California regulators unanimously on Thursday voted to significantly reduce the cost of homeowners with rooftop solar panels for the electricity they feed into the grid from utilities — a decision that could hurt the growing renewable energy business.
The five members of the California Public Utilities Commission said existing payments to homeowners through a program known as net metering are an overly generous subsidy that is no longer needed to encourage solar panel use. According to the proposal adopted on Thursday, the remuneration for the energy fed into the grid from roof panels for new roof solar houses will be reduced by about 75 percent from April.
The move could have national ramifications, as regulators in other states often follow California’s lead. Debates about how far states should go to encourage renewable energy use simmered across the country. Many utilities have long opposed net metering, arguing that it does not adequately address the cost of maintaining power grids and that it places too much value on the power delivered by roof panels.
“This decision is far fairer than the status quo,” said Alice Busching Reynolds, president of the California Public Utilities Commission. She added that the solar industry offers many benefits to California, but that it has been subsidized by residents who don’t have solar panels. “We have to be very careful about how we subsidize this industry when we use taxpayers’ money,” she said.
The California Solar and Storage Association said the decision would limit the growth of rooftop solar installations even as the state sought to increase use of clean energy and reduce burning of fossil fuels, the main cause of climate change.
Consumer and environmental groups that have criticized the proposal have noted that California has experienced some of the most devastating effects of climate change, including deadly wildfires, extreme heat and severe drought.
“This decision goes against everything that California stands for: clean energy leadership, climate solutions and justice,” said Bernadette Del Chiaro, executive director of the California Solar and Storage Association. “That goes against the Biden administration’s clean energy goals for America. This decision will result in job losses and business closures, particularly for the small businesses that make up the majority of installers here in California.”
California began using solar energy under Gov. Arnold Schwarzenegger, a Republican, since the early 2000s. It quickly became a national leader in the use of rooftop solar panels. About 1.5 million solar systems are installed on the roofs of homes and businesses in the state. According to the Energy Information Administration, a federal agency, these small systems provided about 10 percent of all electricity generated in California last year, more than nuclear or hydroelectric power plants.
By cutting subsidies for rooftop solar owners, the Commission wanted to create what it believed to be a fairer system and agreed with the arguments put forward by utilities and some consumer and environmental groups such as the Utility Reform Network and the Natural Resources Defense Council. These groups had claimed that wealthy homeowners were more likely to install rooftop solar panels, leaving lower-income residents to bear a larger share of the cost of supporting the electricity grid.
Under the new net metering program, average residential customers at Pacific Gas and Electric, Southern California Edison, and San Diego Gas & Electric who install solar panels would save $100 a month on their electric bills, and average residential customers installing solar systems in Installing it in combination with battery storage would save at least $136 a month, according to the commission.
As a result of these savings, the average household installing a new solar or solar and battery system can fully amortize the system in nine years or less. Compensation for homeowners who already had solar panels on their roof would not change for at least 20 years after their system was installed.
The Commission took less drastic action than proposed a year ago. As well as reducing payments for excess electricity fed into the grid, the earlier proposal would also have added new monthly charges to the electricity bills of rooftop solar homes.