California proposes slashing subsidies for rooftop solar

California regulators plan to scale back discounts for homeowners with solar panels, a change they say will reduce costs for lower-income energy customers, under a package of proposed reforms released Monday.

Multiple stakeholders — including solar companies, environmental groups, ratepayer advocates and investor-owned utilities like Pacific Gas and Electric — have been fighting to influence changes to a 26-year-old system known as the net metering program since August 2020 when the rulemaking process began.

Under the current system, California energy customers can recover the cost of installing solar panels in a few years by selling surplus energy to utilities and getting big discounts on their power bills. Investor-owned utilities and ratepayer advocacy groups have argued those incentives are too generous and enable solar customers to avoid paying their fair share for costs unrelated to energy production, such as transmission, distribution and wildfire prevention work.

On Monday, an administrative law judge with the California Public Utilities Commission issued a proposed ruling that would reduce rooftop solar subsidies and increase how long it takes customers to recoup solar panel installation costs. It also proposes imposing a minimum monthly fee on customers with solar panels.

Instead of taking three to four years to recover solar-panel installation costs, the commission’s proposal would extend that time to about 10 years. It would also add a “grid participation charge” of about $40 a month to solar customers’ energy bills.

The changes would only affect new solar customers and would not apply to existing solar customers until after they’ve had panels for 15 years.

The incentives were not cut as harshly as sought by investor-owned utilities like PG&E, San Diego Gas & Electric and Southern California Edison, which had asked for a $70 monthly charge for solar customers. The utilities also lobbied for even lower values for excess energy sold to power companies, which would have made it take 11 to 15 years to recover panel installation costs.

In an emailed statement Monday, a PG&E spokesperson called the proposal “a step in the right direction,” adding that “sensible reform” is needed to make the system more equitable for all energy consumers. According to PG&E, 20% of the country’s rooftop solar exists in its service area, in which the company delivers power to 16 million people.

“We encourage the CPUC to approve the proposed decision’s advancements supporting customer equity while considering additional changes to further reduce the burden on customers without rooftop solar who are subsidizing those with solar,” PG&E spokesperson Ari Vanrenen said.

Solar power advocates like the Environmental Working Group blasted the proposal as an example of California regulators “caving to the demands of PG&E and other investor-owned utilities.” The group’s president, Ken Cook, said the decision “speaks volumes” about the commission’s disregard for ratepayers and willingness to ignore the existential threat of climate change.

“This decision by the commission to hobble rooftop solar could undo one of the nation’s most successful efforts to confront the climate crisis and move California to an electric grid powered by renewable energy,” Cook said in a statement Monday.

Members of the California Solar and Storage Association, which represents solar companies, also criticized the proposal, saying it would add a “penalty fee” to solar customers’ monthly energy bills, making it the highest such fee in the nation.

Mark Toney, executive director of the ratepayer advocacy group The Utility Reform Network, dismissed criticism that the reforms will slow down solar panel installation in California and cause the state to backslide on its clean energy goals. He said it’s about making sure all energy customers pay their fair share, and he noted that large-scale solar power facilities charge far less, about $0.03 per kilowatt hour, compared to the $0.20 per kilowatt hour that residential solar customers get for selling their excess energy.

“If the price is too high of electricity you’re going to undermine switching to electric vehicles and electric appliances,” Toney said. “Why would someone switch to electric if they’re going to pay more than for fossil fuels? Having a more fair and equitable solar subsidy promotes California’s climate goals.”

Regulators are also looking to encourage existing solar customers to invest in storage systems so they can save solar power generated during the day to be used at night. More solar storage systems would reduce California’s overall reliance on energy from the grid, most of which currently comes from fossil fuels.

It costs about $20,000 to $25,000 to install rooftop solar panels and another $15,000 for storage systems, according to the Associated Press.

The commission’s proposal would provide a $3,200 subsidy to encourage existing solar customers to purchase and install storage systems.

The proposal would also set up a $600 million fund to help low-income households purchase solar power and storage systems.

Solar panels have been installed on more than 1.3 million homes in California, the highest number in any U.S. state, according to the solar industry. That number is expected to rise after a law that requires solar panels be installed on all new homes took effect in 2020. The state has also set a goal to make its electricity come from 100% renewable sources by 2045.

The five-member California Public Utilities Commission board is expected to vote on the solar subsidy proposal in January.