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Weldon Kennedy and his wife make it their business to keep up with California''s fast-changing clean energy landscape. So when the climate-conscious couple began planning to add a solar system to the roof of their Oakland home, they took their time to talk to installers and shop around for the best deal.
"I don’t think I fully understood the scope of it, but I had people telling me, ''You better get going, get your solar now,'' " Kennedy said. "It seemed like a bunch of tomfoolery was coming down."
Kennedy''s neighbors and other consumers were reacting to a profound policy shift in California: The state Public Utilities Commission in late 2022 slashed by about 75% the rate that utilities pay homeowners with new solar panels when they sell surplus power to the grid. The rate structure went into effect for solar applicants beginning last April.
The state''s decision has caused consumer demand for residential solar to plummet since the new rate took effect. Solar companies say they''ve been shoved to the edge of a cliff, forcing them to lay off workers or even shut down.
Experts worry that the steep decline could stall the state''s battle against climate change. Solar power is critical to meeting California''s ambitious requirement to switch to 90% carbon-free electricity in 2035 and 100% in 2045. Large-scale and rooftop solar is projected to provide more than half of the grid''s power by 2045.
The imminent change in payments to customers drove a three-month surge in homeowners applying for solar connections leading up to the deadline. But then came a 90% decline last May compared to May of 2022, according to state data for areas served by Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric.
In all, about 82% fewer customers applied for solar connections from May through November of last year compared to a year earlier. Fewer than 4,000 customers applied in November, the last month with available data.
"The market is in the gutter. It should be no surprise to anybody. If you are a business and your market took a 80% nosedive, with great pain you have to lay off.’
Now California''s utilities and solar companies have to wait to see if these declines are short-term or permanent.
Deepak Rajagopal, an energy economist at UCLA''s Institute of Environment and Sustainability, said it''s no surprise that consumers balked at going solar after the reimbursement rate changed from what he called the "generous" system. He said the higher payments were a burden on people who don''t have solar.
Questions about the impacts remain: How will California meet its climate change goals without a healthy and growing residential solar market?
And can Gov. Gavin Newsom''s vision of making clean energy affordable to disadvantaged communities become a reality with fewer companies and lower reimbursements?
"The state is betting so strongly on power from rooftop solar. They will have to recalibrate," Rajagopal said.
Rajagopal intended to install a solar system at his newly purchased house. But like many Californians, he missed the April deadline to get in on the higher payments.
The new rule''s impact on the solar industry has been immediate. As many as 17,000 solar workers in California might have lost their jobs by the end of last year, according to industry estimates.
"The market is in the gutter," said Bernadette Del Chiaro, executive director of the California Solar & Storage Association, an industry group. "It should be no surprise to anybody. If you are a business and your market took a 80% nosedive, with great pain you have to lay off. Some companies shut their doors.
The utility commission rule was hotly debated and ultimately passed by unanimous vote. Part of the agency''s rationale was about equity: Because solar customers, largely middle class or wealthy, are being paid near-retail prices for their excess power, they are not paying their fair share of fixed costs to maintain the state''s grid, saddling other ratepayers with higher bills. That burden, regulators said, disproportionately falls on low-income households that can''t afford solar panels.
The utilities commission said the high rates paid to solar customers amounted to a subsidy, and that state incentive programs for installing battery storage systems alongside rooftop solar would provide better, longer-term value for ratepayers.
The new rates only apply to new solar installations and only for the customers of PG&E, Southern California Edison and San Diego Gas & Electric.
It''s not just homes: The utilities commission in November voted to expand the lower payment rates to commercial businesses and multi-family homes that install solar panels.
A spokesperson for the Public Utilities Commission did not answer CalMatters'' questions about the impact of the recent steep declines in solar projects or the job losses in the industry, and declined to make anyone available for an interview.
Instead, in a statement, the agency said residential solar installations have increased 16% a year over the last five years, and that 2022 saw an increase because solar customers and companies were rushing to beat the changes in rates.
"California leads the nation in supporting the solar industry, and has provided billions in rebates and incentives since 2006."
More than 255,000 applications for new residential solar projects were reported in PG&E, Southern California Edison and San Diego Gas & Electric areas last year.
"California leads the nation in supporting the solar industry, and has provided billions in rebates and incentives since 2006," the commission said in its statement.
PG&E, the state''s largest utility, said in an email response to CalMatters'' questions that it received a record number of solar connection applications in 2023, a 20% increase from the previous year and "unprecedented volume" in the four months before the rate change. The company spokesperson did not answer questions about the downturn.
Solar industry executives say California''s rate changes are affecting low and middle income homeowners, where rooftop solar had begun to gain inroads. The Berkeley Lab reported that in 2022 about 45% of solar adopters nationwide were below a threshold used to define low and moderate income. In California, household incomes between $50,000 and 100,000 are the largest segment of solar customers, the report found.
"Rooftop solar is not just the wealthy homeowners anymore," said State Sen. Josh Becker, a San Mateo Democrat. "Central Valley people are suffering from extreme heat. The industry has been making great strides in low-income communities. This (utilities commission decision) makes it harder."
The utilities commission has $280 million in an "equity fund" to assist low-income consumers. None of the money has been spent yet; the agency said it would soon release a plan for operating the program.
Solar can still make financial sense for homeowners who can afford the upfront costs and wait out the return on their investment. Federal tax credits can cover 30% of the installation cost. And as their use of power from the grid declines and they get paid for excess power, customers generally expect to have their new solar system paid off in six to eight years, according to the utilities commission. It''s faster for installations that include battery storage.
"Rooftop solar is not just the wealthy homeowners anymore...The industry has been making great strides in low-income communities. This (utilities commission decision) makes it harder."
The job losses are being acutely felt in the small communities where careers in clean energy are a pathwayinto good-paying jobsfor women and people of color. The average salary for a solar installer in California is $70,000, Del Chiaro said.
"These jobs have been a foot in the door for people who have been in the justice system, their lives have changed," said Adewale OgunBadejo, vice president of workforce development for the Oakland-based non-profit Grid Alternatives, which focuses on underserved communities for clean energy projects.
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