California’s Solar Customers May Get Singed, Imperiling Net-Zero Goals

The town of Paradise, California, is battling to regain its footing three years after it burned to the ground. Its “challenger” is Pacific Gas and Electric — the same utility that sparked the state’s deadliest wildfire in November 2018.

In the three years since the fire, Paradise has been rebuilding. A lesson that some residents learned is to rely less on the local utility and more on solar power and battery storage. It’s good for consumers and the utility — even though the two are at odds over something called “net-metering,” technical jargon for measuring what rooftop solar customers should get paid when they channel their surplus power to the grid.

“When they first let us back in, it was like a bomb dropped. There was nothing,” says Bryn Tyler, a marketing executive who lives with his wife and two daughters in Paradise, in a talk with this writer. “People perished in their cars. The cars got so hot, and it made the asphalt boil. I’m amazed that only 86 people died” in a town of 28,000. “When we rebuilt and returned in July 2020, we went with rooftop solar energy plus batteries. I did not want to pay PG&E
PCG
. I didn’t want to interface with this company. It drove us to an alternative energy system.”

Tyler described the fright that day, November 8, 2018: the fire started just before 7 a.m. — due to a power company equipment failure. High winds had carried the flames northward toward Paradise. By 9.30 a.m., the skies had darkened and only became lighter because of burning embers. After warning his neighbors to evacuate, Tyler got into his car and raced westward — all to beat the fire that could have broadsided him. Others waited too long. Not everyone made it in time with only a few exits out of town. 

With their homes destroyed, residents had to rebuild. Some like Tyler wanted to use distributed energy resources that are greener and less expensive. Homeowners and businesses can generate rooftop solar power and sell any excess electricity to the utility. Not only is the power they generate “free,” but they are paid retail rates if they sell it to the utility.

But now the power company wants to pay the wholesale rate. The price difference supports the grid, a public asset that keeps the power on and communities alive. Moreover, rooftop solar customers still use the wires — to sell power or buy it when they do not produce enough energy.

Who Pays? 

Indeed, one side says that the process results in a wealth transfer from those who depend solely on the grid to those who can afford the panels on their homes. The other side is saying that customers who generate electricity through rooftop solar panels are easing traffic over the wires, which means the utility may not have to build new lines and power plants.

“The issue is not solar users versus non-solar users or solar-users versus the grid,” says Bernadette Del Chiaro, executive director of the California Solar & Storage Association, in an interview. “That is a false dichotomy. This issue concerns what is suitable for the grid and where we need to go in the 21st Century versus what is good for utilities and their profits. 

“I want to disabuse anyone of the notion that it is easy to pass clean energy policies in California,” she adds. “Once you look under the hood, battling California utilities is harder than fighting coal in West Virginia. It’s about retaining the old power structure. But what’s better: embracing the sunshine or getting out of the coal mines? Building renewable resources that do not require poles and wires spells fewer profits for utilities. That is why they oppose distributed generation.”

At issue in California is a proposal to be decided as early as January 27. Under the state’s current net metering laws, the typical payback for installing rooftop solar panels is six years. Installing 20 solar panels on top of a 2,000 square foot home would cost about $18,000, and after the federal tax credit, it would be $13,000. If homeowners or businesses also used battery storage, it would add $15,000. 

The six-year return on solar installations is reliant on customers getting paid the retail rate. But under the changes, any person or company that uses solar would pay a monthly $40 grid fee while getting paid the wholesale price of electricity. That’s about 80% less than the retail rate. Del Chiaro says that the return on investment increases to 16 years. Her storage group is flat-out opposed to the $50 grid charge each month. And it would settle for a “gradual” decline in the reimbursement rates. 

California’s incumbent utilities favor the law change: PG&E Corp., Edison International
EIX
, and Sempra Energy
SRE
. They say that the price of solar power has fallen and that paying retail is unnecessary — a “subsidy” that comes at the expense of those customers who depend exclusively on the network. Utilities add that they are pouring billions into grid upkeep — payments that require all hands on board.

Critical Point

State utility regulators are, generally, sympathetic. “The Proposed Decision adopts more accurate price signals that will promote greater adoption of customer-sited storage, which will help California decrease its dependency on fossil fuels during the early evening hours, when the sun is down and energy demand is high,” the California Public Utilities Commission said. If its ruling passes, it would go into effect in May. 

But according to the California Solar & Storage Association, the state needs five times more solar power to hit its net-zero goals by 2045 — an investment that is not only embraced by the “masses” but also good for utilities. California’s grid is fragile, as evidenced by the rash of wildfires. And according to the association’s Del Chiaro, it is built to meet peak demand or the three summer months when air conditioning systems are going full blast. 

By putting solar on roofs, consumers ease grid pressures and save utilities money. Not only can they avoid expensive capital projects but they can prevent widespread blackouts. Del Chiaro says it is a fallacy to assume that only wealthier residents adopt solar solutions when low-to-moderate earners make up half of that market. 

“Just as we get to a critical point, the commission is threatening to rip out the rug from underneath us,” she says. “Anyone who has a low-and-moderate income would get shut out of the solar market. Then rich environmentalists will be the only ones who can afford it. If the commission’s decision is finalized, solar installations will become three times more expensive than they are today. If you make solar more expensive, consumers won’t adopt it. This threatens the state’s mandates on new construction and its net-zero goals.” 

The public utility commission could adopt the rule change, suggest changes, or issue an alternate plan. If there are significant modifications to the current one, citizens would have a chance to weigh in. That would delay a May start-up date. 

If Paradise, Calif., reflects public sentiment, policymakers may have to ease up and take the middle ground. If the state is to reach its carbon-reduction target, it must foster the development of more onsite solar generation — not pass rules that make such progress more costly and burdensome.