With the state considering sweeping reductions in rooftop solar incentives for new users, advocates of the current program are warning the move would undercut the state’s drive to 100% clean energy and compromise other benefits of the homeowner panels.
But proponents of the changes — which include private electric companies as well as a prominent environmental group — argue that the incentives are unfairly paid for by non-solar customers, who often have lower incomes than those who buy solar units.
Thanks to the steadily declining cost of solar panels, users currently recoup the cost of their panels in three to five years, according to the California Public Utilities Commission. Their bills are subsidized, largely because they receive high rates for the surplus energy they sell back to the utilities for years after the panels have been paid off.
“A three- to five-year payback for something that lasts 30 years is like winning the lottery,” said Mohit Chhabra, an energy scientist with the Natural Resources Defense Council, an environmental advocacy group.
Chhabra is lead author of the council’s proposal to provide a better deal for non-solar users and to help more low-income homeowners afford the panels. Under that plan, new solar users served by Edison would pay off their panels in an average of nine years.
While that’s far less than the 17-year payback in the proposal submitted jointly by the state’s three large private electric companies, the council’s plan has drawn the ire of solar activists as well as other environmental groups that favor far more modest changes.
“The last thing we should be doing is disincentivizing rooftop solar,” said Laura Deehan, state director of Environment California. “Rooftop solar is among the best and fastest ways to generate clean power. California should be doing everything in its power to accelerate rooftop solar, not slow it down.”
In addition to helping California achieve its goal of using 100% clean energy by 2045, Deehan said rooftop solar decreases the need to build solar and wind farms on unspoiled open space. It also eases pressure on transmission lines, reduces utility infrastructure costs, and provides homeowners with self sufficiency during blackouts, she said.
The Public Utilities Commission is pursuing changes to California’s solar incentive system largely because of concerns over inequitable bills for non-solar customers. That premise is supported not only by the utilities but by a UC Berkeley study, by the Natural Resources Defense Council, by UC Irvine renewable energy expert Jack Brouwer, and others.
The utilities peg the annual cost shift from solar to non-solar customers at $3 billion. Using San Diego Gas & Electric as an example, they say it costs the average non-solar household more than $200 annually — a price differential that is growing each year. The Natural Resources Defense Council says that without the solar subsidies, SDG&E’s non-solar users’ bills would drop by 16%.
But Deehan and other opponents of a significant rollback to solar incentives take issue with the methodology, modeling, bias and findings of those reports. They point to a study released Thursday, July 22, by Local Solar for All, a coalition of solar panel providers and non-profit advocacy groups. That study says that continuing along current lines would result in a $120 billion savings to all ratepayers over the next 30 years.
“These savings are the result of generating electricity closer to where it is used, reducing the need for expensive transmission and distribution infrastructure like poles, wires and substations, as well as reducing how much bulk-scale power is needed to serve the state’s grid,” according to a statement by Local Solar for All that accompanied the study.
Solar credits threatened
The state’s rooftop solar program was instituted in 1995 and is attributed for building the momentum that has resulted in 1.2 million rooftop solar installations so far. But as the cost of those installations has steadily fallen, questions of social equity have grown.
The California Public Utilities Commission, which regulates Edison, SDG&E and Pacific Gas & Electric, is now reviewing 11 proposals — and follow-up briefs — submitted by groups ranging from the utilities to the solar industry to environmental groups. The commission’s stated goal is to provide more billing equity to non-solar customers while “providing sufficient bill savings to the prospective (solar) customer” to sustain growth of rooftop solar.
A commission vote on the proposed changes is expected by January.
Revisions will affect customers of those three private utilities. The mandates will not apply to cities with their own power departments, which include Los Angeles, Anaheim and Riverside. Also excluded are areas served by what’s known as community choice aggregation or community choice energy — local public agencies that make decisions about the purchase and distribution of energy provided by private utilities.
At the heart of the debate are credits given to solar owners for the surplus energy they sell to the statewide grid. The credit is currently the same price a customer pays when taking energy from the grid, roughly 25 cents per kilowatt hour with variances depending the utility company and other factors. In other words, for each kilowatt those customers send to the grid, they get one back at no additional charge.
Dubbed net energy metering, the system provides utility companies with their most expensive source of electricity — more than what the utilities pay solar and wind farms, gas-fired power plants and hydroelectric dams. It’s more expensive because the utilities are crediting private solar owners at a retail rate, which includes administrative and infrastructure costs, rather than the wholesale rate it pays commercial energy providers.
Save California Solar, an advocacy coalition, says that credit could fall from 25 cents per kilowatt hour to as little as 5.7 cents under the utilities’ proposal for new solar owners. That proposal also includes new flat monthly fees averaging $56 for future solar users served by Edison and $91 for those served by SDG&E. People who already have solar on their roofs would not be affected by the proposal.
The utilities say the monthly fee currently paid by solar customers is inappropriately small, and that it forces non-solar customers to pay more than their fair share for the costs of infrastructure, maintenance and administrative overhead as well as the cost of programs to help low-income residents become more energy efficient.
The UC Berkeley study found that as much as 77% of customers’ bills go toward those fixed costs, and that as more households install rooftop solar those fixed costs are increasingly shifted to non-solar customers. Over time, that shift could undermine the push to clean energy because it could make electric cars and technology like heat pumps less attractive, according to proponents of reducing rooftop solar incentives.
Even without those incentives, fixed costs are expected to keep rising. Chhabra of the Natural Resources Defense Council said utilities are spending more to maintain aging transmission lines, invest in new infrastructure and to pay for past fire damages and step up future fire prevention — and that utilities also are paying higher rates on bonds.
Chhabra said the flat monthly charges proposed by the utilities for new solar users were too high. But he defended the council’s own proposal, which includes a new monthly fee for those whose panels are paid off. The plan would raise $130 million annually to help low-income homeowners install rooftop solar, according to the proposal.
That new incentive, coupled with the 2020 mandate that new homes have solar panels, should be sufficient to maintain the growth of the rooftop solar, he said.
Need for storage
Rooftop solar currently provides 11% of the state’s electrical capacity and 7.6% of the energy actually generated, according to the California Energy Commission. A state report in March estimated that capacity would nearly quadruple by 2045. Environment California, meanwhile, says there’s potential to accommodate 12 times as much rooftop solar as now exists.
But a problem with increasing the rooftop capacity is that most of the excess energy is sent back to the power grid during the middle of the day, when demand for power is lowest according to Brouwer, director of UC Irvine’s National Fuel Cell Research Center.
“You have so many people installing solar that the electricity it produces costs the utilities money to manage it in the middle of the day,” he said.
As demand peaks in the evening, solar energy– both rooftop and industrial scale — declines, as does wind energy. That’s when the energy grid turns to gas-fired power plants to fill in the gap.
For instance, on Tuesday, July 20 at 2:15 p.m., the statewide demand for the three private utilities was 37,000 megawatts, with 15,000 megawatts of that produced by a combination of solar, wind and small hydroelectric plants, according to the California Independent System Operator, which manages the state’s electric grid.
At 8 p.m., demand was 39,000 megawatts, with only 5,600 megawatts generated by solar, wind and small hydroelectric projects.
Among the 11 proposals before the Public Utilities Commission are a host of incentives for increasing battery storage among rooftop solar owners, a move widely seen as a key next step toward 100% clean energy.
“The solar (incentive) package for so many years has avoided that,” said Sadrul Ula, an energy researcher at UC Riverside.
While battery storage allows solar owners to both save energy to use in the evening and to sell it to the grid during those later hours when it’s most valuable, Ula and Brouwer both pointed to the limited ability of batteries to deliver electricity over an extended period of time.
“Surplus solar should be able to ride me through the next low-pressure system when there’s not sun, but that’s a matter of days — not hours,” Ula said.
The ultimate solution is long-term, non-battery storage managed directly by the utilities, according to Brouwer. He said the developing hydrogen energy storage technology is the candidate likely to best address that need, adding that he expects such storage to be widely available within 10 years — and widely used well before then.
“People are playing games with solar policy when they know it’s not sustainable until we have long-term storage,” Brouwer said. “Until the utilities find a a way to cheaply store energy long term, they will not want more solar in the middle of the day.”