop solar market. And they’ve caused even more hardship for the larger number of smaller solar installers in the state. “We’ve heard from a lot of our customers across the industry in California,” said Fox Swim, policy researcher at solar software company Aurora Solar, which tracked a significant hit from the CPUC’s decision in its recently released report on 2023 nationwide solar installation data. “There are just a lot of companies hurting, a lot of companies having to cut back on staff, and having to make a lot of hard choices.” The policy push to get California rooftop solar back on track In February, the first bill to try and right the listing ship of California distributed solar was introduced: AB 2619. The legislation would “ensure that incentives are restored for residents who generate clean power for the grid,” according to a statement from Assemblymember Damon Connolly (D), the bill’s author. It would repeal the “damaging” decision — commonly known as “NEM 3.0” to distinguish it from the state’s two previous net energy metering (NEM) regimes — and force the CPUC to create new rules aimed at keeping rooftop solar growth on the trajectory needed to meet California’s long-range climate goals. Connolley cited the necessity of reversing the economic fallout from the CPUC’s new rules and highlighted the importance of distributed solar in “achieving 100 percent carbon-free energy by 2045,” the goal set by the state’s landmark clean energy law SB 100. A separate bill, AB 2256, would order the CPUC to restructure its policies by running an independent cost-benefit analysis of the role rooftop and distributed solar can play in achieving the state’s clean energy goals. Authored by Assemblymember Laura Friedman (D) and supported by nonprofit groups including Environment California, the Center for Biological Diversity and Environmental Working Group, AB 2256 would require that the CPUC consider a number of values these groups say were left out of its net-metering analysis, including improved local air and water quality, avoided land use impacts and other “non-economic” benefits. California’s big three investor-owned utilities, Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric, are the primary opponents of these bills. But the legislation also faces pushback from utility ratepayer representatives and some energy policy experts, which back the CPUC’s rooftop solar decision. These groups say that California’s previous policies shifted service costs from customers who had rooftop solar (and therefore much lower monthly bills) to those who didn’t. That’s a major problem, they say, since customers of these utilities already pay some of the highest electricity rates in the country and those rates are set to increase even further. These groups also dispute the solar industry’s claims that the CPUC’s decision is to blame for the drop in solar installations over the past year — or that the industry’s previous pace of growth was healthy for the state’s long-term energy equity and climate goals. They point to large-scale solar, which costs less to build than rooftop solar, as a preferable option. “The rooftop solar market isn’t dying,” Severin Borenstein, head of the Energy Institute at the University of California, Berkeley’s Haas School of Business, wrote in an April blog post. “It is coming down from the 2021-2023 sugar rush when net metering policies combined with rapidly climbing electricity rates, recent power shutoffs and the impending switch from NEM 2.0 to NEM 3.0 to produce growth that simply couldn’t be maintained.” Borenstein argued that, instead, the new policy has simply “stepped us back from the recent exponential growth in new systems,” which have led to “exponential growth in cost shifts onto other ratepayers.” The dreaded “cost shift” argument Borenstein’s case that California’s previous net-metering rules lead to harmful “cost shifts” represents one side of a hotly contested debate that has been raging in regulatory battles across the country. On the other side of the debate, environmental groups, community advocates and energy analysts have argued that utilities have misrepresented the underlying data to counter a set of policies they oppose for other reasons — mostly that utilities can’t make money on rooftop solar. In California, utilities have cited findings from the CPUC’s Public Advocates Office, an independent group tasked with protecting utility customers, that the CPUC’s previous net-metering policies have led to billions of dollars of costs being shifted from solar to non-solar customers. But these cost-shift calculations are flawed, critics say. They argue that CPUC has overestimated the costs that rooftop solar imposes on utility operations and undercounted the societal benefits, as highlighted by Friedman’s recently proposed bill.
California state Senator Josh Becker is worried that the Golden State is undermining a pillar of its clean energy transition: distributed solar power. Though California has more large-scale solar and battery projects than just about any other state, smaller-scale energy — primarily rooftop solar — has contributed…
California state Senator Josh Becker is worried that the Golden State is undermining a pillar of its clean energy transition: distributed solar power.
Though California has more large-scale solar and battery projects than just about any other state, smaller-scale energy — primarily rooftop solar — has contributed nearly as much to its energy transition to date. But over the past year, a string of utility-backed decisions from the California Public Utilities Commission have come “dangerously close to discouraging much-needed distributed energy in this state,” Becker, a Democrat, said.
That’s why he — and a growing number of California politicians — are proposing legislation to reverse that trend.
The first blow to distributed solar was the CPUC’s decision to alter California’s decades-old net-metering regime in ways that have slashed the value of rooftop solar for single-family homes and commercial properties. Two bills introduced this year are taking aim at that policy, which has decimated the state’s once-thriving rooftop solar industry since it went into effect a year ago today. And beyond legislative fixes, a lawsuit seeking to reverse the decision was just granted review by the California Supreme Court.
But even more harmful decisions have followed, Becker said. In November, the CPUC ordered changes that will derail the economics of shared-solar programs used by apartment buildings, schools, farms, municipalities and shared commercial properties, he said — a policy he hopes to reverse with legislation he introduced last month.
And then, in March, the CPUC proposed policies that would undermine a community solar plan backed by environmental justice organizations, consumer advocates, labor unions and the state’s homebuilding industry. That plan was seen by many solar industry groups as a last chance for California to throw a lifeline to its distributed solar sector, which accounts for nearly half of the state’s nation-leading solar capacity.
Taken together, these decisions appear to be leading to a regulatory regime that will prevent distributed solar from continuing to play a role in meeting the state’s clean-energy goals, Becker said in an April interview.
“We should be clear, that’s the message we’re sending right now,” he said. “With a community solar ruling that’s contrary to what 22 other states are doing, with a ruling that discourages schools and municipalities from being able to self-consume their own solar that they generate — I really think we have to take a step back and say, what are our goals here?”
Becker is not the only one asking that question. Solar industry groups, environmental justice organizations, state and local elected officials and other entities are throwing their support behind the various legislative and legal efforts to put the state’s distributed solar industry back on track.
The stakes are high, not only because California emits more planet-warming carbon dioxide than most countries, but also because of its position as the nation’s climate leader. It’s common for California climate policy to be exported to other states and even the federal level.
California’s new distributed solar regulations have also made life more difficult for the solar industry writ large. They’ve crimped sales for nationwide rooftop solar providers such as Sunrun, Sunnova and SunPower in what’s been by far the country’s biggest rooftop solar market. And they’ve caused even more hardship for the larger number of smaller solar installers in the state.
“We’ve heard from a lot of our customers across the industry in California,” said
Fox Swim, policy researcher at solar software company Aurora Solar, which tracked a significant hit from the CPUC’s decision in its recently released report on 2023 nationwide solar installation data. “There are just a lot of companies hurting, a lot of companies having to cut back on staff, and having to make a lot of hard choices.”
The policy push to get California rooftop solar back on track
In February, the first bill to try and right the listing ship of California distributed solar was introduced: AB 2619. The legislation would “ensure that incentives are restored for residents who generate clean power for the grid,” according to a statement from Assemblymember Damon Connolly (D), the bill’s author. It would repeal the “damaging” decision — commonly known as “NEM 3.0” to distinguish it from the state’s two previous net energy metering (NEM) regimes — and force the CPUC to create new rules aimed at keeping rooftop solar growth on the trajectory needed to meet California’s long-range climate goals.
Connolley cited the necessity of reversing the economic fallout from the CPUC’s new rules and highlighted the importance of distributed solar in “achieving 100 percent carbon-free energy by 2045,” the goal set by the state’s landmark clean energy law SB 100.
A separate bill, AB 2256, would order the CPUC to restructure its policies by running an independent cost-benefit analysis of the role rooftop and distributed solar can play in achieving the state’s clean energy goals.
Authored by Assemblymember Laura Friedman (D) and supported by nonprofit groups including Environment California, the Center for Biological Diversity and Environmental Working Group, AB 2256 would require that the CPUC consider a number of values these groups say were left out of its net-metering analysis, including improved local air and water quality, avoided land use impacts and other “non-economic” benefits.
California’s big three investor-owned utilities, Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric, are the primary opponents of these bills. But the legislation also faces pushback from utility ratepayer representatives and some energy policy experts, which back the CPUC’s rooftop solar decision.
These groups say that California’s previous policies shifted service costs from customers who had rooftop solar (and therefore much lower monthly bills) to those who didn’t. That’s a major problem, they say, since customers of these utilities already pay some of the highest electricity rates in the country and those rates are set to increase even further.
These groups also dispute the solar industry’s claims that the CPUC’s decision is to blame for the drop in solar installations over the past year — or that the industry’s previous pace of growth was healthy for the state’s long-term energy equity and climate goals. They point to large-scale solar, which costs less to build than rooftop solar, as a preferable option.
“The rooftop solar market isn’t dying,” Severin Borenstein, head of the Energy Institute at the University of California, Berkeley’s Haas School of Business, wrote in an April blog post. “It is coming down from the 2021-2023 sugar rush when net metering policies combined with rapidly climbing electricity rates, recent power shutoffs and the impending switch from NEM 2.0 to NEM 3.0 to produce growth that simply couldn’t be maintained.”
Borenstein argued that, instead, the new policy has simply “stepped us back from the recent exponential growth in new systems,” which have led to “exponential growth in cost shifts onto other ratepayers.”
The dreaded “cost shift” argument
Borenstein’s case that California’s previous net-metering rules lead to harmful “cost shifts” represents one side of a hotly contested debate that has been raging in regulatory battles across the country.
On the other side of the debate, environmental groups, community advocates and energy analysts have argued that utilities have misrepresented the underlying data to counter a set of policies they oppose for other reasons — mostly that utilities can’t make money on rooftop solar.
In California, utilities have cited findings from the CPUC’s Public Advocates Office, an independent group tasked with protecting utility customers, that the CPUC’s previous net-metering policies have led to billions of dollars of costs being shifted from solar to non-solar customers.
But these cost-shift calculations are flawed, critics say. They argue that CPUC has overestimated the costs that rooftop solar imposes on utility operations and undercounted the societal benefits, as highlighted by Friedman’s recently proposed bill.