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California's solar marketplace could see some major changes soon

A home in the El Cerrito neighborhood of San Diego has solar panels on its roof, Jan. 25, 2016.
Richard Klein
A home in the El Cerrito neighborhood of San Diego has solar panels on its roof, Jan. 25, 2016.

The state's utility regulators are considering adjusting the rules that govern the California solar energy marketplace.

“Come on in,” said Ricardo Castillo as he lifted the latch on his front yard gate.

The door swung open and revealed a long, narrow frontyard crowded with plants.

“My City Heights courtyard cottage,” Castillo said. “Got my tangerines. My avocados go in here. Apple, trying to get some avocados going in here.”

The yard is great for fruit trees for the same reason it’s a great house for a solar power array. There is plenty of sunshine. And while Castillo has solar panels, many of his neighbors do not. And they might find the rooftop solar path a little tougher to walk

That’s because the California Public Utilities Commission is close to revealing how the relationship between rooftop solar owners, installers and utilities will change under new rules known as Net Energy Metering.

RELATED: California's Thirst For Water May Accelerate Global Warming

Those rules did not exist when the former U.S. sailor bought the house in the late 1990s when electricity was cheap.

“Bill's about $18 a month, $22 a month at the highest,” Castillo said. “But that’s when energy was all around the United States. I think we were only playing about a $1.20 for gasoline at the time.”

His electric bill climbed over the years, topping out at about $280 a month. That is why he added solar energy and a new air conditioning unit recently — and those triple digit power bills are just memories.

It also helps that a new air conditioning unit is both efficient and effective at keeping the house cool.

“This thing is so quiet,” Castillo said as he pointed at the machine on the side of his house.

“It uses about that much energy,” Castillo said, putting his index finger and thumb together. “Why? Because of the big beautiful gaseous ball hanging up there in the sky. It gives us energy, it gives up warmth, it grows tomatoes.”

California's solar marketplace could see some major changes soon

Speaker 1: (00:00)

California regulators could dramatically change the state's biggest in the nation's solar marketplace. Next year, the California public utilities commission is close to revealing how it will change the relationship between rooftop, solar owners and utilities. K P S environment reporter. Eric Anderson has details

Speaker 2: (00:20)

Me. Carter Castillo pushes open the door to a long narrow front

Speaker 3: (00:24)

Yard seat Heights, courtyard cottage

Speaker 2: (00:26)

Come on. Castillo bought this house in the late 1990s when he was still in the Navy 61 year old remembers how cheap electricity used

Speaker 3: (00:35)

To be. Bill were about $18 a month, $22 a month at, at the highest

Speaker 2: (00:39)

His electric bill climbed a over the years, topping out at about $280 a month. That's why he added solar energy and a new air conditioning unit.

Speaker 3: (00:49)

When this thing is so quiet uses about that much energy, that much why cuz those beautiful Gast ball hanging up there in the sky

Speaker 2: (00:58)

Castillo leases, his solar system. So there were upfront costs. This is one of more than 1.3 million solar rooftop systems installed in California. Nearly 15% of the state's electricity production comes from solar systems like the one on Castillo's home, but the economics of solar could be changing soon. The current state regulat known as net energy metering are designed to encourage the move to rooftop solar. They set the cost of electricity, sold by residents and include a small monthly fee for fixed utility costs. 15

Speaker 4: (01:35)

Years ago, our electric rates were half of what they are today. And solar panels were more than twice as

Speaker 2: (01:41)

Expensive. The natural resources, defense councils, Mohi Chabra is among those asking regulators to roll back. The subsidy. His organization is advocating sharply, cutting back how much utilities are required to pay for the electricity generated on rooftops. And he wants to charge a hefty monthly connection fee. Based on the size of a solars

Speaker 4: (02:03)

People will still save money. They'll just save less.

Speaker 2: (02:06)

The lower buyback charges and flat monthly fees could mean it'll take solar owners 10 to 12 to 15 years to pay off their upfront investment. To put the panels on their roofs. Chopper says payback times right now are only about four to six years. You

Speaker 4: (02:22)

Will still for my estimate, save around 50% of your bill. If you sign your solar system correctly, with our export rate change and the discharge, you just won't save close to a hundred percent because certain fees are fixed fees for maintaining the grid that we all depend on and social costs. The

Speaker 2: (02:41)

California public utilities commission is considering more than set D proposals to adjust the net energy metering rules. Solar advocates say eliminating the financial incentive for residents to spend thousands of dollars. Installing solar panels could crush demand that endangers 68,000 California jobs. It

Speaker 5: (03:02)

Will mean laying off a majority of their workforce or potentially closing their

Speaker 2: (03:06)

Doors. Karina Gonzalez works for Hammond climate solutions, a company advocating for net energy metering to only get small tweaks. She says rooftop solar needs to be encouraged because as it's critical to help meet the state's clean air goals,

Speaker 5: (03:21)

Less rooftop. Solar means that we're using more dirty energy worsening. The climate crisis contributing to climate racism. That's in Kern county and where there's fracking in people's backyards. And we just think at a time when there's a climate emergency, we can't afford to be taking away clean energy. So from families

Speaker 2: (03:40)

California's investor owned utilities filed their proposed revisions more than a year ago, but San Diego gas and electric steers requests for interviews to surrogates like the natural resources defense council or the utility reform network, the company declined to make an official available for interview both last summer. And in recent weeks, an email statement says the utility is engaged in the formal process. Quote, we are eager to see a resolution that allows the solar industry to continue to thrive and addresses existing inequities and quote. The California public commission is expected to unveil their plans to adjust net energy metering. Soon that preliminary proposal would be vetted and then voted on by the commissioners early next year.

Speaker 1: (04:32)

Joining me is KPBS environment reporter Eric Anderson, Eric. Welcome.

Speaker 2: (04:37)

Thank you.

Speaker 1: (04:38)

What do people who want the present net energy metering systems say is wrong with it?

Speaker 2: (04:46)

Well, uh, the utilities, uh, look at this as a way that they're being forced to buy, uh, electricity well above market rates. This is kind of the line of, of logic that they're, uh, putting forward. They're saying, look, if we, uh, can convince someone to build a huge solar plant in a far flung place, uh, we can buy that electricity for 3 cents a kilowat hour. But if we have rooftop solar in a city, we're forced to, to buy that electricity because of net metering rules at 36 cents an hour. So the difference there is widely considered to be a subsidy. Now, there, there is a reason why that difference is there it's a few pennies below, uh, what the retail rate that the utilities can charge for electricity is. Um, so the utility can charge you even more for that. And so the feeling was, is you wanted to give, uh, new solar are customers, uh, an incentive to lay out this capital expense, this large expense to put solar on their rooftops, cuz there would be a benefit for, uh, generating clean en energy in the state of California. And then, uh, this was how we were going to, uh, pay them back, how to make sure that they, they recoup that investment by locking in the rate of return utilities now are saying, uh, that's way too high, uh, based on electricity, we can buy elsewhere and it should be lowered. And they're also asking for, um, fees, uh, on the size of the solar system and the connection, uh, monthly fees that are basically grid connection fees that would pay for the utilities, uh, maintenance and expansion of the electric grid

Speaker 1: (06:32)

Is the C P C considering these changes because solar energy may not need a big incentive anymore.

Speaker 2: (06:40)

No, this is part of a periodic review. The last time they did, this was about five, six years ago. Um, when they changed, uh, the first setup, right? Uh, in the early days of solar, uh, they had what we called net energy metering 1.0, and basically, um, if you would invested in a solar system, you could sell the electricity, you generate back to the utility for the same price that they charge you. The utility said, look, uh, after about five or six years, they said, look, this just isn't fair to us. We need to kind of tweak the system a little bit. So they adjusted it to net energy metering 2.0 and that created a small monthly action fee for solar users. It lowered the rate that they sell that electricity back to the utility, a few cents below, uh, the rate that the utility can charge back to you.

Speaker 2: (07:28)

And it created, uh, the utility, uh, utilities ability to have these time of use, uh, fees. In other words, they could charge more for, or uh, electricity during certain parts of the day than they do during other parts of the day. Right now it is most expensive to buy electricity between the hours of 4:00 PM and 9:00 PM. Uh, you know, when people come home from work and they, you know, cook dinner and, and sit around the, the house, uh, but need the lights on. And, and at that time of day, the solar doesn't really help you out that much.

Speaker 1: (08:03)

Now saving on energy costs has been an essential selling point for the residential solar industry for years. How much might those savings go down if the net energy metering system changes?

Speaker 2: (08:17)

Yeah, this is a, a kind of really the $64,000 question. Um, there are people all over the spectrum on this. Some people think that the current system just needs to be tweaked, uh, you know, in a very small way. And it's pretty much right where it is. There are people on the other side of the spectrum, uh, you know, the CPU C is considering so 74 proposals somewhere in that neighborhood, people on the other end of the spectrum are saying, look, uh, you know, this really needs to be changed because, uh, it's not allowing the utilities, uh, to, to spread the costs of maintaining this system to equally to all the customers. And those without solar are paying more or will end up paying more, uh, because we have to subsidize the solar, uh, energy costs, uh, to those who do have solar. So, uh, so the range of, of proposals is, is really kind of far and wide. And you have everything in between those, those two polls

Speaker 1: (09:15)

Will the CPU C consider just the bottom line costs to homeowners and utilities, or will it take into consideration the potential impact on climate change if fewer solar installations take place because of their decision?

Speaker 2: (09:31)

Yeah, that's a good question. I, I think one thing that the CPU C he has said is that it is committed, uh, to making sure that the customers who install solar solars maintain that right to self-generate and they want a policy that will allow, uh, the expansion of rooftop, rooftop, solar, uh, to continue perhaps not as lucrative as it current Lee is, but a policy that still, uh, encourages people to, to make that investment because it will help California get to its zero carbon goal in 2045. So it's not just a monetary, uh, consideration for the CPU C um, they have, uh, committed to making sure that that whatever changes they make don't remove the incentive for solar, which is, uh, the fear among some solar advocates.

Speaker 1: (10:25)

And we will be broadcasting the second w two reports on the CPU C decision tomorrow. And I've been speaking with K PBS environment reporter Eric Anderson, Eric. Thanks.

Speaker 2: (10:37)

Pleasure.

Castillo leases his solar system, so there were no up-front costs and he thinks solar is right for anyone who wants it.

“Less rooftop solar means we’re using more dirty energy, worsening the climate crisis contributing to climate racism. We just think at a time when there’s a climate emergency we can’t afford to be taking away clean energy solutions from families.”
Karinna Gonzalez, Hammond Climate Solutions.

This is one of more than 1.3 million rooftop solar systems installed in California over the past decade. The state’s energy office says nearly 15% of the state’s electricity production comes from solar panels like the ones on Castillo’s home.

RELATED: California Assembly Debating Solar Energy Reforms

The current Net Energy Metering regulations are designed to encourage the move to rooftop solar. They set the cost of electricity sold by residents and include a small monthly fee for fixed utility costs. But a state mandated periodic review suggests that those rules might be changing soon.

“Fifteen years ago, our electric rates were half of what they are today. And solar panels were more than twice as expensive,” said Mohit Chhabra of the Natural Resources Defense Council.

His organization is among those asking regulators to roll back the subsidy currently paid to rooftop solar owners.

An NRDC analysis advocates sharply cutting back how much utilities are required to pay for electricity generated on rooftops.

Current rules require utilities to pay homeowners a few cents less than the retail rate they charge.

NRDC officials say the subsidized rates are too high and should be cut to keep electricity rates low for everyone. California currently has some of the highest per kilowatt electric rates in the country.

RELATED: Changes To California Solar Market Are Dead For Now

The NRDC also suggests charging solar owners a flat fee, $40 to $50 every month, just to connect to the grid. Any electricity they use at night would be charged on top of that fee.

“People will still save money, they’ll just save less,” Chhabra said.

The lower buyback charges and flat monthly fees could dramatically increase the amount of time it takes for solar owners to recoup the thousands of dollars they spent installing solar panels and inverters.

Payback times could extend well beyond 10 years.

“So if you have solar for example, you will still by my estimate, save around 50% of your bill if you size your solar system correctly with our export rate change and this charge,” Chhabra said. “You just won’t save close to 100% because certain fees are fixed fees for maintaining the grid that we all depend on and social costs that are independent of electricity use.”

The California Public Utilities Commission is reviewing more than 70 proposals to adjust the Net Energy Metering Rules.

The suggestions range from changing little of the system in place today, to dramatic changes that call for steep monthly grid connection fees and slashing how much utilities are forced to pay to buy back electricity from residents.

Solar advocates are sounding the alarm. They say eliminating the financial incentive for residents to spend thousands of dollars installing solar panels could crush demand and that puts 68,000 solar industry jobs at risk.

“It will mean laying off the majority of their workforce or potentially closing their doors,” said Karinna Gonzalez, who works for Hammond Climate Solutions, a company advocating for Net Energy Metering to only get small tweaks.

RELATED: California Grid Managers Worry About Summer Power Supply

California's solar marketplace could see some major changes soon

Rooftop solar still needs to be encouraged, according to Gonzalez, because the state has to be able to meet aggressive climate goals by 2045.

Those goals will be out of reach if privately owned rooftop solar power stops being built.

“Less rooftop solar means we’re using more dirty energy, worsening the climate crisis contributing to climate racism,” Gonzalez said. “We just think at a time when there’s a climate emergency we can’t afford to be taking away clean energy solutions from families.”

California’s investor-owned utilities filed their proposed revisions more than a year ago.

San Diego Gas & Electric steered KPBS requests for interviews to surrogates like the Natural Resources Defense Council or the Utility Reform Network. The utility declined to make an official available for an interview both last summer and in recent weeks.

The company did offer an email statement:

“After nearly a year of actively participating in the NEM proceeding alongside consumer advocates and environmental groups that are also urging reform, we are eager to see a resolution that allows the solar industry to continue to thrive and addresses the existing inequities."

A preliminary decision on possible NEM changes could come soon from the California Public Utilities Commission. That proposal will be debated before being voted on by commissioners next spring.