Environment

California proposes changes to the state's primary rooftop solar regulation.

Published on: 13 December 2021 07:55 AM
by KnowESG
Solar panels from SunPower are installed on residential buildings at a model home display in the Eureka Grove neighborhood of Granite Bay, California, U.S., October 5, 2021.
Solar panels from SunPower are installed on residential buildings at a model home display in the Eureka Grove neighborhood of Granite Bay, California, U.S., October 5, 2021.

A Brief Summary

California is home to about 40% of the nation's residential solar energy capacity. Any change to the policy could have sweeping impacts on the utility and solar industries - including big panel installers like Sunrun Inc (RUN.O) and SunPower Corp (SPWR.O). California's investor-owned utilities have recommended cutting rates for solar energy sold into the grid and monthly fees to cover the cost of maintaining transmission lines and other infrastructure. The solar industry says such reforms would only hurt the state's efforts to fight climate change. It has instead proposed a gradual reduction in the net metering rate over eight years. "And so we ask ourselves, 'Should we be providing the largest subsidies to the richest customers in the state?'"

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California is set to propose revisions to a state regulation that permits homeowners with solar panels to sell their extra energy into the grid at or near retail rates this week.

Since it was implemented decades ago, the policy known as net metering has become a lightning rod of controversy: supporters say it has been critical to the industry's growth in the fight against climate change, while critics say it amounts to a multi-billion dollar subsidy for wealthy homeowners at the expense of other utility ratepayers.

Any change to the regulation could have far-reaching implications for the utility and solar industries, including large panel installers such as Sunrun Inc (RUN.O) and SunPower Corp. (SPWR.O). Experts say it might also serve as a warning to states that follow California's lead on climate change and sustainable energy initiatives.

About 40% of the nation's residential solar energy capacity is located in California. The state's Public Utilities Commission is gathering information on the matter from utilities, solar industry officials, and others, and could reach a decision as soon as Monday. In 2016, the commission made minor improvements to net metering.

Net metering opponents argue that permitting solar-paneled households to sell their energy at market prices essentially exempts them from paying any share of the cost of maintaining grid infrastructure, which is included in the price of power for regular ratepayers.

Customers without solar in San Diego, where home solar accounts for more than 20% of residential power usage, are spending up to $230 more per year on their utility bills, according to research released earlier this year by the University of California, Berkeley.

In an interview, Matthew Freedman, an attorney with the California ratepayer advocacy group The Utility Reform Network (TURN), described the situation as "a reverse Robin Hood issue." "As a result, we ask ourselves, 'Should we be providing the state's richest clients with the highest subsidies?'"

According to surveys, households with solar panels are wealthier than those without.

Rates for solar energy sold into the grid and monthly fees to cover the cost of maintaining transmission lines and other infrastructure have been proposed by the state's investor-owned utilities.

Such improvements, according to the solar industry, will only exacerbate the state's efforts to combat climate change. Instead, it proposes an eight-year steady reduction in the net metering rate.

If monthly fees are implemented, "solar companies would go out of business in cities all throughout the state, and the market would drop," according to Brad Heavner, policy director for the California Solar & Storage Association.

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