State of the California solar industry
By Greg Wiener, CEO, QuickBOLT
Considering the marketplace today, it is no leap to say the state of the California solar industry is in flux. The largest utilities in California convinced Governor Gavin Newsom and the California Public Utilities Commission (CPUC) that the incentive system in place was unfair, despite creating an environment for the largest growth in solar installs in the world. In the name of some unknown future benefit, the CPUC has upended that environment by replacing NEM2 with NEM3, effectively doubling the amount of the time it takes for homeowners to break even on solar system purchases.
Why? It’s because the incentive structure now encourages purchasing a battery system along with solar, while reducing the value of electricity fed back to the grid. Solar installs and sales are down approximately 70 percent in California since NEM3 went into effect. Even the billions of dollars awarded in the IRA are not helping rooftop solar in California. Even though California mandates that all new homes have solar, new housing starts are significantly down from 2022.
NEM 3.0 was approved by the CPUC in December 2022 and went into effect in April 2023. As a result of NEM 3.0 decreasing the amount of money homeowners can receive for feeding solar back to the grid, “17,000 jobs have or will be lost by the end of 2023 due to the recent net metering changes. The massive job loss represents 22 percent of all solar jobs in California. More pain is expected as 59 percent of residential solar and storage contractors anticipate further layoffs, and another 11 percent are still unsure.” (https://calssa.org/press-releases/2023/11/30/massive-layoffs-business-closures-and-loss-of-clean-energy-progress-since-cpuc-slashed-rooftop-solar-incentives-new-analysis-shows)
Decarbonization efforts—noble as they are—will go unrealized without replacing secure energy with more secure energy. We will simply end up with less reliable energy, and more blackouts and planned shutdowns. Wind and solar cannot 100 percent replace sources like fossil fuels and nuclear because they are unreliable. If we do not adapt the grid to handle more use of electricity as we are headed, then everyone will be affected by random power outages. Although there is money in the IRA for charging stations, building the number of charging stations needed to support the estimated number of electric cars expected to be on the road in seven years is daunting and impossible. According to the state’s own declarations, this is not possible—yet here we are. The gap between what California wants and what it can do is vast, and unless the gap is closed, none of these lofty goals can be achieved.
The bigger question here is why Governor Newsom allowed this change to occur. On the face of it, it is bad for rooftop solar, and if California is honestly trying to reach its goal of 100 percent carbon free by 2030, then how in the world is removing incentives helping?
Removing and reducing subsidies doesn’t increase adopting renewables—those maneuvers decrease adoption. On average, NEM2 subsidies allowed for a 7 to 9-year payback period; however, with NEM3, that payback period is expected to nearly double, to 13 to 16 years. Now, some may argue that’s fine, but it’s the difference between deciding yes to solar, versus no to solar.
Under this model, lower and middle-income households will be priced out of the solar industry altogether. Claiming we can be carbon neutral by 2030 is going to be significantly harder without residential solar growth continuing as it has for the past 10 years; it’s simply a fact.
The utilities, the PUC and the Governor can all claim otherwise, but math is math, and when you make policy that will double the price of a product, you will diminish the market for that product. We are seeing the result happening right now live, and it’s a very expensive lesson to all of us who make a living in the solar industry.
Q1 2024
