California regulators voted unanimously on Thursday to significantly reduce the amount utilities will have to pay homeowners with rooftop solar panels for power they send to the grid — a decision that could hurt the growing renewable energy trade.
The five members of the California Public Utilities Commission said existing payments to homeowners through a program known as net metering amounted to an excessively generous subsidy that was no longer needed to encourage solar panel use. Under the proposal passed Thursday, compensation for the energy sent to the grid by roof panels will be cut by about 75 percent for new rooftop solar homes from April.
The move could have national ramifications, as regulators in other states often follow California’s lead. Debates about how far states should go to encourage renewable energy use simmer across the country. Many utilities have long opposed net metering, arguing that it does not adequately account for the cost of maintaining power grids and that it places too high a value on the electricity provided by roof panels.
“This decision is significantly fairer than the status quo,” said Alice Busching Reynolds, president of the California Public Utilities Commission. She added that California’s solar energy industry has many benefits, but it has been subsidized by residents who don’t have solar panels. “We have to be very careful about designing subsidies for this industry when we use taxpayers’ money,” she said.
The California Solar and Storage Association said the decision would limit the growth of rooftop solar even as the state sought to increase clean energy use and reduce fossil fuel burning, the leading driver of climate change.
Consumer and environmental groups critical of the proposal have noted that California has experienced some of the most destructive impacts of climate change, including deadly wildfires, extreme heat and severe drought.
“This decision goes against everything California stands for: clean energy leadership, climate solutions and justice,” said Bernadette Del Chiaro, executive director of the California Solar and Storage Association. “It goes against the Biden administration’s clean energy goals for America. This decision will lead to job losses and business closures, especially small businesses, which make up the majority of installers here in California.”
California began to massively encourage the use of solar energy under the Arnold Schwarzenegger administration, a Republican, from the early 2000s. It quickly became the country’s leader in the use of rooftop solar energy. About 1.5 million rooftop solar panels for homes and businesses have been installed in the state. Those small systems provided about 10 percent of California’s electricity generated last year, more than nuclear or hydroelectric plants, according to the Energy Information Administration, a federal agency.
By cutting the subsidy for rooftop solar owners, the commission wanted to create what it said would be a fairer system, in line with the arguments of utilities and some consumer and environmental groups such as the Utility Reform Network and the Natural Resources Defense Council. Those groups had argued that affluent homeowners were more likely to install rooftop solar systems, forcing lower-income residents to bear more costs to support the electric grid.
Under the new net metering program, average residential customers of Pacific Gas and Electric, Southern California Edison, and San Diego Gas & Electric who install solar panels would save $100 per month on their electricity bills, and average residential customers who install solar in conjunction with battery storage would do so save at least $136 per month, according to the commission.
As a result of those savings, it said, the average household installing a new solar or solar and battery system could pay for the system in full in nine years or less. Compensation would not change for homeowners who already had rooftop solar panels for at least 20 years from when their system was installed.
The committee took a less drastic approach than was proposed a year ago. In addition to cutting payments for excess power sent to the grid, the earlier proposal would also have imposed new monthly fees on the energy bills of rooftop solar homes.
