California has long championed renewable energy, but a change in the state’s policies last year has led to a sharp decline in the installation of residential rooftop solar in the state.
Thousands of companies — including installers, manufacturers and distributors — are reeling from the new policy, which took effect in April and greatly reduced incentives that had encouraged homeowners to install solar panels. Since the change, sales of rooftop solar installations in California dropped as much as 85 percent in some months of 2023 from a year earlier, according to a report by Ohm Analytics, a research firm that tracks the solar marketplace. Industry groups project that installations in the state will drop more than 40 percent this year and continue to decline through 2028.
“The solar installations are off a ton,” said Michael Wara, a senior research scholar at Stanford Woods Institute for the Environment. “What’s happening right now is a painful adjustment process.”
Construct Sun, a solar installation company that is based in Reno, Nev., stopped doing business in California after its sales dried up four months after the policy began; executives said the company was now focusing its efforts on Florida, North Carolina and Ohio.
“I had a very dismal pipeline and had to make the decision to shut down in California,” Thomas Devine, executive vice president of operations for Construct Sun, said. He added that the state’s rooftop policies undercut its goal to effectively eliminate greenhouse gas emissions by 2045. “These competing policies are crazy,” he said.
State officials chafe at the idea that California is undercutting renewable energy and have defended the policy change, which lowered the value of the credits homeowners with new installations receive for the power they send to the grid by 75 percent. They have argued that the old rules, which still apply to systems installed before April, offered too generous a subsidy, helping mostly affluent homeowners. As a result, lower-income people who could not afford panels were effectively left bearing more of the cost of maintaining the state’s electricity system.
“California has done more for the solar industry than any other state in the nation by providing billions in rebates and incentives since 2006,” the state’s Public Utilities Commission, which oversees rooftop solar and investor-owned utilities, said in a statement.
States across the country have wrestled with how to compensate consumers for the electricity their rooftop solar systems send to the grid. And officials have often looked to California for guidance.
Many states, including California before it changed its policy, generally allow homeowners to receive credits that are roughly equivalent to the retail electricity rate for the energy their systems send to the grid. This has never sat well with most utility companies, who contend that offering homeowners a one-for-one credit for solar energy overstates the value of that electricity. Utilities say they could buy electricity for a lot less on the wholesale market or by producing it themselves.
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