Canary Media’s Down to the Wire column tackles the more complicated challenges of decarbonizing our energy systems.
This is the final installment in a three-part Down to the Wire series this week digging into a new rooftop-solar policy expected to be adopted by the California Public Utilities Commission on December 15, 2022. Read part one and part two.
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Amid all the conflict over the future of rooftop-solar policy in California, a common thread has united utilities, regulators, solar industry groups, environmental activists and consumer advocates alike. They all agree that rooftop solar systems need to be accessible to everyone, not just the wealthy — as do batteries that can shift solar power to when it’s more valuable, and electric vehicles and heating systems that can run on that solar power.
Now the question is how to make that happen.
Rooftop solar has, until recently, largely been limited to customers who own their homes and have higher-than-average incomes and credit scores. In the past few years, however, solar adoption has started to spread to more moderate-income households, driven by falling solar prices, better financing options and, in some states, incentives aimed at expanding access in lower-income communities.
But the accessibility of a rooftop solar system is still largely dependent on how much it can earn for the household installing it. And the California Public Utilities Commission’s proposal to revamp rooftop-solar policy would reduce compensation for rooftop solar power exported to the grid by an average of 75 percent, likely worsening the economics for all customers, including those already struggling to afford solar.
Then there’s the cost of batteries to consider. The CPUC’s proposed structure will make battery-backed rooftop solar far more lucrative than solar alone, as we explained in part one and part two of this series. But batteries add several thousands of dollars to the upfront cost of a home solar system, making it even harder to afford or finance.
Stakeholders weighing in during the CPUC’s decision-making process laid out a host of proposals for how regulators could help low-income and disadvantaged communities gain access to solar and battery systems, but the CPUC declined to adopt them.
Instead, its proposed plan offers one incentive for low-income customers: People who qualify for utility low-income customer-assistance programs will be paid a higher price for solar power they export to the grid — an “adder” on top of the standard price, in CPUC parlance. The goal is to ensure they’ll earn enough money to cover the cost of their solar or solar-battery systems within nine years — the same “payback” target the CPUC has set for all customers. But even this adder will leave low-income customers earning less on their exported power than they and other customers are paid under California’s existing net-metering regime.
People with lower incomes and lower credit scores have less access to lending and are offered less-favorable lending terms than people with higher incomes and credit scores. That increases the cost of financing solar installations for economically disadvantaged customers, which drives the need for higher export payments to make their investments pencil out economically.
It’s also harder for lower-income customers to afford the extra cost of adding batteries to their rooftop solar systems. To tackle that problem, the CPUC has cited the availability of $900 million in state funds — $630 million of that set aside for low-income customers — that is expected to be available next year to expand a battery incentive program. That structure is supported by California’s utilities, which are eager to shift costs for programs like these from their customer base to California taxpayers at large, Carla Peterman, chief sustainability officer at utility Pacific Gas & Electric, said during a CPUC hearing on rooftop-solar policy last month.
The barriers to low-income solar and battery adoption
But many solar advocates fear that these measures don’t go far enough to overcome existing barriers to solar adoption for low-income and disadvantaged customers, let alone make up for the reduced solar values the CPUC’s new proposal will create.
As Steve Campbell, policy and business development project manager for solar nonprofit Grid Alternatives, said at last month’s hearing, low-income customers will still struggle to afford or finance the upfront costs of new solar and battery installations. That includes many customers who earn too much to qualify for utility low-income assistance programs but still face financial barriers to solar and battery adoption, he said. Campbell also warned that the $630 million in low-income battery incentives, while approved in a law passed this summer, hasn’t yet been appropriated by the state legislature, leaving open the risk that it won’t be fully funded.
Sachu Constantine, executive director of solar advocacy nonprofit Vote Solar, highlighted barriers beyond price, “although price is a big part of it,” he said. “There’s a real need for easy enrollment, for streamlined interconnection, for technical advice — and we need additional funding to support that.”
Data collected by Lawrence Berkeley National Laboratory shows that customers on the lower end of the income scale are slowly adding more rooftop solar in California. Still, families with annual incomes of less than $50,000 made up only 12 percent of the total in 2021, even though almost a third of Californians fall into this income bracket, indicating how much work needs to be done to expand access.
Lower-income Californians are much less likely than others to install rooftop solar. (LBNL)
Rooftop solar also remains almost completely out of reach for the nearly half of all California residents who rent rather than own their homes, which includes many lower-income households.
All of these barriers require discrete solutions, Constantine said. Some of them could lie within the scope of the CPUC’s rooftop-solar policy structure, such as “more dedicated, more transparent funding for low-income customers” and a less steep drop-off in compensation for the solar they export, he said.
But other solutions need to come from outside the structure the CPUC is expected to approve this week, he said. Those include expanding options for renters to access solar, through existing structures like virtual net metering or assistance to multifamily housing tenants and property owners. They also include community solar, which has yet to find a workable policy model in California, although a newly mandated structure could help.