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Solar power advocates slam new California proposal to reduce subsidies

Construction crew installing solar panels on a house

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California regulators on Monday proposed significant changes to the state’s solar incentive program in a move vehemently opposed by industry advocates.

The new policy would reduce payments granted to solar customers for the excess power they generate — a policy known as net-energy metering — and also add monthly charges for customers. These changes would apply to new customers as well consumers and businesses who already have rooftop panels.

The California Public Utilities Commission said the proposed changes, in a decision known as NEM 3.0, are meant to encourage consumers to install battery storage systems alongside solar panels, so they can store the excess power generated by solar panels and feed it back to the grid when it’s most needed.

Solar adopters have traditionally been wealthier consumers, given the high up-front cost of installing a solar system, and the state’s utility companies have long argued that other customers are unfairly subsidizing grid costs for these solar customers. In the 204-page document, the regulatory body said that the current net-energy metering policy “disproportionately harms low-income ratepayers.”

The proposed changes would also create a $600 million fund to help low-income customers gain access to distributed clean energy.

Southern California Edison, one of the state’s largest utility companies, said the proposed decision is a “meaningful step toward modernizing California’s rooftop solar program.”

But solar companies and advocacy groups were quick to sound the alarm. California has the highest number of residential solar customers across the U.S. — more than 1.3 million — and the incentive program has been a key driver of that growth.

Solar executives said that the elevated costs under the new proposal will significantly dampen growth since the policies will increase the payback period — that is, how long it takes for a customer to make back their initial investment due to lower electric bills.

Solar systems vary significantly, but the current payback period is between four and five years, according to research firm E3. CPUC said that the new proposal will lead to a 10-year payback period for solar plus storage systems. The Solar Energy Industries Association said it’s working on its own calculation to determine the payback period under the new policy, and argued that the proposal would create the “highest solar tax in the country and tarnish the state’s clean energy legacy.”

“The last thing we need is to go backward on our climate goals,” Abigail Ross Hopper, president and CEO of SEIA, said in a statement. “The only winners today are the utilities, which will make more profits at the expense of their ratepayers,” she added. “California is now on the wrong path.”

The California Solar & Storage Association echoed this statement, saying “CPUC proposed a giveaway to investor-owned utilities that would boost utility profits at the expense of energy consumers, family-supporting jobs, and California’s clean energy future.”

Solar executives also weighed in, with Sunrun’s vice president of public policy Walker Write saying the proposal would “impose the highest discriminatory charges on solar and energy storage customers in the U.S., putting rooftop solar and batteries out of reach for countless families in California just as more households are demanding that the state do more to combat climate change and provide them with reliable, sustainable energy.”

The proposed decision is not final. A comment period will now follow, with the full commission voting on a final decision no sooner than Jan. 27, 2022. The ultimate decision could wind up looking nothing like Monday’s proposed decision.

Complicating matters further, the CPUC’s president — one of the five commissioners — is set to step down at the end of this year.

Monday’s decision follows a process that’s been going on for months. A number of parties, including SEIA and the California Solar & Storage Association, submitted proposals for the committee to review in March. California’s three largest utility companies — PG&E, SoCal Edison and San Diego Gas & Electric — submitted a joint proposal. Other groups, including The Utility Reform Network and the National Resources Defense Council, also offered proposals on what California’s solar policy should look like going forward. There was wide variety among those proposals.

Mark Toney, the executive director at The Utility Reform Network, said the proposed decision is a “step in the right direction and and recognizes the importance of a sustainable solar policy that benefits all customers.”

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