California heads back to drawing board on solar net-metering policy

California regulators are about to take another crack at reforming the state’s solar net-metering policies. The proposal they unveiled in December elicited massive public backlash; it would have reduced the compensation paid to new rooftop solar owners for power they send to the grid and imposed a monthly fee on solar owners that would have been the highest such charge in the nation.

On Monday, the California Public Utilities Commission issued a ruling reopening public comment on aspects of its December net-energy-metering (NEM) proposal. The comment period will be open until June 24, after which the CPUC will revise its proposal. That pushes the timeline for the release of a new policy into July at the earliest.

But this new effort to find consensus on the state’s future rooftop solar policy must contend with opponents of the existing policy who claim that it harms the state’s poorest residents, as well as solar supporters who warn that gutting the value of rooftop PV will harm rich and poor customers alike while undermining the state’s ability to achieve its climate goals.

Initial responses to Monday’s ruling highlighted the distance that remains between the two sides in the net-metering debate. They have not come any closer to a consensus since the CPUC postponed a decision on its initial proposal in January in the face of criticisms from Governor Gavin Newsom (D) and opposition from a majority of California residents.

Opponents of the existing net-metering policy doubled down on their criticism. ​“Every single day that goes by without NEM reform imposes more cost burden on non-solar customers,” Kathy Fairbanks, spokesperson for the utility-affiliated Affordable Clean Energy for All coalition, said in a Monday statement.

The group claims that utility customers without solar have subsidized wealthier solar-equipped customers to the tune of $1.8 billion over the past four months alone. That figure is based on claims from California’s three big investor-owned utilities — Pacific Gas and Electric, Southern California Edison and San Diego Gas & Electric — that net-metered solar customers are causing a ​“cost shift” onto customers without solar because the rooftop-solar owners don’t pay their fair share of the fixed utility costs that keep the grid up and running.

But rooftop solar supporters contend these utility cost-shift claims are vastly inflated. They say this utility argument is part of a long-standing effort to undercut rooftop solar because it reduces the amount of electricity that needs to be supplied from central power plants, solar farms, battery installations and other large-scale assets that utilities build and operate and can charge their customers for through increased electricity rates.

Solar groups also say the CPUC’s year-long process to establish a new net-metering regime has failed to account for the environmental and grid-resilience benefits of a policy that’s made California the U.S. leader in solar power. The state’s more than 1.3 million rooftop solar systems together amount to more than 11 gigawatts of generation capacity, and maintaining that growth will be vital to meeting the state’s long-term decarbonization goals, they argue.

Walker Wright, vice president of public policy for leading U.S. residential solar company Sunrun, said in a Monday interview that California’s rooftop solar fleet has saved customers of the state’s three major utilities billions of dollars in energy costs by reducing how much electricity had to be generated by ratepayer-funded sources, in much the same way that the state’s decades of energy-efficiency policies have reduced customers’ energy costs.

Wright added that California’s current rooftop solar policy is not causing the two major energy crises that were highlighted by state energy officials last week: rising utility rates and increased risk of grid-supply shortfalls.

Sharp increases in utility rates are being driven by the cost of hardening grids against wildfires and building new transmission infrastructure, not by the mere existence of distributed solar, he said. ​“There’s no evidence that rooftop solar is a driver [of any significance] for why rates are going up.”

Meanwhile, utilities are failing to meet deployment targets for the vast amounts of utility-scale solar and battery resources they’ve been ordered to build to forestall the risk of supply shortfalls and prevent rolling blackouts during hot summer evenings. Distributed solar and batteries, deployed by consumers tapping into private capital, can scale up more quickly than those backlogged utility-scale projects — ​“as long as we don’t have roadblocks put in front of us,” Wright said.

The potential value of rooftop solar accompanied by batteries was highlighted in a Monday statement from the California Solar and Storage Association (CALSSA). The trade group said the amount of rooftop solar built between 2017 and 2021 equals twice the generation capacity of the Diablo Canyon nuclear power plant, which is set to close in 2025 and leave the state with a significant shortfall in round-the-clock carbon-free energy.

More and more of that rooftop solar is being paired with batteries, with more than 800 megawatts deployed to date and more than 1 gigawatt expected by 2024, CALSSA added. That could provide several hours of energy storage capacity equivalent to the nuclear plant’s generation capacity — if the state sets regulations that encourage rather than discourage growth of solar-plus-storage installations, CALSSA said.

“Californians strongly support rooftop solar and will not accept a decision that taxes the sun or slows our state’s clean energy progress by making solar unaffordable,” CALSSA Executive Director Bernadette Del Chiaro said in a Monday statement.

What changes are on the table for net-metering policy? 

Del Chiaro is concerned that Monday’s ruling from the CPUC doesn’t specifically ask for public comment on what her group considers to be the most harmful part of the December proposal: the monthly ​“grid-access charge” for owners of new rooftop solar systems, which CALSSA and its allies have dubbed a ​“solar tax.” It would be a fee of $8 per kilowatt of solar production capacity, adding up to an extra $40 to $60 per month for typical systems.

That would come on top of any reductions in what owners are paid for solar power fed into the grid. CPUC had proposed to stop paying the full retail rate for such power and instead pay a much lower ​“avoided-cost” rate. These changes together would have made rooftop solar uneconomic for all but the wealthiest customers, solar industry and environmental advocates say.

The CPUC’s ruling lays out the goal of achieving ​“a gradual transition” from today’s net-metering structure to a successor system that can balance fairness for all utility customers with the need to maintain stable growth of California’s rooftop solar industry. Those are the mandates set for the state’s next version of net-metering policy under state law AB 327.

But the specific issues the ruling asks for public comment on — how to create a ​“glide path” for gradual reductions in net-metered solar compensation, how to address certain utility charges as part of net-metered customers’ bills, and how to incorporate community solar and batteries into the policy — do not include the grid-access charge. This indicates that ​“the solar tax is still on the table,” Del Chiaro said.

It’s unclear whether the scope of the CPUC’s review of net-metering policy will be restricted to the specific issues cited in Monday’s ruling or expand beyond them. Since the initial proposal in December, the CPUC commissioner presiding over net-metering policy, Martha Guzman Aceves, has retired, and the proceeding has been reassigned to newly appointed commission President Alice Reynolds.

But rooftop-solar backers fear that even a scaled-down grid-access charge or ​“solar tax” could remain high enough to irreparably harm rooftop solar economics. ​“What looks like a negotiation in the compromise could still be one of the highest discriminatory fees in the country,” Walker warned.