The battle for California's rooftop solar

A third of all rooftop solar panels are installed in California – in large part, thanks to the state's generous subsidies.

Now, the California public utilities commission says it’s time to pull back the support.

“In the last several decades, solar costs have dropped precipitously. Meanwhile, rates have skyrocketed up," Matt Freedman, staff attorney at The Utility Reform Network, says. "Yet we are still using the same metric for compensating customers.”

Critics say cutting solar subsidies amount to a damaging tax on an important source of clean energy:

"We live in a climate challenged world, where natural disasters are quickly becoming the norm," Terry Tamminen, former secretary of the California Environmental Protection Agency, says. "If the grid goes down, I think there’s going to be a lot of people that would be very glad that they have power that can be generated from their roof.”

Today, On Point: The battle for California’s rooftop solar.

Matt Freedman, staff attorney at The Utility Reform Network (TURN) specializing in electricity. (@freed_man)

Terry Tamminen, former secretary of the California Environmental Protection Agency who helped design the state’s Million Solar Roofs Initiative. (@terrytamminen)

Take us back to 2006, what was the genesis of this idea to put 1 million rooftop solar panels across California?

Terry Tamminen: “When Governor Schwarzenegger ran for the office in 2003, and the rather unique recall election, I helped him write an environmental action plan, which included getting much more solar and other renewable energy onto the grid as soon as possible, to tackle climate change and air pollution. And when we got into office, we started talking about what that should look like, how big could it be? We conferred with people like Dan Jacobson, who was in your introduction. And others around the state. And we came back to the governor with a plan. And he looked at it and he said, That's it? This is the fifth largest economy in the world, and that's all you're thinking? He said, We should have a million roofs covered in solar all over the state.

" ... He said, we can do better. So we went back to work. And as Dan Jacobson said in your introduction, we set a big goal. My team at the California EPA, actually, it was Drew Bohan, who today is the executive director of the California Energy Commission. It was his brainchild and he put the numbers together and he said, we can do a million roofs. And, also in your introduction, you heard the governor say that the goal was to get 3,000 megawatts in total from all these roofs. Well, in 2019, he and Governor Brown and I celebrated the 10th anniversary of the program. We had not only achieved 1 million roofs, but those million roofs generate 8,000 megawatts. So more than twice what the original goal was, meaning the program is wildly successful."

Back in 2006, the price of rooftop solar panels was significantly higher than it is now. How did you make this an attractive deal for homeowners?

Terry Tamminen: “We studied different methods from around the world where they had incentivized solar. In Germany, they have what's called a feed-in tariff. They basically say if you put solar on your roof at your own expense, we'll give you what at the time was about 50 cents a kilowatt hour. And typically, people across the United States pay anywhere from seven to 15 cents a kilowatt hour for their electricity. Here in California is higher, even up to 20 cents and more if you use too much in a given month, et cetera. But imagine that, 50 euro cents per kilowatt hour, so a very high price in order to incentivize people to do it.

"And so, like even farmers, started paving over fields because they got into the solar business. Others used an incentive model, where the government would pay people an incentive to bring down the cost of solar to incentivize them to do that. And that's the model we chose. And we decided to frontload those incentives. So in other words, in the first year of the program, half of the cost of installing solar was paid by the state. If you waited a year, only 40%. If you waited another year, only 30%. And the idea was that by incentivizing a lot of it quickly, more companies would get into the business and bring the price down. And that's exactly what happened.”

On whether it's time to subsidize rooftop solar in California

Terry Tamminen: “I think economists have to kind of debate whether or not it would stall out if there weren't incentives. And the incentives are certainly a lot less today than they were before. Because as you pointed out, thanks to frontloading the incentives and so many people putting solar on their rooftops, that did lead to competition, that led to a reduction of almost 70% of the installed cost of solar on a rooftop, from when we started this program. And that does suggest that then you don't need the subsidies, or as much subsidies, and people will do it. But you shouldn't then penalize people for putting solar on their rooftop by starting to charge them more just to have access to the grid, or some of the other things that are in the legislation that is pending.

"We want to continue to make sure that we get more solar on rooftops, because we're running out of time. Climate change has proven to us that we just don't have another moment to spare, and we've got to make this transition to clean energy as quickly as we can. And here in California, one of our two nuclear power plants closed because it was leaking and couldn't be fixed. And the second one, Diablo Canyon, is about to be closed out of safety concerns. And so when you lose what was 20% of the state's energy, you've got to replace that with something. And that's both energy efficiency measures. Like I mentioned, the public goods charges used to incentivize people to buy more efficient appliances, and things like that. But it's also things like getting more solar on rooftops, getting everybody involved in generating clean energy, and enough energy for the state to avoid blackouts."

Is there a system by which you can imagine that rates for ratepayers, especially those who are lower on the socioeconomic status, that they're not disproportionately hit — while also supporting the expansion of of solar in California? 

Matt Freedman: "I'm very interested in seeing how we can think outside the box on this. And the most important idea that I'd like to put out today, and that we've been socializing with decision-makers in California, is we need to find a way to remove a variety of costs from electricity rates, and find other sources of funding to support some of these initiatives. Electricity rates are the most economically regressive way to collect costs from society. They hit lower income and middle income families the hardest. They hit families in the hot areas of the state even harder than families who live in the cooler coastal areas.

"So it's really not a great strategy for collecting billions and billions of dollars of subsidy payments. Instead, we'd like to look at opportunities to use tax revenues. The state's general fund, which, by the way, has a huge surplus this year to provide funding for rebates to customers, or a state tax credit. A tax credit is basically as good as cash because it tends to come off the top of a customer's initial investment. So these sources of funding should be used to provide upfront subsidies. And that actually was our proposal in the current Public Utilities Commission process. Was to, in a sense, replicate what the Million Solar Roofs initiative did. Which is providing upfront rebates to customers, while at the same time reducing the compensation that they would receive through rates over 10 or 20 years.

"By reducing the compensation through rates, we protect customers that don't have solar, including low income customers. And by providing subsidies from sources of money outside of rates, we're able to ensure that customers that do want solar are able to achieve whatever payback period is deemed appropriate, to ensure that they're motivated to make these investments."

On how to modernize utilities in California

Terry Tamminen: "In fairness to the utilities, again, I totally understand they don't want to build transmission lines and try to modernize the grid. They're under a lot of pressure for that. Put some of their grid assets underground to avoid these problems that happened with wildfires and hurricane force winds and so forth, and invest in more generation, or make commitments to those that do generate electricity and then find that people aren't using that. They totally understand that if they're also a regulated entity, they're actually required to do some of that, to make sure that the electricity can be provided since there is no competition. So I totally understand that.

"But it is something where smart people and economists who can predict the future need to be planning for this transition, because it is going to happen. And I will say that again, the utilities have had a bit of a break in that regard. Because as we mentioned earlier, in the beginning of the program, they fought to make sure that not more than 5% of the total electricity in their area would come from rooftop solar. Because they just didn't want to have too much complexity, or too much of their assets be stranded all at once. And then slowly, that has been increased over time.

"So they had their way. They've had a chance to go to the utilities commission and say, Wait a minute, slow down, slow down. We've got to at least be able to understand this transition as it's happening. So I do think that there are ways to prepare for that, but that's absolutely right. There's lots of money in this state. You know, look, taxes are redistribution of wealth. Let's face it, the government takes money from us from different forms, whether it's on our utility bills or in our annual tax return.

"And they use that for services that we all agree that we need. And this is another one of those examples, but it's one that has perhaps gotten out of hand and, as Matt says, definitely needs reform. So that it's fair, but so that it also accomplishes the goal. Let us not forget how urgent this matter is that we have got to get off fossil fuels. We have got to have more distributed energy, so that we are more resilient as a state to natural disasters."