Will California Take a Huge Step Backward?

OWOE Staff: California tends to be a polarizing state. As the most populous US state and what would be the 5th largest economy in the world if it were a country, as the home of the television and movie industry, as the home to Silicon Valley with its technology leaders and billionaires, and as the home base to many environmental organizations, it has always been a trendsetter. In the battle against climate change, California has been a leader. It is the #1 state for installed cumulative solar electrical capacity by a factor of about 3 over the #2 state (Texas). It has the highest volume of Electric Vehicles owned of any state by a factor of about 7 over the #2 state (Florida). It has required higher vehicle emission standards than the rest of the US since the 1970 Clean Air Act. It has set a goal of 100% clean electric power by 2045. It has banned the sales of new gasoline powered automobiles by 2035 and is moving toward accelerating that to 2030. Progressives and those concerned about the health of the planet love these programs. Conservatives and those beholden to the fossil fuel industry hate these programs. But, suddenly, California is making a move against residential rooftop solar power as in Florida, where utilities argue that rooftop residential solar affects their business model. That’s correct; suddenly California is limiting the ability of its residents to achieve both energy independence and greatly reduce the State’s overall carbon footprint.

The California Public Utilities Commission (CAPUC) has issued its proposal for the replacement for the State’s current net metering rules that will likely kill the rooftop solar industry in the State. The new rules would reduce what the utilities must pay for power exported to the grid, reduce previously established grandfathering durations for existing rooftop systems, and add a Grid Participation Charge of $8/month per kW of installed solar capacity. For an average-sized California home with a 7 kW solar system, the fee would $56/month just to connect to the grid, which would be among the largest fixed costs billed to solar customers in any US state. Sage Energy Consultants has analyzed the effect and concluded that residential customers will see a 55-75% loss in the value of their systems as illustrated in Figure 1.

Figure 1 – NEM3.0 Impact on Value (Sage Energy Consultants)

The driver behind the new proposal is pressure by the large electric utilities in the State (PG&E, SCE, and SDG&E) to stifle the rooftop solar market in order to protect market share and boost profits. The impact will be significant – these new costs, in addition to the capital outlay required to install a new system, will make rooftop solar unattractive for most new homeowners. After years of the state promoting rooftop solar power as an important climate solution, California will take a huge step backward.

OWOE believes that all participants in the fight for energy independence and against climate change need to take a stand on this issue:

CAPUC Commissioners – get out of the utility companies’ pockets and do the job you have been tasked with. Your mission is to ensure that Californians have “safe, clean and affordable utility service”, not to protect utility companies’ present and future profits. Go back and revise this proposal to something that better balances electricity providers, in all forms, and consumers.

Utility Companies – yes, you are investor-owned and must ultimately account to your stockholders; however, if you don’t provide good service to your customers, who are increasingly opposed to your practices, you need to go out of business – it is market Darwinism. It is time to accept the fact that the world is changing and your business model needs to change, or history will leave you behind. Instead of fighting the inevitable, you should be finding ways to lead (adapt or die).

Shareholders of Utility Companies – don’t be short sighted. You need to put long-term survival and growth of your investment ahead of short term profits. Just look at what happened to the legacy telephone system. You need to force your companies to change with the world or you will be the losers.

Governor Newsom and State Senators – you have been energetic leaders and proponents of California’s fight against climate change. You are also responsible for appointing the CAPUC Commissioners. You need to push them to rework this proposal to better align with your climate goals or you should replace them.

Solar Industry  – you have been on the frontlines in the development of new technology to provide clean, reliable power to homeowners, and you have already taken a stand against this new proposal. But right now those are just words. You have the resources to fight the utilities where it hurts – in the pocketbook. How about taking a proactive approach to developing and pricing systems that will enable customers to totally disconnect from the grid?

Public – ultimately, you and your children and grandchildren will be the losers in this battle unless you make your voices heard. You can sign up here (thanks to Tesla) to provide a verbal comment directly to the five commissioners at the upcoming CPUC meetings on January 27. And/or you can email the CPUC and the governor’s office with your comments.

What’s missing from California policy is a truly integrated, long-term approach to clean and reliable energy. California needs to look at what it has (lots of sunshine, lots of geothermal) and what it needs (energy storage systems, distributed grids) before it embarks upon a flurry of disjointed, ill-conceived measures to kill its existing assets (rooftop solar, nuclear) for the sake of special interests.

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