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On December 15, the California Public Utilities Commission (CPUC) decided that, effective April 2023, new California Solar customers will experience an 80% cut in a key Solar incentive. Clean energy advocates warned that the proposal would discourage Californians from “going solar” at a time when the state is committed to more, not less, renewable energy to replace polluting fossil fuels.

“It’s devastating to see California’s Utility Commission vote to dismantle Solar incentives that have made California the nation’s leader in Solar power,” said Environment California State Director Laura Deehan. “This misguided decision, which undervalues solar’s numerous benefits for all Californians, will dim the lights on the growth of Solar in the Golden State.”

San Diegans generate the most rooftop Solar in the state, so a plan that cuts incentives to continue building it will hurt locally. Under the current rate structure, San Diego’s rooftop Solar owners make 30 cents per kilowatt, but the new PUC plan, according to the California Solar and Storage Association, would cut that rate to about 8 cents per kilowatt hour.

“The change has no impact on existing rooftop Solar customers and will maintain their current compensation rates, and will also encourage consumers to install batteries with their Solar panels,” the commission said.

“This won’t kill the Solar industry,” said Tyson Siegele, an energy analyst at The Protect Our Communities Foundation, a local rooftop Solar advocacy group. “SDG&E has the highest electric rates in the continental U.S. and rates are continuing to go up year after year. People are still going to be installing solar.”

Siegele pointed out some positives of the new CPUC 2023 rules, which eliminated the monthly charge rooftop owners had to pay to connect to the grid under the 2021 Solar incentive plan. And, the current plan benefits rooftop Solar owners that add battery storage by dolling out potentially higher-value credits when Solar is discharged back to the grid in times of high demand – like at night when the sun isn’t shining or during heat waves when Californians flip on their air conditioners.

“The new rules allow also for first time Solar users to be grandfathered into the former rules and rates. They have until April 13, to submit an Interconnection Application,” he added.

The overhaul comes as California needs to lean more heavily on renewable energy to meet state targets to produce zero-carbon electricity by 2045 and end use of fossil fuels. Currently, about 1.5 million rooftop Solar systems are installed on California’s houses, schools and small businesses. About 14% of California’s total electricity comes from large-scale Solar projects; another 10% of the state’s power comes from rooftop residential Solar.

Passed with all five commissioners voting in favor, the complicated 260-page decision also will include $900 million in upfront incentives for customers to pair Solar with battery storage systems, and $630 million to generate low-income customers. The commission estimates the updated rules will save average residential customers with solar-plus-storage at least $136 a month on their utility bills.

Solar companies and environmental groups say the policy could undermine the state’s booming Solar industry by raising the costs of operating panels on homes and small businesses. They say that in states where similar rate shifts have been adopted, Solar system installation has plummeted.

Bernadette Del Chiaro, executive director of the California Solar & Storage Association, called the decision a backward step. “The CPUC’s final plan is a loser for California on many levels,” she said in a statement. “For the Solar industry, it will result in business closures and the loss of green jobs. For middle class and working-class neighborhoods where Solar is growing fastest, it puts clean energy further out of reach.”

Many make the point that the provision to nudge consumers to install Solar systems with batteries will have the unintended consequence of quashing new Solar systems because the cost of storage systems is beyond the financial reach of many homeowners. Only about 15% of current rooftop systems currently have storage, the commission said.

Arguments on either side focus on fairness. Utility companies say demand for rooftop Solar is strong enough in California that the industry doesn’t need more help. They say the retail rate they pay to Solar customers for their excess power is too high and doesn’t reflect the value of their power, which is produced during daytime hours.

Others still see the proposal as a failure for renewable energy adoption during the climate crisis.

The PUC argues, “Because residents and businesses with Solar panels generally have smaller energy bills, they contribute less to a utility company’s fixed costs, such as transmission and distribution networks, which are passed on to ratepayers. As a result, non-Solar residents, including low-income residents and renters, carry more of the cost burden.”

The Solar rules increased bills for customers who do not have rooftop Solar by $3.37 billion in 2021, growing to $4.5 billion so far this year, according to the CPUC’s Public Advocates Office. “Solar customers should pay their fair share of grid, wildfire, and other related costs,” the public advocates office said in an analysis. “Customers with rooftop Solar depend on the grid to use electricity when their rooftop Solar systems are not generating electricity. The compensation that (Solar) customers receive is greater than the value of the energy.”

Matt Baker, director of the office, said, “San Diego Gas & Electric customers without rooftop Solar pay about 20% of their bill to cover those fixed costs.”

Solar advocates dispute the commission’s cost shift equations, challenging the details and pointing out that such calculations fail to consider the benefits of rooftop Solar, including the need to construct costly infrastructure such as power plants. Advocates say the widespread adoption of rooftop systems provides a valuable service to both the grid and the battle against climate change. They call the commission’s new policy a “solar cliff.”

The CPUC is required under state law to update its net metering rules, which triggered a prolonged, complex and politically thorny process. The commission’s proposal earlier this year was attacked by both the Solar industry and utilities as unfair and inadequate. “The changes,” stated the commissioners, “take into account evolving consumer habits: Heavy power use has shifted to evenings, when people return home and plug in a myriad of electronic devices.”

According to the California Solar and Storage Association, “distributed Solar energy systems have added a total of 13 gigawatts of Solar energy to the state, roughly the size of six nuclear power plants. In addition, consumers with Solar and battery storage have added nearly 1 gigawatt of energy storage, which played a meaningful role in keeping the lights on during recent heat waves.

“The utilities are trying to sell the myth that Solar is only for the wealthy. But net metering helps local businesses provide rooftop Solar to working- and middle-class neighborhoods. These hard-working individuals and families represent almost half of all new Solar customers in the state today and are already paying the highest utility rates in the country.”

A trio of environmental groups wants the California Public Utilities Commission to upend the decision. The Protect Our Communities Foundation, the Environmental Working Group and the Center for Biological Diversity filed an application for a rehearing and a reversal of the Dec. 15 ruling by the commission. At issue is what’s colloquially called NEM 3.0 – the third iteration of Net Energy Metering rules in California that determine the size of the credits customers receive on their utility bills when their rooftop Solar systems generate more energy than they consumed.

The request for a rehearing focuses in on a state law that became part of the Public Utilities Code. A section of the code instructs the commission to ensure “that customer-sited renewable distributed generation continues to grow sustainably and include specific alternatives designed for growth among residential customers in disadvantaged communities.”

The groups’ filing argues NEM 3.0 as written “fails to comply” with that section. Installing rooftop Solar can run into the tens of thousands of dollars, and the groups say the new rules will extend the system’s payback period, discouraging customers from investing in Solar, and decrease the savings customers receive on their utility bills. Therefore, they say, the decision “will devastate Solar adoption rates and thus fail to ensure the continued sustainable growth of distributed generation.”

As for what happens next, CPUC spokeswoman Terrie Prosper said in an email that although the commission will issue a formal decision regarding the applications for a rehearing, “there is no specific timeline” as to when that decision will be issued.”

Bill Powers, of the Protect Our Communities Foundation, said he is not optimistic that the commission will reverse its decision but cited a procedural requirement called “exhaustion of administrative remedies” that mandates challengers pursue all available administrative avenues and raise all issues before bringing a lawsuit against a public agency.

“So, if we don’t file the application for a rehearing, there is no possibility of taking this to an appellate court,” he explained

“The last thing we need is to go backward on our climate goals,” Abigail Ross Hopper, president and CEO of SEIA, said in a statement. “The only winners today are the utilities, which will make more profits at the expense of their ratepayers,” she added. “California is now on the wrong path.”

The California Solar & Storage Association echoed this statement, saying “CPUC proposed a giveaway to investor-owned utilities that would boost utility profits at the expense of energy consumers, family-supporting jobs, and California’s clean energy future.”

Solar executives also weighed in, with Sunrun’s vice president of public policy, Walker Wright, saying the proposal would “impose the highest discriminatory charges on Solar and energy storage customers in the U.S., putting rooftop Solar and batteries out of reach for countless families in California just as more households are demanding that the state do more to combat climate change and provide them with reliable, sustainable energy.”