2019 was a very good 12 months for residential solar installations in California. Homes served by the three major investor-owned utilities—Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric— Furnished 14% more electricity generation capability than last 12 months. The California Solar & Storage Association celebrated the development of 1 million solar roofs within the state and surrounding areas Annual report beamed with optimism.
Fast forward to today and the news media is filled with it Article around catastrophic market Waste. The industry group and plenty of lawmakers blame a change introduced last April by the California Public Utilities Commission that reduced the compensation solar homes receive for selling electricity to the state grid.
However, a careful examination of the change shows that this just isn’t the rationale for the decline in solar panel sales. The rooftop solar market just isn’t dying. It is gearing up for the top of the 2021-23 rush, which resulted in growth that was unsustainable.
CPUC change
The CPUC made the compensation change to cut back the burden on households without solar energy. Under the old policy, referred to as Net Energy Metering 2.0, utilities needed to pay private solar owners over and over more for his or her excess power than in the event that they had purchased that clean power from medium and huge solar and wind farms.
The higher costs for utilities were passed on to consumers, driving up electricity prices for all households. This was particularly unfair because the common income of solar households is far higher than that of non-solar households.
Households that signed up for solar energy before April 15, 2023 will still be subject to NEM 2.0. However, systems approved since then fall under the brand new “NEM 3.0” directive. They receive a significantly cheaper rate for his or her exports, but still save the complete retail price once they use their solar energy locally.
The last detail is significant. So should you do somewhat math, it seems that the price savings incentive for installing solar today under NEM 3.0 is concerning the same because it was for many households in 2019, in the course of the halcyon days under NEM 2.0.
How can that be? Well, the standard solar household consumes about 50% of roofing production. While the brand new policy reduces the worth of exports, rising retail prices – up 80% for PG&E, 91% for SCE and 33% for SDG&E since 2019 – significantly increase the worth of on-site solar energy.
By my calculation, PG&E and SCE customers still have a rather higher incentive to go solar today than they did in 2019, as a consequence of the upper value of on-site solar use, offset by the lower cost of exported electricity. The incentive is 38% lower for SDG&E customers, although SDG&E is about 80% smaller than the opposite two and already had by far the very best electric rates and solar penetration in 2019.
To put this into perspective: from 2014 to 2019When electricity price increases were much slower, residential solar business in California grew at a mean annual rate of 14%. Then, after a stagnant solar market in the course of the pandemic in 2020, electricity rates and the solar market exploded, causing annual sales to greater than double by 2022. The CPUC's policy change last 12 months has just tempered the recent exponential growth in recent systems.
Why sales slowed
But if the stimulus remains to be as strong because it was in 2019, why did recent sales fall so sharply within the last 8½ months of 2023?
First, anticipation of the CPUC policy change created a gold rush in the primary three and a half months of 2023. Many of those early 2023 buyers would have been buyers later in 2023 if the installation had not occurred before April fifteenth. In fact, overall 2023 residential sales were 12% higher than 2022.
However, several other aspects are also slowing down the sale of solar modules:
• Rising rates of interest: For a brand new solar system financed over 15 years with mortgage interest, a buyer would must pay a 21% higher monthly payment in 2023 in comparison with 2021, although the worth of putting in a rooftop solar system has decreased barely is the period.
• The big winners have already switched to solar: Customers who switched to residential solar energy within the last decade had the very best roofs, the very best electricity consumption, access to low-cost financing and the best commitment to combating climate change. A rooftop solar system lasts for a long time, so corporations need to repeatedly attract recent customers who weren't as interested just a few years ago. This makes it difficult to proceed growing.
• Reduced Power Shutdowns: In its Report “Annual Review” 2019The Solar Energy Industries Association reported that a key driver of residential solar growth in California has been the state's public safety shutdowns, which “provided an important incentive for homeowners to purchase solar energy, increasingly paired with storage.”
Through luck and improved technology, these barriers have faded in recent times. Because memory is scarce, fewer and fewer homes today are using solar energy (plus battery) to reduce disruption from power outages.
It is difficult to undo an unfair policy like NEM 2.0 when it delivers outsized advantages to a small group of consumers and investors which can be paid for by everyone else. But if we don't do it now, it is going to be even harder to handle in the long run. It is critical for California to chart a sustainable and equitable path in order that it might function a model for other regions.
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