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California dealt a major blow to renewable energy, some companies say

Written by The Anand Market

Updated on:

California has long championed renewable energy, but a change in state policy last year led to a sharp decline in the installation of residential rooftop solar in the state.

Thousands of businesses – including installers, manufacturers and distributors – are reeling from the new policy, which took effect in April and significantly reduced incentives that encouraged homeowners to install solar panels. Since this change, sales of rooftop solar installations in California have fallen by as much 85 percent in certain months of 2023 compared to the previous year, according to a report from Ohm Analytics, a research firm that tracks the solar energy market. Industry groups predict installations in the state will drop more than 40% this year and continue to decline through 2028.

“Solar installations are monstrous,” said Michael Wara, a senior scientist at the Stanford Woods Institute for the Environment. “What is happening now is a painful adjustment process.”

Construct Sun, a solar installation company based in Reno, Nevada, ceased operations in California after its sales dried up four months into the policy; executives said the company is now focusing its efforts on Florida, North Carolina and Ohio.

“I had a very dismal pipeline and had to make the decision to close in California,” said Thomas Devine, Construct Sun’s executive vice president of operations. He added that the state’s rooftop policies undermine its goal of effectively eliminating greenhouse gas emissions by 2045. “These competing policies are crazy,” he said.

State officials chafe at the idea that California is undercutting renewable energy and have defended the policy change, which reduced by 75 percent the value of credits that owners of new facilities receive for renewable energy. electricity they send to the grid. They argued that the old rules, which still apply to systems installed before April, offered too generous a subsidy, mainly helping well-off homeowners. As a result, low-income people who couldn’t afford panels actually had to shoulder more of the cost of maintaining the state’s electricity system.

“California has done more for the solar industry than any other state in the country by offering billions in rebates and incentives since 2006,” the state Public Utilities Commission, which oversees the solar industry, said in a statement. rooftop solar and investor-owned utilities.

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States across the country are grappling with how to compensate consumers for the electricity their rooftop solar systems send to the grid. And officials have often looked to California for guidance.

Many states, including California before it changed its policy, generally allow homeowners to receive credits that are roughly equivalent to the retail electricity rate for the energy their systems send to the grid. That has never sat well with most utility companies, who argue that offering homeowners a one-for-one credit for solar overestimates the value of that electricity. Utilities say they could buy electricity at a much lower price on the wholesale market or by generating it themselves.

Overall, renewable energy is growing and now provides more than a fifth of the country’s electricity. In California, renewable sources produce more than a third of electricity.

But the growth of carbon-free sources has become bumpy as regulators, utilities, consumers and renewable energy companies compete for financial benefits. They’re also trying to find ways to add not only equipment that can produce electricity, but also batteries that can store it, since solar and wind power are intermittent.

California officials note that while they reduced compensation for rooftop solar, they offered residents more incentives to install batteries. Batteries, they say, can help deliver power to the grid when it’s needed most, not just in the middle of the day, when California typically has a surplus. The devices can also provide energy in the event of a power outage.

“Today, California has a tremendous need for more energy storage and our state must shift incentives toward storage technologies to support reliability, enable the decommissioning of polluting gas facilities and ease pressure on electricity rates,” said David Hochschild, chairman of the California Energy Commission. , which largely oversees the energy sector.

Since regulators implemented the new rooftop solar policy, the percentage of consumers purchasing battery-powered solar panels has increased to 50 percent, up from just 5 percent before the changes.

But batteries are expensive, especially in an era of high interest rates. Without federal tax incentives, a solar and battery system costs an average of $33,700, compared to $22,700 for systems that don’t include batteries, according to EnergySage, a trade site that compares rooftop solar panels.

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Installers and homeowners say it’s difficult to financially justify investing in rooftop solar systems without access to adequate electricity credits. California’s decision to reduce the incentive increased the time it takes for a solar system to pay for itself to at least eight years, up from about five years.

Picturea woman holds a white chicken in her right hand.  two children and several solar panels are behind her.
Before California changed its rooftop solar policy, solar sales made up more than half of the business at Amy Atchley, Amy’s Roofing and Solar, in Petaluma, California.Credit…Rachel Bujalski for the New York Times

The nation’s largest residential solar company, San Francisco-based Sunrun, cut about 2,000 jobs after California regulators cut rooftop incentives.

“This is very unfortunate given that this is happening at a time when the planet is on fire,” said Mary Powell, Sunrun’s chief executive. But she added that because of her company’s size and nationwide operations, she was able to absorb much of the impact.

Other companies face greater challenges.

About four years ago, Amy Atchley started Amy’s Roofing and Solar. Before California changed its policy, solar sales accounted for more than 55 percent of her business, which she runs with her husband Brian in Petaluma, north of San Francisco. Since the policy went into effect, solar power sales have fallen to 45 percent. To keep costs down, Ms Atchley said she usually recommends her clients install solar panels when they also replace their roof.

“California should do everything in its power to become a clean energy state,” Atchley said. “But the momentum has been stopped.”

Providing energy credits to homeowners with rooftop solar panels was a central part of legislation, approved when Arnold Schwarzenegger was governor, that aimed to add a million solar roofs, reduce electricity bills and fight against climate change. The State achieved the roof goal by 2019 and now has panels on 1.8 million roofs.

Some solar experts say California’s new policy is flawed because it doesn’t sufficiently take into account the environmental value of rooftop solar panels.

“You value solar energy the same as fossil energy, so it doesn’t make sense,” said Yogi Goswami, professor of engineering and director of the Clean Energy Research Center at the University of Florida from South. “We should have given some value to the environmental factor.”

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By removing incentives at a time when the world needs more clean energy, “they’re making it even more difficult,” he added.

Nationally, rooftop solar increased about 13 percent last year, but this year it could decline by 11.5 percent, according to the Solar Energy Industries Association, which attributes this decline mainly due to California’s policy change.

Pacific Gas & Electric, California’s largest utility, said rooftop solar connections to its system hit a record high last year, up 20% from 2022. That may be due to fact that many homeowners rushed to install solar panels before the new policy took effect in April. .

“At PG&E, we recognize the important role that rooftop solar plays in California’s clean energy future,” said Carla Peterman, PG&E executive vice president of corporate affairs and former state utility regulator. the State, in a press release. “We are proud to have interconnected more than 750,000 private solar customers, more than any other U.S. utility. »

Supporters of rooftop solar have asked the courts to intervene, and others have pressured regulators and state lawmakers to reverse the trend or risk losing more jobs and opportunities. businesses.

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Some energy experts said rooftop solar could regain some of its financial appeal as California raises electricity rates, already among the highest in the country.Credit…Rachel Bujalski for the New York Times

“The question is: who survives this? said Bernadette Del Chiaro, executive director of the California Solar and Storage Association. “How many companies are successfully making this transition?

Some energy experts said rooftop solar could regain some of its financial appeal as California raises electricity rates, which are already among the highest in the country. The Public Utilities Commission recently approved higher rates for customers of investor-owned utilities Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric.

PG&E customers will soon pay about 45 cents per kilowatt hour, up from about 35 cents. This equates to about $250 per month for 571 kilowatt hours, the average consumption of California homes. For comparison, the national average retail electricity rate was 16.2 cents in October.

More Californians could install solar panels and batteries, not to get credits for excess energy produced by the panels, but simply to reduce their reliance on utilities. But this option would mainly be an advantage that could benefit wealthy homeowners rather than those of limited means, said Mr. Wara of Stanford. He added: “There is a huge affordability challenge for California electricity. »