California regulators have ordered changes to the state’s shared-solar programs that critics say will ruin the economics of rooftop solar on apartment buildings, schools and farms across much of the state.
And while the new regulations approved by the California Public Utilities Commission on Thursday have been modified from the rules proposed earlier this year to reduce the impact of the changes on renters, critics say the current version will still make rooftop solar uneconomic for most rental property owners, putting the benefits of solar further out of reach for the four in 10 Californians who rent their homes.
CPUC President Alice Reynolds said at Thursday’s meeting that the changes will help California “achieve a constellation of goals including grid reliability, greenhouse gas reductions, affordability equity, consumer protections and cost containment of utility bills.” The changes won’t affect existing customers, but they will apply to new projects for customers of Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric, the state’s three biggest utilities, starting in early 2024.*
But Reynolds’ comments fly in the face of strident opposition from clean energy groups, renters’ rights advocates, affordable-housing proponents, farming groups, school districts and more than 135 local elected officials. These groups have warned that the new regulations could derail investments in clean power needed to help the state reach its decarbonization goals, while preventing schools, farms and rental-housing properties from mitigating the burden of utility bills that are already among the highest in the country and are set to rise further in the coming years.
“It’s really disappointing that state regulators are standing in the way of modernizing schools and farms” with solar, Brad Heavner, policy director for the California Solar and Storage Association trade group, said of the CPUC’s decision. As for the new rules for multifamily residential rental properties, “the changes will help on some projects, but will still hurt others,” he said.
What’s more, the new regulations could undermine the economics of new construction, Heavner said, echoing concerns from building-industry groups. California building codes require new commercial and multifamily buildings to include solar and batteries — and reducing the value of those solar and battery systems will add costs to new construction that can’t be recaptured in bill savings for owners and tenants.
That, in turn, could undermine California policies aimed at encouraging homes and businesses to install electric-vehicle chargers and switch from fossil-fueled heating to electric-powered heat pumps, Heavner said, again echoing broad criticisms of the proposed decision. In that light, the CPUC’s decision appears to ignore “the link between electrification and solar,” he said.
Breaking down the controversy over shared-solar policy
Thursday’s unanimous vote by the CPUC’s five commissioners makes major changes to the state’s virtual net energy metering (VNEM) and Net Energy Metering Aggregation (NEMA) programs, which allow properties with multiple electric meters to share one solar system’s electricity and bill credits.
Those programs have previously worked much the same way that solar net metering for other customers used to work in California. Simply put, customers could reduce their electric bills by consuming the power that rooftop solar generated, while also earning the equivalent retail rate for solar power in excess of what they consumed that is “exported,” or flows back onto the utility grid.
But in December 2022, the CPUC decided to significantly reduce the value of rooftop solar systems for single-family homes and businesses served by those utilities. Customers can still reduce their utility bills by consuming the solar power they generate. But any solar power they don’t consume and is exported to the grid instead is paid at an “export rate” that is roughly 75 percent lower on average than the retail rates that customers pay.
The CPUC’s changes to VNEM and NEMA take things even further, however. The commission largely adopts the perspective laid out in filings by the state’s major utilities that customers with shared-solar systems shouldn’t be allowed to offset their utility bills with solar power at all. That’s because how much solar power versus utility grid-delivered power they are actually consuming at any time can’t be precisely measured. (Opponents of this proposal offered multiple arguments against this logic which the CPUC has largely rejected, as Canary Media noted in previous coverage.)
Instead, under the new rules, all of these classes of customers except for residential renters will earn only the much lower export rate for every kilowatt-hour of solar they produce. And, as has been proven out in similar policy battles in states across the country, the economics of rooftop solar projects simply don’t work if customers can only earn lower export rates.
Reynolds emphasized that the state’s existing initiatives to support solar on low-income housing — the Solar on Multifamily Affordable Housing and Multifamily Affordable Solar Housing programs — will be exempt from the changes being applied to other customer classes. She also noted that the CPUC’s broader net-metering decision created a “glide path for the industry and consumers to help transition to the new tariff design” in the form of additional bill credits for new net-metering customers and low-income customers.
Still, solar industry groups have tracked a dramatic drop-off in home solar projects since the CPUC’s new net-metering policy went into effect in May. Now they fear that the changes to VNEM and NEMA will cause an even steeper reduction in the markets that rely on the programs, despite the recent modifications that provide some relief to renters.
Farms and schools are the worst hit, Heavner said. Eliminating the capacity to reduce utility bills “will devastate the ability of farmers in California to use solar,” he said. “And for schools, it’s going to knock out a lot of projects — and there’s a lot of concern that it will mess with the ability to do construction of new buildings.”
Suzanne Leta, head of policy at solar installer SunPower, said that the new rules could also undermine a key goal of the CPUC: to encourage the deployment of batteries alongside solar systems to store power at midday for use in late evenings, when the state faces peak grid demands and risks of rolling blackouts. The CPUC’s new net-metering structure is designed to make grid exports most valuable at those times.
“But that only works if the customer — meaning the residential tenant and building owner — can benefit from the self-generation on the site,” she said. “That’s why we and so many others — members of Congress, the state legislature, environmental justice organizations — locked arms in this proceeding, to ensure that the benefits of clean energy on a roof of every building are shared with the people in that building, and that everyone gets those benefits fairly.”