Rooftop solar subsidy program needs reform

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With so many families and small businesses struggling to make ends meet, policymakers and regulators must ensure California achieves its clean energy objectives at the least possible cost for all, and particularly for the most vulnerable populations.

One policy that flies in the face of that objective is our state’s rooftop solar subsidy program called Net Energy Metering, or NEM. The program is overseen by the California Public Utilities Commission and regulates the credits, or financial incentives, given to homeowners to put rooftop solar on their homes.

The outdated, 25-year-old program is contributing to higher electric rates across California and increasing the bills of customers without solar, including small businesses, renters, low-income Californians and seniors on fixed incomes, by roughly $3 billion a year. This cost shift is not consistent with state law and needs to be fixed.

A diverse array of consumer and environmental groups like The Utility Reform Network (TURN), AARP, Natural Resources Defense Council and the Public Advocates Office of the CPUC, along with the state’s large electric utilities, are collectively calling for reform. Their approaches vary, but they all recognize the systemic, unfair cost shift must be fixed before it gets worse.

Currently, customers with rooftop solar receive a credit on their electric bills when their system generates excess electricity. This credit is set at or very near the full retail rate. There are two big problems with that:

• The amount utilities are required to credit rooftop customers for excess solar is eight times more than it would cost to buy solar in the open market. 
• The artificially high monthly bill credits mandated by the Net Energy Metering program means customers with solar systems are paying nominal bills and no longer contributing their fair share toward costs of operation and maintenance of the electric grid, or mandated public policy programs that support energy efficiency, low-income customers or public safety efforts such as wildfire mitigation.

The costs don’t go away. They get shifted to non-solar customers. Statewide, non-solar customers end up paying roughly $200 more each year to pay for these overly generous credits.

If no changes are made to the Net Energy Metering program, this amount will continue to increase each year as more customers install solar, and fewer and fewer customers are paying for state-mandated programs and to maintain the grid, even though all customers rely on it. Just like non-solar customers, solar customers rely on the grid 24-7 – to either receive energy or sell energy back to the grid.

According to the Lawrence Berkeley National Laboratory, about 70% of solar adopters are in the wealthiest 40% of society. Lower-income Californians and renters are subsidizing significant discounts for the wealthier, underscoring the glaring inequity that currently exists.

Even electricity customers who qualify for low-income assistance are paying extra in their electric bills to cover costs being avoided by wealthier customers who have installed solar systems.

These overly generous subsidies are no longer necessary. When the Net Energy Metering program was launched in 1995, there were 10,000 home-based solar systems in California. Today, California is a global leader in rooftop solar with more than 1 million home-based systems. 

These systems produce 15% of energy used in the state. During this same period, the cost of rooftop solar technology has fallen by 70%, but because the Net Energy Metering credit is tied to retail rates, the credit keeps going up.

Given California’s clean energy progress, dramatically falling rooftop solar prices, and policies that assure continued growth of rooftop solar in California, it’s difficult to rationalize why the same generous subsidies should remain. This is particularly so when those subsidies end up being paid predominantly by lower-income residents.

We can and should meet our greenhouse-gas reduction goals and continue to grow rooftop solar without overpaying for energy generated by rooftop systems.