Rooftop solar program

California's rooftop solar program collides with equity concerns

A pandemic-era backlash against California's yawning wealth gap is taking aim at incentives for rooftop solar panels.

By COLBY BERMEL

A pandemic-era backlash against California's yawning wealth gap is taking aim at the state's pioneering climate policies. The latest target: incentives for rooftop solar panels.

The generous rewards paid to those who can afford to install them on their roofs amount to subsidies for the rich, utilities and other critics of the program argue.

It's the latest fault line in a clash over whether too many Californians are being left behind by the state's green push. For years, the state has wrestled with similar concerns about electric vehicle rebates flowing to wealthy Tesla drivers.

That anti-elitism sentiment has taken off during a recession that has disproportionately burdened low-income communities. It has also plagued Gov. Gavin Newsom, a multimillionaire whose children attended private school as most public schools remained closed. The governor now faces a likely recall election. But some solar advocates worry the resulting policy changes to the incentive program known as "net metering" could swing too far, or that they will inspire similar rollbacks in other states making the thorny transition to zero-carbon electricity.

If state regulators slash the rewards, "that will be very damaging to solar in California," said state Sen. Scott Wiener (D-San Francisco), one of the industry's biggest champions in the Legislature. "It will send a loud message to the rest of the country that California is not fully committed to a clean energy future."

Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric have used similar equity arguments for years as they pushed to reduce incentives that challenge their business model. Now they are getting newfound support from an unlikely source: environmental groups concerned the policy is unfair.

As solar becomes more ubiquitous, they argue, low- and middle-income residents have to pay a higher share of costs to maintain utilities' poles and wires for everyone's benefit, including solar owners. The rewards fueled rooftop solar's explosive growth, but that success has been clouded by concerns that maintaining incentives at current levels is unsustainable.

"Solar is still 'mom and apple pie' here," said Mike Florio, a former California utility regulator who warned half a decade ago about the solar program's increasing cost. "It was never a politically popular position to say [the benefits are] too rich," he added, but pandemic-inflamed disparities have changed the calculus.

Paying owners of rooftop solar panels for the excess energy they feed back into the grid has propelled Californians to outfit a million-plus homes with solar panels, a target set 15 years ago when Arnold Schwarzenegger was governor. Roughly one in 10 buildings with an electric meter have solar panels, according to California's three largest utilities.

Customer-owned solar is still a key piece of the state's ambitious climate agenda: Energy agencies projected in March that California needs to more than triple rooftop solar capacity by its 2045 deadline to help eliminate carbon emissions from the electricity supply.

But the state's net metering policy has long been dogged by claims that the payments are too generous, forcing utilities to raise rates to compensate for lost revenue. And as solar owners install batteries to store their extra electricity, further reducing their monthly bills, the remaining customers are left to absorb those service costs.

Also contributing to the rate hikes: expenses associated with upgrading the century-old grid so it doesn't spark climate-exacerbated wildfires, which last year burned a record 4.2 million acres across California and killed 33 people.

Net metering "should be totally eliminated," said state Sen. Steve Bradford (D-Gardena), who used to work for utility Southern California Edison and chairs the California Legislative Black Caucus. "It was an incentive for early adopters of solar, and now we have a program that's approaching 20 years. I think it's proven its self-worth, and now it's time to do away with it."

Many consumer advocates, environmentalists and even solar groups now agree that the benefits should be stepped down over time. California's electricity rates are among the highest in the country, and the state, for all its wealth, has millions living in poverty. Nearly a third of its households pay a discounted rate for low-income residents.

"California has climate goals, but the question is how we get to those cost-effectively and equitably," said Natural Resources Defense Council senior scientist Mohit Chhabra. "The challenge is how we do that and still keep rooftop solar growing, because it has a place."

State regulators studying the program have signaled they're open to changes. An initial decision could come as soon as October.

"We have to be real about the disparity between who participates and who doesn't," California Public Utilities Commissioner Martha Guzman Aceves, who's leading the agency's incentives review, told POLITICO last fall.

Meanwhile battle lines are being drawn over how much the payments should be cut — and whether regulators should go further by allowing utilities to charge solar owners monthly fees. Utilities and solar groups have already hired top PR firms to mobilize public support through opposing campaigns.

The utilities' joint proposal — to not just slash incentives, but charge fees as high as $55 per monthly energy bill for an average-size rooftop solar system — reverberated in the stock market in mid-March. Shares of San Francisco-headquartered Sunrun, a manufacturer of residential solar panels and battery packs, plummeted nearly 9 percent the day after the utilities' announcement, and the San Jose-based SunPower, a competitor, was down 8 percent.

Utilities want solar owners to be compensated based on when their excess energy is sent to the grid, and to encourage solar owners who install battery packs to export power during high-demand times. But Californians might be hard pressed to do so given the state's heat- and wildfire-driven power outages that can leave residents in the dark for days at a time.

Solar advocates say the utilities' proposals would harm the industry and threaten the state's climate goals just as California looks to wean its transportation and building sectors off fossil fuels.

"It's unfortunate that the idea of equity is being spun by the utilities to mean that everybody should pay a fair share of stuffing their pockets with money, as opposed to what's best for the state and consumers, which is prioritizing distributed, local energy," said Bernadette Del Chiaro, executive director of the California Solar and Storage Association.

"If I grew carrots in my backyard and ate them, then I had a few extras and tossed them over the fence to share with my neighbor — and as a result, both my neighbor and I purchased fewer carrots from Safeway, is that a cost shift?" she asked. "No. Safeway has fewer carrots they need to sell, and that doesn't mean everybody else is bearing that burden."

Groups advocating for low-income communities of color located near factories, oil wells and other industrial sites are torn between wanting to increase access to renewable energy — and the resulting jobs for solar installers — and reining in benefits for the wealthy. The nonprofit People Power Solar Cooperative has worked with the Sierra Club, Vote Solar and GRID Alternatives on a proposal to preserve existing incentives for low-income residents while reducing rewards for other solar customers.

"We have to figure out how to insert ourselves" into the debate, said Crystal Huang, the cooperative's co-founder and CEO. "Solar should be more than just bill savings or decarbonization. It should be looking at the tools of wealth building, for communities to come together. ... That's what we call energy democracy."