California could reduce rooftop solar incentives due to market booms

SACRAMENTO (Calif.) -- California's 26-year old program to encourage more people to install solar panels on their homes has been wildly popular. However, state regulators are considering lowering the incentives to make it easier for residents to go solar to lower their electricity bills.

California could reduce rooftop solar incentives due to market booms

Residential solar customers can sell any energy they don’t use to power companies at their retail power rate, which usually results in a large discount on their energy bills. However, power companies claim that the savings are so large that solar customers no longer have to pay their fair share of operating the entire energy grid.

The state's major utilities have been engaged in fierce discussions about the future of net energy metering. The California Public Utilities Commission, which regulates the state's major utilities as well as the rates they can set for them, is expected to release proposed reforms Monday. This comes as California strives for its ambitious clean energy goals.

California's net-metering program was launched in 1995 to encourage solar adoption in the state. According to the solar industry, California has more residential solar installations than any other state. This number will continue to grow as all new homes built in California, 2020 must include solar panels.

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As solar panels became more common, there was growing criticism of the program. Southern California Edison, San Diego Gas & Electric, and Pacific Gas & Electric all claim that the current system allows solar customers to sell more of their energy back into the grid than they are worth. They believe more must be done to ensure solar customers, who rely heavily on utilities for power at night, are paying for the entire energy grid.

Power rates cover many costs that are not related to energy generation such as transmission, distribution, and even wildfire prevention. Solar households that have significantly lower electricity bills or none at all, are contributing less to these costs. This means that customers are responsible for more of the cost. Although the utilities put that cost at $3Billion, the solar industry disagrees.

California Public Utilities Commission initiated a reform process last year to improve the program. It aimed at ensuring that energy grid maintenance costs are distributed fairly and making it easier for all residents to buy solar panels. Because solar panels are expensive upfront, it is more common for households with higher incomes to install solar panels than those with lower incomes.

There is a wide range of opinions about potential reforms. 18 groups, including the utilities, ratepayer advocates, environmental groups, and the solar industry submitted proposals to state regulators. The final PUC reform proposal will be voted on by a five-member panel, which is likely to take place in January.

According to the solar industry, a drastic decrease in financial incentives will make it less attractive for people to install solar panels on their homes. This would jeopardize the market and reduce the state's ability achieve its clean energy goals. California is aiming to provide all electricity retail with renewable or zero-carbon power by 2045.

According to Bernadette De Chiaro, executive director of the California Solar and Storage Association which represents 700 businesses in the market for solar panels, the average cost to install solar panels on a California house is between $20,000 and $25,000 According to companies, homeowners can recoup their installation costs in three to four years by selling more energy to the utilities.

Utility companies have suggested lowering the amount that solar customers receive back. This would mean it would take homeowners longer to recover their costs, which could be between 11 and 15 years. Residential solar customers will also be subject to a "grid benefit charge" and "customer fee" that could reach up to $70 per month.

People who have solar panels already installed on their homes would not be affected by the utilities' proposed changes. Only those who decide to install solar panels will be eligible for the utility's desired changes. Customers with low income who install them within three year would be charged lower fees.

Utility Reform Network is a consumer advocacy group which often fights with utilities over rates. They also want to lower the amount that solar panel owners are required to pay back for excess energy. They suggested that homeowners lock in a price for 10 years so they know what they will be charged for excess energy. They want to improve financial incentives for low-income households.

Matt Freedman (staff attorney), stated that the group is focused on affordability.

According to the solar industry and its allies (including some environmental justice organizations and clean energy organizations), regulators should look for ways to increase incentives for California residents to purchase solar panels.

Del Chiaro stated that the state should make it easier for people with solar storage systems to be purchased alongside their panels. These systems cost around $15,000 to put in and allow solar panel users to store their energy to use at night, making them less dependent on the grid.

She said that utilities will have to spend less money on new power plants and transmission lines as more people create storage systems. It also means that they will have fewer customers who rely on them for their energy.

Del Chiaro stated that batteries are threatening the utility sector. They are really fighting to slow down this market.

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