California proposes steep rooftop solar tax, cuts to export tariffs

Californian energy regulators have moved to wind back generous incentives for rooftop solar installations and are considering proposed reforms that would slash feed-in tariffs and impose new grid integration charges on existing installations – the latter of which makes Australia’s proposed rooftop solar tax look pretty reasonable.

The reforms, being considered by the California Public Utilities Commission (CPUC), are part of a package of changes to the state’s ‘Net Energy Metering’ rules that have been used to incentivise and support the installation of rooftop solar.

In putting forward the proposal, the CPUC said the time had come to modernise its rooftop solar policies and ensure new financial incentives that provided “more accurate price signals that will promote greater adoption of customer-sited storage.”

California leads the United States in terms of solar uptake, with an estimated 1.3 million households with rooftop solar, and is home to around 40 per cent of the United State’s total distributed solar generation capacity.

Reforms to incentives would see feed-in tariffs slashed from the relatively high amount of around 25-30 US cents per kWh to just 5c/kWh, as regulators shift the goal for the tariffs from supporting increased uptake of solar to more directly reflecting the value of solar to the grid.

As a counter-balance to the tariff cut, the reforms also propose giving a $US15 per month credit to households for 10 years to facilitate the installation of battery storage systems, which would in turn support households to store and use their excess solar generation rather than sending it into the grid.

The commission said the change would help reduce the estimated $US3.4 billion in feed-in-tariff payments that are ultimately passed on to energy users that don’t have solar – a similar argument to that being used to justify Australia’s own rooftop solar reforms.

Controversially, however, California will also introduce a new solar charge to account for grid integration costs, dubbed a “grid participation charge” – a flat rate of $8 per kilowatt of solar capacity, each month.

It is a proposal that makes similar reforms in Australia look comparatively tame. While Australia’s solar export charges would be proportionate to the amount of excess solar sent into the grid, California’s proposal would impose a flat charge irrespective of exported power.

For a standard 5kW solar installation, this could amount to $US480 per year, or around $US9,600 over a 20-year system life, diverting a significant portion of the financial benefits of installing solar – especially if systems are also slugged with lower feed-in-tariffs.

Low income and tribal households would be exempted from the charge, while a $US600 million fund would also be created to assist low-income and disadvantaged communities to install solar and storage.

Unsurprisingly, the proposed reforms have been met with stiff opposition from California’s solar industry.

Speaking with the ‘Save California Solar coalition’, the state director of the Environment California Research & Policy Center, Laura Deehan, said the policy would benefit the state’s large energy companies at the expense of households and businesses wanting to install solar.

“California is on a path to 100% renewable energy, and that path requires a sustained commitment to growing rooftop solar. Instead, the CPUC is proposing to put a drag on our transition away from fossil fuels,” Deehan said.

“The momentum that rooftop solar has now would help us reach our goal – but to gut net metering is to gut that momentum. The CPUC needs to put California’s climate change efforts first, ahead of the financial interests of the big utilities.”

Leading American solar company, SunPower said the proposed reforms could make rooftop solar inaccessible to many Californian households.

“At a time when wildfires and power shut offs are an ongoing problem, today’s proposed decision would leave many Californians in the dark,” SunPower’s head of policy, Suzanne Leta, said.

“Access to reliable power should be available to every American family, regardless of income or zip code. We believe Governor Newsom will take the right steps via the final decision on the NEM program to help keep California as a leader in our clean energy transition.”

It sees California’s solar industry battling through issues that are now well familiar for Australia’s solar industry.

Virtually all of the generous feed-in-tariffs that had been available to early Australian adopters of rooftop solar have long been wound back, while Australian energy regulators have allowed for the introduction of network connection charges for rooftop solar systems, albeit on a voluntary basis.

The Australian proposal was met with strong opposition from Australia’s solar industry, which feared that it would amount to a tax on solar installations and diminish solar’s financial benefits.

However, local regulators argued that such charges were becoming necessary to ensure solar owners contribute to network upgrades designed to manage the growing penetration of behind-the-meter solar capacity, especially in congested parts of the grid.

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