California rooftop solar proposal sparks firestorm

A proposed decision that would upend California’s rooftop solar industry is pitting economic justice advocates against solar buildout supporters and fracturing its environmental movement.

The controversial proposal — which has now been postponed “until further notice” — would lower the incentives that homeowners receive for generating their own solar power and charge them to connect to the electric grid.

The fight illustrates that battles within the energy transition don’t always conform to typical ideological lines, and pose hard questions for advocates of both expanded clean energy and fighting economic inequality. 

The proposal, first unveiled in December by the California Public Utilities Commission (CPUC), would alter its rooftop solar program by revising current “Net Energy Metering” (NEM) rules in such a way that “balances the needs of the electric grid, the environment and consumers,” a statement from the commission said. 

The plans have been met with wide ranging backlash — including from celebrities like Elon Musk and Mark Ruffalo — who raise concerns it will stunt the state’s transition to clean energy. 

Former Gov. Arnold Schwarzenegger (R) penned a recent New York Times op-ed warning that “California is about to take a big step backward.” Earlier this month, Gov. Gavin Newsom (D) told reporters that changes to the proposal needed to be made.

“I don’t think the commission appreciated the firestorm that their proposal was going to ignite,” Ken Cook, president and co-founder of the Environmental Working Group, told The Hill. 

That firestorm, he explained, resulted from “the convergence of the public’s deep frustration with the big utilities” and what they felt would be a disruption to “one of the most successful elements of energy policy in the state.” 

The plans are so contentious, the CPUC removed a scheduled vote on the decision from its Jan. 27 meeting agenda. And on Thursday, the commission’s administrative law judge sent an email to a designated service list indicating that the proposed decision “will not appear on the Commission’s voting meeting agenda until further notice.”

A commissioner recently reassigned to the rulemaking “has requested additional time to analyze the record and consider revisions to the proposed decision based on party comments,” the email said, noting that the oral argument hearing will be rescheduled. 

The proposal in question, dubbed NEM 3.0, would decrease the payments that solar customers receive when they send the excess power they generate back to the grid. NEM 3.0’s predecessors — introduced in 2013 and revised in 2016 — enabled customers to get credit on their electricity bills at retail rates, meaning they could essentially offset their monthly energy expenses. 

Changes to this approach are necessary, the proposal argued, because the money provided to home solar producers is set at a fixed retail rate and not tied to how much the electricity is actually worth. Transitions to lower rates for existing customers would occur 15 years from their initial grid connection date.  

NEM 3.0 would also require solar customers to pay a “grid participation charge” of $8 per kilowatt — a fee that the CPUC said would serve to “capture residential adopters’ fair share of costs to maintain the grid.” Low-income and tribal households would be exempt from these fees, while a $600-million Equity Fund would facilitate clean energy adoption in low-income communities, according to the proposal. 

If the average San Diego rooftop system is about 5 to 6 kilowatts, most customers in that region would pay between $40 to $48 per month, The San Diego Tribune estimated. 

The move could sharply curtail solar in the state. An analysis from Wood Mackenzie found that by 2024, it could cut the state’s residential solar market in half. 

Laura Deehan, state director of the group Environment California, referred to a similar cutback in Nevada as a cautionary tale. 

“We saw, very quickly, solar adoption just plummeted,” Deehan said. “And I am very concerned that the same thing will happen if the California Public Utilities Commission adopts anything close to what has been proposed.”

Whatever proposal ends up being adopted, Deehan said that there must be “no solar penalty fees,” as such charges would penalize people for fulfilling state energy goals. 

In response to a query from The Hill, Newsom’s office said only that “the governor is deeply committed to moving forward our clean energy goals, including helping Californians access a diverse range of renewable energy sources.” 

For proponents of the proposal, however, the current system comes with inherent disadvantages for low-income electricity users, who end up paying higher rates to offset the solar subsidy. 

These proponents, which include consumer groups and the Natural Resources Defense Council (NRDC), an environmental group, note that low-income residents often can’t afford solar’s upfront costs and may not own their homes, so they can’t install panels. 

They also point to the ephemeral nature of solar energy: while solar panels provide energy while the sun is shining during the day, in the evenings, these consumers may be using whichever electrons are on the grid, including those from fossil fuels. 

“If you charge 30 cents a kilowatt hour, you’re not going to get the climate benefits, and you’re going to screw poor people,” said Severin Borenstein, a professor of business administration and public policy at the University of California, Berkeley. 

“As the sun sets, the need for other generation ramps up really fast…That’s why we really need the gas capacity still…because we need to be able to meet demand at those times,” Borenstein said. 

He explained that rooftop solar is “particularly ineffective” at the end of the day “because the production from it drops off earliest, so we’re not getting the benefits from rooftop solar that are going to shut down those gas plants.”

Deehan argued that rooftop solar has the potential to save money for everyone because when people produce their own electricity, they may not need what’s already on the grid, cutting demand.  

“I’m instead creating my own electricity, sharing it with my neighbors,” she said. “The utility isn’t profiting from that but it’s essentially canceling out that demand.”

This situation, she conceded, could pose a problem “if there was suddenly no use for that extra energy” and therefore everyone ended up paying more. 

But Deehan explained that this is “just not a problem we’re seeing,” as the “demand for electricity is surging” in California — particularly as people purchase electric vehicles that require charging.

“In fact, it’s projected that we’re going to need somewhere between 150 percent and 200 percent of our current electricity needs,” she said.

The controversy is dividing the state’s environmental advocates, as the NRDC supports the proposal while other groups like the Sierra Club and the Environmental Working Group oppose it. 

In an explainer page on its website, the NRDC argues that the rates the program pays have not kept up with changes as solar became more widely adopted.

“Today’s rates for net metering were established when solar power was just beginning to take off, at a time when solar needed to be incentivized because of its high installation cost,” the page said. 

While the grid initially required more power at midday, that need has decreased, and retail rates have since “doubled or tripled,” according to the group.  

“So today, utilities effectively pay rooftop solar users five times what that energy is worth in California,” it added.  

The Sierra Club has taken issue with the extra charge for solar producers to hook up to the grid, but is more sympathetic to the argument about how solar producers are overcompensated. 

The group has put forward something of a compromise proposal that would slowly decrease the payments for rooftop solar.

Katherine Ramsey, a senior Sierra Club attorney said that the key difference is that its proposal would tie the rate reductions to whether or not rooftop solar is actually being built out. 

“We’re not really fighting over the long-term vision for this program,” Ramsey said, noting that it’s critical for step-downs to be linked to capacity.

This way, she explained, if the commission ends up cutting compensation too much and rooftop solar stalls, the export credit wouldn’t “decrease until they’ve caught up and are actually deploying new rooftop solar systems.”

Cook, from the Environmental Working Group, emphasized the importance of democratizing clean electricity generation through policy that puts lower-income or working-class families “at the front of the line” for solar adoption. 

“Let’s ask the Public Utility Commission to start there — not with the approach they’ve taken, which is to basically make solar more expensive for everybody,” Cook said.

Cook stressed that the CPUC needs “to start from scratch and ask the question, how do we deal with the fact that low-income families are paying too much for power, and they don’t have access to solar?”

“I don’t think it’s by crushing the rooftop solar industry,” he added. “That’s exactly backwards. And I think that’s a better starting point.”