One of the many benefits of rooftop solar is having the ability to participate in net metering, a billing mechanism that allows solar energy system owners to receive credits on their electricity bills for the excess electricity they generate and feed back into the grid. But a recent change to how these payments are handled in California is causing big disruptions in the Golden State, the current leader in the U.S. for solar energy production.
Where it all began
The controversy began in April of 2023, when the California Public Utilities Commission (CPUC) decided to make major cuts to the solar incentives that homes and businesses receive through net metering. Previously, CPUC required utilities to pay owners with rooftop solar the retail rate for electricity they sent to the grid. This was usually about 33¢ per kilowatt-hour, but could sometimes be as much as 75¢—significantly more than the wholesale price of around 5¢ that utilities pay to big solar installations. In effect, this helped encourage and subsidize rooftop solar and helped lead to California’s explosive solar growth over the past few years.
Net metering is often viewed as a win-win situation for both consumers and utilities. It allows utilities to diversify their energy sources, reduce peak demand on the grid, and defer the need for costly infrastructure upgrades by utilizing distributed renewable energy resources from customers’ solar installations. Customers, of course, benefit from seeing this “energy buyback” on their utility bills, sometimes effectively bringing their energy bills closer to zero. So you can see how this big of a change in the buyback price would affect someone’s monthly budget.
The rest of the story
The old rules will still apply to systems installed in the state before April of 2023, but California officials believed that the previously high rates provided too much of a subsidy, particularly for affluent homeowners. Lower-income residents who may not be able to afford a home or solar panels in the increasingly unaffordable state could be left paying for a higher amount of the state’s electricity system. A recent opinion article in the Los Angeles Times proposes keeping the new lower whole rate, but then offering additional state tax credits to help make up the difference between rates. Doing so will help bring rooftop installations back to their pre-2023 rate (they’ve dropped 85% since the change occurred according to a report from Ohm Analytics), minimize the massive job losses in the solar industry that have resulted from this change (an estimated 17,000 jobs so far), and can keep California on their path to a clean energy future.
It’s also worth noting that the state has begun offering increased incentives to install batteries as part of their solar installations. This change can help offset the steep drop in net metering fees, while also helping create a more resilient energy system in a state when EV adoption is growing faster than most other states.
California has long been a leader in solar energy and will continue to be so for some time, but many other states are watching the results of this battle closely. Policy has a very big effect on adoption and we’re beginning to see a wide variety of “levers” that can be pulled to help influence our energy future.
