Regulators in California Approve Reduced Solar Compensation for Homeowners
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Solar installations are expected to decline as reduced rates for new solar users would extend the time necessary to earn back the cost of rooftop panels.
December 15, 2022
California utility regulators on Thursday unanimously approved long-anticipated changes to how the state compensates homeowners with renewable energy installations, reducing financial incentives for the electricity generated from solar on customer’s rooftops.
The vote came after more than three hours of public comment in which many California residents expressed concern that the decision would imperil the state’s climate goals. When they go into effect, the new rules will cut credits for most new customers by about 75 percent and are expected to slow installations in California’s nation-leading home solar market. Existing customers would continue to receive current compensation rates.
“Will the industry adapt? Of course. Will they still be able to have a fairly big market size? Of course,” said Michelle Davis, a solar analyst at the energy research and consulting firm Wood Mackenzie. “But it’s not going to be as big as it was before.”
The state’s residential market is set to remain the largest in the U.S., but some worry the changes could hinder California’s efforts to reach entirely carbon-free electricity by 2045 by limiting solar growth. Last year, renewable energy, including rooftop solar systems, accounted for almost half of the state’s electricity generation. In a 2016 report, the National Renewable Energy Laboratory estimated that California could technically power more than 40 percent of its annual electricity sales with solar on small rooftops.
The California Solar and Storage Association called the new policy “a loser for California on many levels.”
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