Connolly bill proposes boost in residential solar incentives

Assemblyman Damon Connolly has introduced a bill to reinstate higher incentives for Californians who install residential solar projects.

“The removal of incentives that have helped offset the cost of solar installation has had severe consequences on our ability to generate clean energy,” Connolly, a Democrat who lives in San Rafael, said in a statement announcing the legislation.

In 2022, the California Public Utilities Commission, for the third time, changed the “net energy metering” solar tariff, or NEM, that determines how much money owners of residential solar systems are reimbursed by utilities for the electricity they produce.

Under what has come to be known as NEM 3.0, which took effect on April 15, the rate is approximately 75% lower than under NEM 2.0.

“The NEM 3.0 decision has clearly disincentivized clean energy adoption with rooftop solar sales down between 66% to 83% and thousands of workers left without good-paying jobs,” Connolly said.

Connolly’s legislation, Assembly Bill 2619, would repeal the CPUC’s decision and require it to create a new rule structure based on the clean energy goals set by Senate Bill 100, which committed the state to achieving 100% clean carbon-free energy by 2045.

Increased use of solar power has long been viewed as a key strategy for meeting the state’s requirement. The California Energy Commission has projected that large-scale and rooftop solar will provide more than half of the state’s power by 2045.

Connolly’s bill would require the CPUC to generate a new tariff to “achieve an annual rate of installation of solar renewable electrical generation facilities that is sufficient to meet the state’s anticipated need for customer-side solar generation resources.”

The law also would mandate that the tariff “ensure that the annual rate of installation of renewable electrical generation facilities in disadvantaged communities is reasonably comparable to the statewide annual rate.”

No details have been provided regarding how this might be achieved or what the new tariff might be.

To bolster his argument for rolling back NEM 3.0, Connolly cites state reports showing that demand for solar installations has declined 90% since 2022. He also cites an analysis by Wood Mackenzie, a research firm, estimating that under NEM 3.0, the residential solar market will be cut in half by this year.

Forty-three percent of the respondents to a survey conducted by the California Solar and Storage Association in November said they would struggle to remain in business over the winter.

Brian and Amy Atchley, who operate Amy’s Roofing and Solar in Petaluma, said their business plummeted after NEM 3.0 took effect in April.

Brian Atchley said residential solar operators used to be paid the same amount for the energy they produced as they paid for electricity from Pacific Gas & Electric Co. Now, he said, they get about 6 cents per kilowatt hour for their electricity and have to pay about 40 to 48 cents for every kilowatt hour they get from PG&E.

He said this means it takes longer for solar projects to pay for themselves and makes it harder to finance them, especially in combination with today’s high interest rates.

Severin Borenstein, a business professor at the University of California, Berkeley, said the proposed legislation would subsidize residential solar operators by raising electricity prices on everyone else.

“Making other ratepayers pay for it is a hugely regressive tax,” Borenstein said. “Those other ratepayers are poorer than the people who are putting in solar.”

Borenstein also said there other reasons for the steep decline in residential solar installations, such as fading memories of the state’s power outages from massive wildfires.

Mark Toney, director of the Utility Reform Network, said, “I look forward to working with the author and the committee to discuss the consequences of this bill, particularly for renters and low-income homeowners who aren’t able to have solar.”

Robert Archer of Ross, a former energy adviser for the U.S. Agency for International Development, said that the CPUC’s rationale for altering the subsidy for residential solar projects was sound.

“The rooftop solar contribution in the afternoon was less and less useful because the peak demand had shifted to 5 p.m. to 9 p.m.,” Archer said. “Therefore the CPUC shifted the subsidies to incentivize battery storage.”

Announcing the NEM 3.0 decision in 2022, CPUC Commissioner John Reynolds said, “The future needs a solar program designed around the value of solar to the grid and one that encourages true carbon reductions at peak energy times, which is after the sun goes down, by creating better incentives for customers to pair solar with batteries.”

Borenstein said, “If people put in batteries, the economics of installing solar are probably stronger now than they were in 2019.”

But Brian Atchley said that “batteries double the upfront cost for the customer.” He said a higher percentage of his solar customers now include batteries in their projects, but he is installing fewer batteries overall because he is doing fewer solar projects.

Amy Atchley said solar projects accounted for more than half of the company’s business prior to NEM 3.0., and now they are well under 50%. She said the company has had to reduce the size of the staff accordingly.

Mike Gazda, a spokesperson for PG&E, said, “We are reviewing the proposed legislation and remain committed to a fair and equitable clean energy future for all Californians.”

Jenna Tenney, a spokesperson for MCE, the nonprofit formerly known as Marin Clean Energy, said it had no comment on the legislation.