California, once the gold standard for solar adoption, is now at a crossroads. The state’s pioneering solar policies, which drove the nation’s solar revolution, are now under scrutiny as recent policy shifts threaten to stifle the very industry California helped to build. The state’s solar journey began with ambitious goals and innovative policies, but recent changes have sparked debate and uncertainty.
California’s Million Solar Roofs Initiative, launched in 2006, was a resounding success, achieving its goal in 2019. By the end of 2023, the state generated 30.1% of its energy from solar, powering nearly 15 million homes. This feat was accomplished through early investments that commercialized solar technology and drove down costs, accelerating solar deployment nationwide and globally. However, the tide has turned. Since 2022, California’s legislature, Governor Gavin Newsom, and the California Public Utilities Commission (CPUC) have implemented policies that devalue behind-the-meter projects, increase installation costs, and fail to establish a viable community solar program.
The most significant policy change was the shift from Net Energy Metering (NEM) 2.0 to NEM 3.0. NEM 2.0, developed as a successor to NEM 1.0, offered compensation for exported energy at the full retail rate, driving solar adoption and establishing a robust solar industry. However, NEM 3.0 dramatically reduced the export compensation rate, basing it on the CPUC’s Avoided Cost Calculator (ACC). This devaluation of exported energy has led to reduced savings for solar customers and smaller, less impactful projects.
Simultaneously, Assembly Bill (AB) 2143 classified commercial and most multi-family net metering projects as public works, imposing prevailing wage requirements. While beneficial for workers, this increase in project costs, coupled with reduced net metering value, has made fewer projects financially viable. This policy contrast with the Inflation Reduction Act (IRA), which increased incentives to offset higher labor costs, highlights California’s misstep.
The potential for a community renewable energy program also fell short. AB 2316 tasked the CPUC with evaluating existing programs and considering a new one. The proposed Net Value Billing Tariff (NVBT) promised affordable clean energy and energy storage solutions. However, the CPUC, siding with utilities, declined to create a workable program, citing cost shift concerns.
Despite these headwinds, two significant tailwinds support solar deployment. The IRA increased the investment tax credit (ITC) to 30% and extended it through 2033, with bonus credits for energy communities, many of which are in California. Additionally, escalating utility rates, exacerbated by inflation, make solar an increasingly attractive option for cost-conscious consumers.
California’s policy shifts have sparked a national debate. The state’s anti-solar arguments, once unthinkable, are now fueling similar discussions in other states. The solar industry, once a darling of California’s clean energy portfolio, now faces an uncertain future. As the state grapples with these policy changes, one thing is clear: California’s solar journey is far from over. The state’s next moves will shape not only its own energy landscape but also the national conversation on solar energy. The solar industry, policymakers, and advocates must engage in open dialogue, challenge norms, and spark debate to navigate this complex landscape. The future of solar in California hangs in the balance, and the stakes have never been higher.
