California Regulators Soften Blow of Solar Subsidy Rollback

(Bloomberg) -- California regulators unveiled a scaled-back proposal to reform a landmark subsidy for rooftop solar after clean-power advocates warned an earlier plan would have undermined the state’s climate goals.

If approved, the plan released Thursday would be a victory for companies that sell residential-solar systems -- and indicates California officials are not yet willing to significantly scale back a program that’s been crucial to the growth of clear power.

Read the proposal here

The plan removed a proposal for a monthly grid-connection fee that solar companies opposed. Regulators will instead consider it in a separate proceeding.

The proposal is “better than expected,” Maheep Mandloi, an analyst at Credit Suisse, said in a research note. “No grid-access fee.”

The proposal from an administrative law judge also calls for incentive payments for homeowners’ excess solar power to be reduced over a five-year period. It would eventually make that power equal to how much a utility pays for other clean-energy sources.

“It is extremely disappointing that under this proposal, low-income families and all customers without solar will continue to pay a hidden tax on their electricity bills to subsidize rooftop solar for mostly wealthier Californians,” said Kathy Fairbanks, a spokeswoman for Affordable Clean Energy for All, a utility-backed group.

Shares of rooftop-solar companies surged. Sunrun Inc. rose as much as 31%. SunPower Corp. jumped as much as 21%. And Sunnova Energy International Inc. climbed as much as 29%.

The proposal is subject to change before being finalized by a vote by the five-member California Public Utilities Commission.

Read: Fight over solar subsidy tests California’s climate commitment

While California’s incentive program has helped rooftop solar flourish, it’s also drawn criticism for raising power bills for poor and middle-class residents.

An earlier proposal would have slashed payments to residents who install rooftop solar and added new monthly fees, which risked slowing the growth of solar -- a key piece in the Golden State’s push to fully green its grid by 2045. That plan called for cutting incentives by as much as 80%. Research firm Wood Mackenzie estimated it would have reduced the rooftop market in half by 2024.

The state’s rooftop-subsidy program, known as net metering, has offered rooftop customers full retail credit for green power they supply to the grid. The incentive, adopted more than 20 years ago, has spurred the installation of 1.3 million home solar systems, or about 45% of the nationwide total.

State regulators said the earlier proposal was designed to encourage the adoption of batteries that store solar power. But solar companies, climate advocates and even some movie stars pushed back against that plan, saying it would devastate the rooftop-solar market, cost jobs and erode California’s green goals.

Utilities, labor unions and consumer advocates, meanwhile, have contended the existing subsidy has outgrown its usefulness given that panel costs have plummeted over the past decade. They argue the credit for excess solar energy should be reduced -- and that rooftop users need to pay a greater share of grid costs to ease the financial burden on existing utility customers, including low-income Californians.

(Updates with analyst quote in 4th paragraph.)

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