High-stakes cost-sharing battle ignites solar power industry, rooftop solar adopters

There is plainly self-interest involved, as well as conflicting visions for California’s future: One with a grid-centered, utility-controlled energy structure or one that is decentralized, democratic and more resilient.

The topic also has mobilized well-organized, sometimes unexpected allies on both sides — disrupting the usual harmony between some social justice and environmental interests, for example.

And those alliances may continue to shift as parties wade through complex economic analyses and mixed predictions about consumer behavior if what one Los Angeles Times columnist called “lavish” incentives for solar adopters disappear.

“The goal isn’t to punish early solar adopters,” wrote one high-profile supporter of the plan, Severin Borenstein, faculty director at the U.C. Berkeley Haas School of Business’ Energy Institute.

Instead, it is to “correct the policy path we are on in which the only people left paying for the grid — the grid that all of us are going to be using for a long time — will be renters and low-income customers.”

Unusual alliances

The utilities-funded Affordable Clean Energy for All coalition has 114 diverse member organizations ranging from local chambers of commerce to taxpayer groups, senior citizen and conservation groups, and nonprofit agencies serving disadvantaged and communities of color.

It also includes the giant and powerful union, International Brotherhood of Electrical Workers.

The National Resources Defense Council, the Sierra Club and the American Association of Retired Persons, or AARP, also back reform of the long-standing practice known as net metering, which allows solar users to sell the excess power they generate back to the grid.

Both sides in the debate have academics, editorials and studies backing their positions and predicting dire consequences should the other side prevail.

Consumers, renewable energy advocates, solar installers and others opposed to the idea are incensed by a plan they believe will slow adoption of systems that capture power from the sun. They say it will turn back the clock on efforts to address climate change in the Golden State.

They contend supporters use flawed analyses that understate the value of customer power generation and plays into utilities’ self-interest in maintaining a large, centralized transmission system that generates more profit as it grows.

“This is just another case of the big guys — the investor-owned utilities — fighting for themselves and hurting people who have invested or want to invest in solar panels,” former California Gov. Arnold Schwarzenegger wrote in the New York Times. It was Schwarzenegger who, in 2006, established the state’s goal of building 1 million rooftop systems.

Fighting for the old ways?

Bernadette Del Chiaro, executive director of the California Solar & Storage Association, described it as “a battle of the titans … fighting for the old ways of doing this,” supported by a revolving door of utility executives, commission members and staff, and analysts who circulate within the same orbit.

A maturing industry has reduced the cost of rooftop solar, allowing increasing numbers of middle-income households that are able to participate. At the same time, investor-owned utility rates are skyrocketing, and wildfires and public safety shutdowns underscore the need to build resilience and independence into the grid, Del Chiaro and others said.

A move to radically cut incentives now would raise barriers to all but the wealthiest, critics say. It would also gut the industry, which employs more than 60,000 people statewide, and decrease rooftop solar installations by 80% or more.

“It would be like hitting a brick wall overnight, once it gets implemented,” said Keith Kruetzfeldt, president of Santa Rosa-based Suntegrity Solar. “I’m hopeful there’s some compromise that’s in between that allows for a healthy solar market going forward, but I think reality is whatever they come up with is going to have a real impact.”

The proposed regulation is the latest iteration of what started in 1995 as net energy metering, known by some in the industry as NEM.

Those who installed photovoltaic panels on their rooftops were billed for the difference between how much electricity they used and how much they generated and fed back to the grid. Solar users were credited at the retail rate at which utilities would sell the electricity to others customers.

Since peak usage across the grid typically occurs in the afternoon, electric rates were highest then, allowing those who gained power from the sun to benefit under the 1995 scheme. Rates were lower at night, when consumer demand was less, so solar users paid less after the sun went down when they had to draw from the grid.

Early adopters could invest in rooftop panels — at a cost, for example, of $30,000, though it’s highly variable — and with credits and rebates, bank on recouping their investment in far fewer than the 20 years their net metering structure was guaranteed.

In 2016, the utility commission made adjustments, adopting NEM 2.0. It was prompted in part by 2013 legislation requiring periodic reviews to ensure balance between the costs and benefits of sustained solar energy growth across all grid users.

New charges added

Under the new version, lower electrical rates were applied to the daily time periods during which solar users were most likely to be credited for surplus power, and higher rates were in play when they were more likely to need to buy electrons, reducing their financial advantage.

A new grid-connection fee between $75 and $150 and other monthly charges were added, as well.

The CPUC says that’s still well below what it costs utilities to serve them, however.

The latest proposal includes new monthly fees averaging $58 per household, or about $700 a year, for those who install solar panels.

It also would cut the value of surplus electrons by at least 80% and adopt a rate structure that asks solar users to pay more for power at night in hopes they’ll invest in solar-storage batteries that would facilitate transition to electrification and reduce reliance on fossil fuels.

Supporters say the scheme better reflects the true value of surplus rooftop solar energy compared to other forms of renewable energy like wind or large solar farms, where solar power can be generated for a fraction of the cost.

Critics argue that associated transmission costs invalidate that argument — that the real expense is addiction to a large, centralized grid whose maintenance and construction allows utilities to reap guaranteed profits. Since deregulation, they can’t profit from the sale of electricity, but return-on-investment in infrastructure is guaranteed.

The plan also includes a $600 million equity fund to help lower income communities access solar power generation, but it eliminates incentives that currently make it possible for many people to afford solar power. That, critics say, will raise financial barriers to all but the very wealthiest or those that qualify for low-income help.

That means shutting out the people in the middle who have been driven to solar by skyrocketing electric costs, said Kruetzfeldt, the Santa Rosa solar company president. “The vast majority of our customer base is solid middle class,” he said.

Many consumers already equipped with solar panels also feel betrayed by provisions in the new rules, which would shorten the 20-year time frame under which they enjoy favorable rates for excess power they sell to the grid.

Many took out home loans or used the gains from selling large homes to downsize for retirement.

“This was not the deal I signed up for,” Brian Babbitt, of Santa Rosa, wrote to the commission. “… There has to be a better plan than this.”

Solar industry representatives said they knew when work began on NEM 3.0 that the formula would be tipped further against them, and many said they’re OK with that.

It’s the degree to which they feel it overturns all appeal for adopting solar they can’t fathom.

“We understand the current policy is really good for solar customers,” said Dylan Mathias, co-owner of First Response Solar in Sebastopol, with his brother, Chaz, and a second-generation rooftop solar installer.

“We knew it was going be scaled back a little bit,” he said. “But to go from where we’re at to putting almost every solar company out of business if the current one were to go through, it was a pretty good shock.”

Many point to similar shifts in Nevada and other states that went too far, driving out solar businesses, requiring reform that’s just now getting solar installation back on its feet.

“The industry collapsed,” said Jeff Mathias, owner and chief financial officer at Synergy Solar & Electrical Systems in Sebastopol.

Del Chiaro said part of the problem is the rapid escalation of electricity rates, due in no small part to wildfire liability and maintenance that should have been done in the past. Site-centered solar reduces overall rates, meanwhile, but reduces the need to expand the grid, she said.

“We don’t have to keep having the value of our product go up and up and up in order to keep seeing value,” she said. “We don’t necessarily have to be tied to their inability to control costs.”

‘It doesn’t make sense’

But the drastic rate reduction, without a transition period, would simply turn consumers away and prove disastrous to the industry.

The new plan “is literally just slashing it to a point where it doesn’t make sense for anybody to go solar,” Jeff Mathias said.

Gov. Gavin Newsom, who appointed two new commission members, including its president, at the end of last year, in part to replace the author of the pending proposal. The governor concedes it still needs “some work,” though precisely what that means is unclear.

But an extension of the public comment period after its December release made an anticipated Jan. 27 vote impossible.

The CPUC announced Thursday that its new president, Alice Reynolds, had requested “additional time to analyze the record and consider revisions to the proposed decisions based on party comments.” The issue has not been scheduled for a hearing.

Anna Baney of Rohnert Park said those driven by conscience “to do something about climate change” will bear the burden of that choice if no changes are made.

“How do we expect to achieve 100% clean energy if we are slowing down progress in the name of progress?” she wrote to the CPUC.

“Our future,” wrote Santa Rosa commenter Daniel Dycus, “is one of microgrids where neighbors cannot only share a cup of sugar but also share valuable electricity. These small microgrids can include whole neighborhoods where we can provide power to each other for each other.

“This tax proposal goes against everything this great state stands for. Don’t let PG&E off the hook, blow up our homes, ravage our state with wildfires and punish our efforts to bring power to where it belongs, with the people.”

You can reach Staff Writer Mary Callahan at 707-521-5249 or mary.callahan@pressdemocrat.com. On Twitter @MaryCallahanB.