A Fight Over Rooftop Solar Threatens California’s Climate Goals

California has led the nation in setting ambitious climate change goals and policies. But the state’s progress is threatened by a nasty fight between rival camps in the energy industry that both consider themselves proponents of renewable energy.

The dispute is about who will get to build the green energy economy — utilities or smaller companies that install solar panels and batteries at homes — and reap billions of dollars in profits from those investments. At stake is whether the state can reach its goal of 100 percent clean energy by 2045.

For years, the rooftop solar business was ascendant in California, growing as much as 62 percent a year. That angered utilities and their labor unions, which long controlled the production, sale and distribution of electricity, and they lobbied state leaders to rein in the rooftop solar business — an effort that is on the cusp of success.

The infighting couldn’t come at a worse time, some energy experts said. President Biden’s main legislative effort to move the country toward clean energy and electric cars has stalled in Congress even as natural disasters and heat waves linked to a warming planet are becoming more common. U.S. greenhouse gas emissions, which fell sharply in 2020 because of the pandemic, jumped 6.2 percent last year.

In addition to having about 12 percent of the U.S. population, California is widely considered a leader in energy and climate policy. Its decisions matter far beyond its territory because other states and the federal government often copy them.

The California Public Utilities Commission plans to vote in the next few weeks to reduce the growth of solar energy in the state, which has added more of it than any other. The commission has proposed slashing the incentives homeowners receive to install rooftop solar systems. Officials argue that the changes would help reduce utility bills for lower-income residents about $10 a month by forcing rooftop solar users to pay higher fees to support the electric grid.

Analysts with Bank of America Global Research say the proposal would lead to a 20 percent annual drop in new rooftop solar systems in California next year before they would begin to recover. Representatives of the solar business expect a decline of up to 80 percent.

The proposal would force California to rely more on large power installations, including solar and wind farms, and long-distance transmission lines operated by utilities like Pacific Gas & Electric and Southern California Edison. Every watt of electricity not produced on the rooftop of a home will be produced and transmitted by a utility or wholesale power companies.

“You can understand why utilities don’t like distributive resources,” said David Feldman, a senior energy analyst at the National Renewable Energy Laboratory, using an industry term for small energy systems. “The more electricity they sell, the more money they make.”

Some energy experts say utilities would not be able to produce or buy enough renewable energy to replace what would be lost from the decline in rooftop solar panels — which supplied 9 percent of the state’s electricity in 2020, more than nuclear and coal put together. California would need to set aside about a quarter of its land for renewable energy to meet its climate goals without expanding rooftop solar, said Mark Z. Jacobson, a professor of civil and environmental energy at Stanford. As a result, utilities would have to turn to natural gas and other fossil fuels.

“The only thing this is going to do is reduce rooftop solar,” Professor Jacobson said. “That will mean there will be more natural gas in the system. Every rooftop should have solar on it. You should be encouraging more of it.”

People who install solar panels on their roofs or property are still connected to the electrical grid, but they receive credit on their bills for power they produce beyond what they use. California’s proposal would cut the value of those credits, which are roughly equivalent to retail electricity rates, by about 87 percent. In addition, the measure would impose a new monthly fee on solar homeowners — about $56 for the typical rooftop system.

The monthly cost of solar and electricity for homeowners with an average rooftop system who are served by PG&E, the state’s largest utility, would jump to $215, from $133, according to the California Solar and Storage Association.

An intense campaign is underway to sway regulators. Rooftop solar companies, homeowners and activists on one side and utilities and the International Brotherhood of Electrical Workers on the other are lobbying Gov. Gavin Newsom to intervene. While the commission is independent of Mr. Newsom, he wields enormous influence. The governor recently told reporters that the regulators should change their proposal but didn’t specify how.

The electrical workers union, which did not respond to requests for comment, is playing a central role. It represents linemen, electricians and other utility employees, who usually earn more than the mostly nonunion workers who install rooftop systems. Many union members, an important constituency for Democrats, fear being left behind in the transition to green energy.

Other states are also targeting rooftop solar. Florida is considering legislation to roll back compensation to homeowners for the excess energy their panels produce, a benefit known as net energy metering.

No government, though, has adopted as big a change as California has proposed. The Solar Energy Industries Association said that if regulators approved the measure, the state would slide to last place for rooftop solar incentives from near the top of the group’s rankings.

“The design of this proposal has been, ‘Let’s get solar out of the way,’” said Vikram Aggarwal, the founder and chief executive of EnergySage, a rooftop-solar comparison shopping site. “This proposal just doesn’t feel fair from any perspective.”

Fairness has been at the heart of California’s solar debate.

Since Gov. Arnold Schwarzenegger, a Republican, kicked off the state’s “Million Solar Roofs” initiative in 2006, regulators have struggled to find a balance between encouraging rooftop solar and keeping electrical rates affordable. The dispute boils down to two big questions: How much should homeowners be paid for the excess power their solar panels send to the grid, and how much should rooftop solar users pay toward running the grid.

Utilities, their labor unions and some environmental and consumer groups say rooftop solar owners are being paid too much because utilities can produce electricity or buy it on the wholesale market at a much lower cost.

Lower-income customers who cannot afford solar panels are effectively subsidizing affluent homeowners, said Matthew Freedman, a staff lawyer for The Utility Reform Network, which represents ratepayers in California. “We have a crisis of affordability.”

Ari Vanrenen, a spokeswoman for PG&E, said: “Sensible reform is necessary to support customer equity and help continue California’s success toward a clean energy future.”

During a virtual public hearing this month, Al Fortier, a leader in the electrical workers union, said well-paying union jobs at utilities were under threat from the growth of rooftop solar. “Net metering is making it worse,” he said.

Unions representing coal miners, electricians and other workers have expressed similar concerns that the transition to renewable energy will depress wages. Companies in that business have generally opposed organizing efforts and usually pay less than old-line energy businesses. Utility linemen in California earned an average salary of $94,000 in 2020, while solar panel installers made about $50,000, according to government data.

The solar industry argues that it provides various jobs, many that pay as well as comparable utility positions. Solar employs about 69,000 workers in California, including 25,000 residential installers, compared with the 38,000 who work for the state’s three large investor-owned utilities.

Mary Powell, a former Vermont utility executive who last year became chief executive of Sunrun, the country’s largest residential solar company, said the energy transition offered many opportunities for her company and utilities.

“This should not be a fight,” Ms. Powell said at a rally this month in Los Angeles. “If the utilities are enlightened, what do they do? They embrace what we do.”

Mr. Feldman of the National Renewable Energy Laboratory, a division of the U.S. Energy Department, said the campaign to limit rooftop solar often ignores its benefits. Rooftop panels reduce the amount of power the grid needs to deliver, making the system more efficient.

“If you insulate your roof, buy energy-efficient appliances,” Mr. Feldman said, “that’s not any different from the grid perspective of a solar system.”

The use of rooftop systems also reduces the need for new power plants — including those that contribute to climate change — and long-distance power lines, which have ignited large wildfires.

That is why other state officials want more rooftop solar. The California Energy Commission requires solar panels on new homes and last year voted to require solar panels and batteries in some new buildings, including apartments.

The utility commission’s proposal may not limit the use of rooftop solar by affluent people, but it would discourage others, said Bernadette Del Chiaro, the executive director of the California Solar and Storage Association. About 12 percent of California’s rooftop solar users, or 150,000 homes, have incomes low enough to qualify for discounted electricity — $34,840 a year or less for individuals and up to $62,080 for families of five. That’s more than all of the 107,000 rooftop solar homes in Florida.

“All the rhetoric of only rich people adopting rooftop solar is patently false,” Ms. Del Chiaro said.

Ralph Baca, a retired warehouse worker for the federal government, said the proposed changes would probably have made his rooftop solar system unaffordable.

Because he has a low, fixed income, he receives a 30 to 35 percent discount on his electric bill. Mr. Baca, who is 68 and lives in Barstow, two hours outside Los Angeles, typically paid $100 a month for electricity and up to $150 in the summer, forcing him to cut back on other necessities. After he bought solar panels about a month ago, his electricity costs are fixed at $94 a month — $84 goes to Sunrun and $10 to Southern California Edison.

“I’m not wealthy,” Mr. Baca said. “I was raised to turn everything off or we’d get a whipping.”

Terrie Prosper, a utility commission spokeswoman, said its proposal would save lower-income consumers $60 to $120 a year in 2030.

The proposal would raise monthly costs on people who already had solar panels in the 15th year after their system was connected to the grid. New solar users would pay higher fees right away.

Other states, like Nevada and Hawaii, cut solar incentives but reversed course after public outcry and when regulators reassessed their policies.

Leah Stokes, an associate professor of political science at the University of California, Santa Barbara, who specializes in energy and environmental policy, said the commission ought to have found a way to make electricity bills and rooftop solar more affordable — a goal of at least one bill in the Legislature.

“California has really led the nation in many ways, as well as helped bring down the costs,” she said. “So we don’t want to imperil that industry. But at the same time, electricity bills need to be affordable, particularly for low-income people.”