Solar power is the future. So why might California regulators make it less appealing?

To encourage Californians to go green for their energy, the state in 1995 began offering a subsidy to homeowners to put solar panels on their rooftops.

It is a superb example of a government-led program that became a smashing success. Today nearly 23% of California’s energy comes from solar power, both industrial-sized farms like the ones visible to motorists on the west side of the San Joaquin Valley, as well as installations atop homes throughout the state.

But California’s big three utilities — Pacific Gas and Electric, Southern California Edison and San Diego Gas and Electric — are unhappy with the subsidies going to residents for their rooftop systems. The companies have asked the state Public Utilities Commission to cut by half the credit that gets paid to customers who have solar installations.

The utilities’ arguments are twofold: the subsidies have become too generous over time, and have shifted the real cost of producing and delivering electricity to customers who lack solar systems. Those customers tend to be lower-to-moderate income and are unable to afford the outlay to set up solar systems on their roofs — usually $20,000 or more. So the program has become unfair, the companies argue.

The PUC is holding hearings over the next few months to review the utilities’ proposals. A decision could come later this year.

That determination will be significant because California has ambitious climate-change goals. By 2045, the state’s electricity is to be generated from 100% renewable sources. In the shorter-term, 60% of the state’s energy has to be carbon free by 2030.

It is a classic California dilemma pitting major corporations and their need for shareholder value against the political goals of leaders like Gov. Gavin Newsom. Who is left in the middle? California consumers.

Then there is the potential jobs impact. The solar industry estimates 8,000 people are employed by solar companies from Sacramento to Fresno.

How residential solar works

A homeowner interested in solar calls an installation company for a quote. For most single-family home systems, the price will be between $20,000 to $30,000. Once the panels are on the rooftop, the homeowner’s electricity provider — PG&E for most of Central and Northern California — confirms the residential system will feed properly into the company’s grid, and the system becomes operational.

Solar power will help lower a consumer’s bill, especially in the hot summer months in the Central Valley, where the need for air conditioning can result in monthly charges in the hundreds of dollars for large homes.

But before the days get too toasty, like springtime, residential solar systems produce an abundance of power, and by state law, the utility must take that electricity. Any surplus energy the home system produces over a year earns a credit that the utility must pay to the homeowner at the retail rate for power. For PG&E, that comes to an average of 25 cents per kilowatt-hour.

Under the utilities’ proposal, that credit rate would be reduced to 5 to 13 cents per kilowatt-hour.

Furthermore, the companies want to start charging a flat fee of anywhere from $70 to $90 per month simply to be connected to the grid.

More solar, not less

California’s Democratic leaders, supported by environmentalists and climate-change activists, have set the 100% goal for carbon neutrality by 2045.

Couple that with Newsom’s push to have new vehicles for sale be zero emission by 2035, and one can easily grasp that California will require more solar, not less.

For example, solar installers point out that it takes at least one panel atop a roof, and maybe two or three, to recharge just the electric vehicles parked in the garage.

California began the year with a $15 billion surplus. At the end of March Newsom announced state revenues are $14.3 billion ahead of projections made at the start of the year.

So the state does not have a money problem currently, even with COVID relief and equity efforts underway.

Rather than scrap the existing rooftop program, the PUC should retain it and take some of that unexpected money to create a fund to help low-to-moderate income residents to get their own solar systems installed.

If the current credit model needs to be tweaked, allowing for less generous credits might be possible. But there should be no monthly fee to hook into the grid. The utilities conveniently overlook the expense the homeowner paid to set up their system in the first place.

Any attempts now to make residential solar less appealing by reducing homeowner incentives is counter-intuitive. The PUC must make solar more attractive if California is to have any chance to meet its climate-change goals.