Weldon Kennedy and his wife are working to keep up with California's rapidly changing clean energy landscape. So when a climate-conscious couple began considering adding a solar system to the roof of their Oakland home, they spent time talking to installers and shopping around for the best deal.
But last spring he learned that a neighbor had decided to accelerate his solar project. Other homeowners in the area were also rushing to get in line.
"I don't think I fully understood what that meant, but I've had people tell me, 'You better get your solar power now,'" Kennedy said. "It was like a bunch of thrones were falling apart."
Kennedy's neighbors and other consumers were reacting to the dramatic policy change in California. By the end of 2022, the state Public Utilities Commission had reduced by about 75% the rates that utilities pay to owners of new solar panels when they sell excess electricity to the grid. The pricing structure for solar applicants came into effect in April of last year.
The state's decision caused a drop in consumer demand for residential solar after the new rate went into effect. Solar companies say they have been pushed to the limit, forced to lay off workers or even close their doors.
Experts fear the sharp drop could hamper the state's efforts against climate change. Solar energy is essential to achieving California's ambitious goal of 90% carbon-free electricity by 2035 and 100% carbon-free electricity by 2045. It is expected that by 2045, solar energy for large-scale electricity and on rooftops provide more than half of the grid's electricity. electricity.
An unexpected change in customer bills caused a three-month increase in the number of homeowners applying for solar connections before the deadline. But there was a 90% drop last May compared to May 2022, according to state data from areas served by Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric.
Overall, from May to November last year, the number of customers requesting solar connections decreased by around 82% compared to the previous year. Fewer than 4,000 customers placed orders in November, the last month for which data is available.
Now, California solar and utility companies will have to wait and see whether these restrictions are short-term or permanent.
Deepak Rajagopal, an energy economist at the University of California's Institute for Environment and Sustainability, said it's not surprising that consumers are moving away from solar power after the pay rate has changed from what he calls the "system." generous". He said rising bills are a burden on people who don't have solar power.
"C'est un fait, la demande va ralentir. L'effet global sera de ralentir la vitesse à laquelle les gens se tourneront vers l'énergie solaire sur les toits. Cela reviendra peut-être avec le temps, mais c'est difficile to say."
Questions remain about the effects. How will California achieve its climate change goals without a healthy and growing residential solar market?
What about Governor Gavin Newsom's vision of making clean energy more affordable for underserved communities with fewer utilities and fewer rebates?
"The state is betting big on rooftop solar. They're going to have to requalify," Rajagopal said.
Rajagopal planned to install a solar system in his newly purchased house. But like many Californians, he missed the April deadline for higher payments.
"I only had a few months to decide, and now I regret not taking the time to register sooner," he said, adding that he would wait to see what happened before looking at the sun.
The impact of the new standard on the solar industry was immediate. About 17,000 California solar workers could lose their jobs by the end of last year, according to industry estimates.
“The market is a mess,” said Bernadette Del Chiaro, executive director of the California Solar and Storage Association, an industry group. "This shouldn't surprise anyone. If you're a business owner and your market is down 80%, you should feel relieved. Some businesses are closing their doors."
"We're talking about the largest solar market in the country," he said. “This is the most important energy decision of this century so far. »
The Public Utilities Commission's rule was hotly debated and ultimately adopted unanimously. Part of the logic of agency is tied to ownership; Because solar customers, most of whom are middle class or wealthy, receive near-retail prices for their excess energy, they are not paying their fair share. Impose fees on other taxpayers. With rising bills. Organizers say this burden falls disproportionately on low-income families who cannot afford solar panels.
The Public Utilities Commission said higher rates paid to solar consumers constitute a subsidy and that state incentives to install battery storage systems, as well as rooftop solar, would provide better long-term value to the taxpayers.
The new rates apply only to new solar installations and to PG&E, Southern California Edison and San Diego Gas & Electric customers only.
And it's not just about houses. The Public Utilities Commission voted in November to reduce payments to commercial businesses and residential buildings that install solar panels.
A Public Utilities Commission spokesperson did not respond to CalMatters' questions about the impact of the recent major crisis on solar projects or job losses in the industry, and declined to make anyone available for an interview.
Instead, the agency said in a statement that residential solar installations have grown 16% annually over the past five years and that growth is on track for 2022, as customers and solar companies struggle to keep up with the changes. of prices.
Last year, more than 255,000 applications for new residential solar projects were reported to PG&E, Southern California Edison and San Diego Gas & Electric.
The committee said in a statement: "California is the nation's leading supporter of the solar industry and has provided billions in rebates and incentives since 2006."
PG&E, the nation's largest utility, said in an email response to questions from CalMatters that it received a record number of applications for solar connections in 2023, a 20% increase from the previous year and a “zero volume.” “precedent” rates for the next four. months. changes. . A company representative did not respond to questions about the decrease.
Solar industry executives say price changes in California are hurting low- and moderate-income homeowners as rooftop solar begins to gain traction. Berkeley Lab reported that in 2022, about 45% of solar energy users nationwide were below the threshold used to define low and moderate income. In California, families with incomes between $50,000 and $100,000 make up the largest segment of solar consumers, according to the report.
As the solar market has grown, costs have fallen, allowing modest homeowners to adopt solar systems and reduce their utility bills.
“Rooftop solar is no longer just for wealthy homeowners,” said Sen. Josh Baker, D-San Mateo. "Central Valley residents are suffering from extreme heat. The industry has made great strides in low-income communities. This (Public Utilities Commission decision) makes things even more difficult."
The Public Utilities Commission has a $280 million “capital fund” to help low-income consumers. No money has been spent yet. The agency said it will soon release a plan for how the program will work.
Solar energy can still make financial sense for homeowners who can afford the upfront costs and expect a return on investment. Federal tax credits can cover up to 30% of the installation cost. Because their use of energy from the grid is reduced and they are billed for excess energy, customers typically expect their new solar system to pay for themselves within six to eight years, according to the Public Utilities Commission. This is faster for installations that include battery storage.
Some solar business owners say the new rules extend payback periods to 10 years or more. One installer said some of his customers would drop the price to 4 or 5 cents per watt to sell excess electricity starting at 30 cents per watt.
Job losses are most severe in smaller communities, where clean energy jobs provide access to well-paying jobs for women and people of color. The average salary for a solar installer in California is $70,000, Del Chiaro said.
“These jobs are a stepping stone for people who have encountered the justice system and have had their lives changed,” said Adewale Ogun Badejo, vice president of workforce development at Grid Alternatives, an Oakland-based nonprofit focused on in the unemployed. Local communities for clean energy projects.
“It is 100% job destruction. »
Solar energy gave Ken Wells a second chance. Wells rose through the gang ranks and had few options in South Los Angeles. When his friend is murdered by a rival gang, 15-year-old Wells grabs a gun, hijacks a car, and leads authorities on a high-speed chase. He was tried as an adult, found guilty and sentenced to six years in prison.
Bearing the indelible mark of a criminal, Wells went through smuggling programs to train in something that could help underserved communities provide clean energy and reduce his neighbors' utility bills.
In 2017, Wells founded his own company, O&M Solar Services. He made a lot of money and created jobs for 20 employees. They were all expelled.
"We need to transform our communities, not only with clean energy, but with these jobs," said Wells, 35. "When I hear political news coming out of Sacramento, I feel sad. Why? Are we talking out of both sides of our mouths?"
"On the one hand, we want to promote clean energy, and on the other, we want to prevent it. We cannot afford to cripple the solar industry for years by simply suppressing it with these policies. These policymakers have got everything wrong."
Other factors are also disrupting the industry, which was just recovering from coronavirus lockdowns. Interest rates have made it difficult for small businesses to grow and have made it difficult for owners to borrow money for systems that can start with $30,000. The extension of the federal tax credit through 2030, which was scheduled to be phased out this year, could ease the urgency for some consumers.
For small businesses like Wells, even small successes become big successes. For now, his clients are waiting to see if things change.
"I don't know what the future holds," he added. "Here, south of the center, there is a sunny desert. The community is not bothered, a transition to clean energy is demanded. The situation will only get worse."
The company, which has been in business for 30 years, recently laid off half its workforce, said Carlos Picard, marketing director at Energy Concepts in Fresno. Baker said 60% of the company's installations over the past five years have been in ZIP codes where the median household income is below the market average.
He said his service area includes neighborhoods struggling with extreme heat, where it's common to see utility bills averaging $800 during the summer months. "This policy was idiotic, not a light punch in the gut," he said.
The new policy "has made it harder to write (for some churches)," said Susan Stevenson of California Interfaith Power & Light, an Oakland-based organization that advocates for the adoption of clean energy in houses of worship.
"Solar energy could be a solution that would end up being profitable. Now, with this change, we increasingly have to look at the long term."
"Not all religious congregations can afford the upfront costs or wait years to recoup their investments," Stevenson said. "Until recently, tax-exempt religious organizations have not been able to take advantage of federal solar taxes, making the state's reduction in payments a real blow." That policy has changed, but many nonprofits still have to deal with the new rules, and even a 30% direct payment can't offset the drop in reimbursements.
"Ironically, this will make solar energy less fair and less expensive," Stevenson said. "There are good people working at the PUC who want to do the right thing. It's unfortunate that they made this decision based on information from companies that may not have provided a full picture. We can see that the equality goals they were trying to achieve." results obtained were undermined. I hope they reconsider their decision. "
State Senator Baker said: “Where is the just transition for laid-off solar workers? Citing efforts to create a fund to help the country's oil workers who lose their jobs.
Ross Williams has owned HES Solar in San Diego since 2013. After the pricing decision, sales “fell off a cliff,” he said. "In the first quarter we sold 600 deals and in May we closed one. That's how dramatic it was and the breakup was crazy."
Like many other solar installers, his company now does roofing work and plans to expand to Nevada and Arizona in search of clients.
"We're a small business and we don't have large cash reserves that we can hold on to for years," Williams, 41, said. So far nothing that I thought would happen has happened. My crystal ball is very far away.
When asked for his message to policymakers, Williams responded, "Thank you, California."
This article was originally published in the Palm Springs Desert Sun; California cuts payments for home solar energy. Demand decreased by 80%
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