California’s new solar regulations imperil future investments in small projects

By Will Carruthers, freelance writer

Although California has a reputation for leading the country toward a greener future by supporting clean technologies, particularly solar photovoltaics, the state’s investor owned utilities have held the state back from a complete transformation with a truly modern energy production and distribution system.

California’s solar industry was born in 2006 when California and the federal government passed incentives and tax credits for residential and commercial solar arrays. The 30 percent solar investment tax credit has helped many residential and commercial installations pencil out. The California Solar Initiative, a rebate program, was so successful at encouraging residents to invest in solar that it ended two years before schedule.

These national and California policies, both of which were signed into law by Republican lawmakers, were viewed as good for business and the planet.

Over the past twelve years, we’ve seen the incentives work. With increased investment in solar energy, technology has continued to improve and supplies have increased while solar panel prices have dropped. In 2017, 11.79 percent of California’s electricity was generated by solar.

Unfortunately, that’s not the end of the story. Accompanying this solar boom has been a tension between the utilities’ interests in an old-fashioned, centralized production and distribution model and the possibility of a new reality.

A new energy system could be based around a network of Community Choice Agencies (CCAs) uniquely positioned to foster decentralized small and mid-scale clean energy projects. These deployments would not only boost solar and other clean generation, they would also encourage the use of an array of decentralized energy resources such as energy storage, electric vehicles, fuel-switched appliances, and automated controls.

A 2015 staff report to the California Public Utilities Commission outlined the uncertain position of the state’s utilities with questions such as, What should utilities be in the future? What services and value should they provide and to whom? What is the role of the market, and how should the utility interact with the key players in the market?

 New Solar Regulations Deal Blow to Solar Financing

 The CPUC has responded to utilities’ concerns, and passed three policies since 2016 that undermine the financial incentives for residential and commercial customers to invest in rooftop solar instead of utility-scale solar.

The three policies – Net Metering 2.0, Time of Use rates, and Demand Charges – could reduce the electric bill savings from solar projects on affordable housing projects by as much as 50 percent, according to a report by the Clean Energy Group.

Among proponents of distributed energy resources, these regulatory changes have been widely seen as playing into the utilities’ financial interests.

While the State of California does not allow utilities to profit from selling energy to customers, the utilities are allowed to profit on capital investments in transmission and distribution infrastructure. Because an increased use of distributed energy would reduce the need for infrastructure investments, distributed energy threatens the utilities’ current business model.

The Local Way

Another battleground in recent years has been the utility fight against the creation of Community Choice Agencies (CCAs), which allow local purchasing and generation of electricity, as well as other statutory powers.

Not only are CCAs more accountable to their customers, they can also set up more ambitious renewable energy goals than those that utilities are required to meet under state guidelines. Since 2010 when CCAs began operating in California, they have offered greener electricity at lower rates than the investor-owned utilities.

CCAs have also provided their customers with incentives to buy electric vehicles, financing programs for solar and electric storage programs, and solar purchasing discounts for low-income households.

Although the utilities fought the formation of CCAs across the state, they have lost ground in recent years.

Nineteen CCAs are now operational in California, with many others underway. By 2020, California CCAs will serve about 18 million people.

Another boon for the local energy movement came in late September when Governor Jerry Brown signed Senate Bill 700 into law.

The legislation, known as the “Sun Shine at Night” bill, will generate up to $800 million in incentives for people purchasing local energy storage systems by extending the state’s Self-Generation Incentive Program (SGIP) through 2025.

The bill’s backers anticipate that the incentive program will fund hundreds of thousands of energy storage devices and batteries connected to solar arrays, resulting in a boost for the energy storage industry similar to the one the solar industry experienced after the state enacted its incentive programs in 2006.

 At a time of uncertainty for the future business models of California’s utilities, legislation like SB 700 sends a strong message to regulators and utilities that California’s future energy system looks more distributed than it does today.

To meet the state’s long-term renewable energy goals and to build a smarter, more robust and resilient energy system, it is important for advocates to continue pressuring lawmakers and regulators to enact laws that allow the state’s rooftop solar industries and other decentralized energy systems to thrive.

 

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