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Electric utilities in California and across the country are fighting back against rooftop solar, the main threat to their effective monopoly on the electricity market, according to the California Solar Energy and Storage Association (CALSSA).
California’s three major electric utilities have actively pushed an agenda to inhibit the growth of rooftop solar, the only technological solution that poses an existential threat to their monopoly on electricity sales in the state, according to Bernadette Del Chiaro, executive director of the California Solar Energy and Storage Association (CALSSA) during pv magazine’s USA Week event in October.
A series of regulatory decisions backed by the three utilities PG&E, SCE and SDG&E have won the support of the California Public Utilities Commission (CPUC), which has moved in unison to gut rooftop solar.
Over the past two years, the fight against rooftop solar in California has been on a roll. California has reduced net metering, or the payment for exporting solar energy from the home to the grid, by about 80%. It created strict labor standards for commercial solar installations with AB2143. It ruled that multi-metered properties, such as schools and farms, cannot use their own solar energy production and must sell it to the grid at a low price and buy it back at a significantly higher price.
The assault on rooftops continued in 2024, as the CPUC approved monthly flat charges of $24 that are payable even if 100% of a home’s energy comes from solar. These flat charges, already double the national average, have no legal cap and are likely to continue to rise, according to Del Chiaro. There is also the threat of changes to net metering rates for solar customers.
The rooftop solar market in California has plummeted following these changes. The chart below, shared by Del Chiaro, shows the number of interconnection applications submitted to utilities in a given month. There was a huge spike in applications as customers rushed to secure older, more lucrative net metering rates, and the subsequent crash was the state of the market going into NEM 3.0.
The chart undermines some of the rationale behind why NEM 3.0 was approved. It refutes the claim that rooftop solar customers are only upper-class, while middle- and low-income Californians are left behind, Del Chiaro said. It also refutes the suggestion that while solar installations may slow, more energy storage batteries will be installed, stabilizing the grid. While its true that batteries went from being included in 15% of projects to more than 60%, the decline in installations resulted in a lower overall volume of storage installations, he noted.
A year after NEM 3.0 was passed, leading solar insurance provider Solar Insure said 75% of California rooftop solar providers were at risk of bankruptcy. And several major installers have since gone bankrupt.
Maintain the monopoly
For Californians, rooftop solar represents an opportunity to stem the ever-rising price of electricity by making clear what energy will cost over the next 20-25 years or more. But for power companies, it represents competition.
Companies have tried to stifle this competition by promoting the idea that rooftop solar creates “cost shifting,” making it more expensive to run the grid and leaving non-solar customers with higher bills. Del Chiaro described “cost shifting” not as an argument but as a myth.
This August, the CPUC’s Public Advocate’s Office (PAO), which has sided with investor-owned utilities in all previous rulemaking decisions, released a report outlining the implications of cost shifting. It assessed that rooftop solar would result in $8.5 billion in additional costs for customers of the three investor-owned utilities. This has been the primary basis for the numerous anti-rooftop solar rulemaking decisions mentioned above.
However, this argument of cost shifting to utilities has been debunked. The Lawrence Berkeley Laboratory found that in 47 states, cost shifting from solar is negligible. Most states have solar penetration levels well below 10%. Until that level of penetration is reached, no cost shifting occurs, but states across the country are following California’s lead in reducing net metering.
Even at penetration levels of 10% or higher, the national lab found that the “shift” is only 5/1,000th of a cent per kilowatt-hour. Sixteen state analyses have come to the same conclusion: the cost shift is negligible.
“If the goal is to keep prices low, there are other pieces of the puzzle that affect rates far more than net metering,” Galen L. Barbose, a research scientist at LBNL, echoing an LBNL study that put this in context. “Carbon pricing, the operation of aging plants — those are the issues that utilities and regulators should be focusing on.”
A recent analysis by M.Cubed Consulting suggests that rooftop solar has no net costs, but instead represents a net benefit of $2.3 billion on utility bills.
Much of the cost-shifting analysis of rooftop solar relies on the assumption that all grid costs are fixed and do not vary over time. So, as the number of people installing solar increases, these fixed costs are paid by those without solar. However, over the past 20 years, even though electricity consumption has remained stable, utility spending on transmission and distribution has increased by 300%.
Far above inflation, electric rates have skyrocketed in California. CALSSA argues that the fundamental structure of private utilities in the state has created a perverse incentive to spend inefficiently. The more capital utilities spend on infrastructure, the more they can get electric rate increases approved. The higher rates go, the greater the profits.
“Getting utilities to stop fighting customers’ solar is ultimately what’s needed in California and around the world,” said CALSSA Policy Director Brad Heavner. “It’s been on our minds for years — how do we change this perverse incentive? It’s a difficult thing to do, but I’m hearing more and more about it.”
The California Air Resources Board estimates that the state needs to add about 10 GW of solar per year to meet its goal of 100% emissions-free energy by 2035. Over the past four years, the rooftop solar and storage market has accounted for 40% of capacity additions, which have yet to total 10 GW in a single year. CALSSA argues that the state will need a strong mix of rooftop and utility-scale solar to meet its goals. A healthy mix of project types, from utility-scale to rooftop, offers Californians the best chance of getting a handle on the state’s current electricity affordability crisis. |
