California updates proposal on solar incentives that reduces costs but pays less

The state is working to reform the previous proposal that made solar hard to afford for lower-income households but, in turn, will tank the grid sell-back rates in what some groups are calling a ‘hidden tax.’

The California Public Utilities Commission’s (CPUC) new solar energy proposal removes a previously proposed monthly grid tax that could’ve added hundreds of dollars per year to the cost of solar installations (via Reuters).

The CPUC was looking to slash solar incentives for customers of investor-owned utilities and, in December, proposed charging a monthly fee of $8 per kilowatt to connect new solar customers to the grid. As pointed out by my colleague Justine Calma, some industry groups opposed the plan saying it “would end California’s solar boom,” which has made it the state with more rooftop solar than anywhere else in the US.

The CPUC responded by removing the monthly grid fee from its proposal.

At the same time, the CPUC is also planning to reduce energy payouts back to the grid, called Net Energy Metering (NEM). This could reduce payouts from $0.30 per kilowatt to a paltry $0.08, according to an analysis by the clean energy business group California Solar & Storage Association (CALSSA), reducing the possibility of recouping installation costs in less than 10 years.

Reuters notes that the new proposal included an additional $900 million to support battery and solar systems, mostly for low-income customers, and that the CPUC has previously said it wants to encourage battery storage over selling excess power. The CPUC also said that the adjusted NEM rates would only affect new solar installations, and current panel owners can continue selling back to the grid at the higher rate.

Residential solar providers like Sunrun, which can install both solar panel systems and battery systems like Tesla Powerwalls, could benefit from the new proposal by working to get more energy storage systems out there. “Customers will not be unduly penalized for generating and storing (in batteries) local clean energy to both participate in modern ways to power their lives and contribute to the fight against climate change, which is an important move in the right direction,” Sunrun CEO Mary Powell said in a statement to Reuters.

“If passed as is, the CPUC’s proposal would protect utility monopolies and boost their profits, while making solar less affordable and delaying the goal of 100 percent clean energy,” Bernadette Del Chiaro, CALSSA’s executive director, said in a statement. “We urge Governor Newsom and the CPUC to make further adjustments to help more middle- and working-class consumers as well as schools and farms access affordable, reliable, clean energy.”

Voting for the proposal is set for December 15th, with an April 15th, 2023, date set for implementation should it pass.

Update 6:05PM: Added note that the CPUC will grandfather in solar panel owners to the earlier, higher NEM rates.