New Report: Will Solar Power Have a Home in California?

Solar energy is almost freakishly popular. At a time when Americans are divided along all sorts of economic, political and cultural lines, 85 percent of Americans have a favorable opinion of solar energy.  Solar energy is available everywhere, uses no fossil fuels, produces no direct pollution, consumes barely any water, and can often be installed in places such as rooftops and parking lots where it requires no additional land. It creates jobs, too. It’s a win-win-win-win-win-win-win!

But solar energy has thus far been hamstrung by three fundamental challenges:

• Solar energy has long been stuck on the far side of the “valley of death” that separates innovative technologies popular among early adopters from mainstream commercialization. Virtually all of the technologies we rely on so much today – from cars to smartphones – were once on that same side of that valley until cost, technological or business model breakthroughs finally enabled them to catch hold in the broader market.
• People and companies who “go solar” produce benefits that the rest of us enjoy. Cleaner air. Less global warming pollution. Reduced need for costly centralized power plants and new transmission lines. The list goes on and on. However, those who install solar panels may not receive adequate compensation from the rest of us for the benefits we receive – a situation that’s not fair to solar homeowners and that causes there to be less solar energy than is societally optimal.
• Monopoly investor-owned utilities have the power to either make it easy for their customers to go solar – through favorable rate treatment for solar energy and good interconnection policies – or very, very difficult. Traditional utility incentive structures, which encourage utilities to add to the “rate base” of physical plant on which they profit, push utilities toward making solar adoption difficult.

Smart public policy can help overcome all three of these challenges. As our July report, Lighting the Way, demonstrated, states with strong pro-solar policies have seen dramatic growth in solar energy in recent years, helping them to reduce emissions and dependence on fossil fuels.

Our latest report, Will Solar Power Have a Home in California?, released today in conjunction with Environment California Research & Policy Center, takes a detailed look at one of the most important policies for the development of a strong residential solar market: net energy metering.

Net metering allows consumers with solar panels to sell any power that they are not currently using back into the grid at retail electricity rates. In essence, net metering allows consumers’ electricity meters to “spin backwards” – subtracting a kilowatt-hour of electricity from their bill for every extra kilowatt-hour they supply to the grid.

Successful net metering programs such as the one in California kill several birds with one stone. First, they help solar energy to cross the “valley of death” by making solar energy a practical, financially smart choice for homeowners. Our report estimates that, for a typical California customer, net metering is worth about $6,000 over the lifespan of a typical residential solar system (or $2,800 on a net present value basis). Net metering helps solar energy to make economic sense to a broader array of households, sparking demand that creates economies of scale, generates innovative new business models, and otherwise speeds the development of a mature solar industry.

Net metering policies also provide a measure of compensation to homeowners for the value their solar panels deliver to other ratepayers and the environment, while limiting utilities’ ability to impede or discourage their customers from going solar.

In California, net metering is one of several key policies that have catapulted the Golden State into a position of global leadership in solar energy. But that success is generating pushback from the state’s utilities, who are working to limit, or even eliminate, net metering. Our report shows that curtailing net metering could pull the rug out from underneath California’s burgeoning residential solar market – especially since other key incentives for solar energy, such as the federal residential renewable energy tax credit, are also scheduled to expire in the next several years.

California is a trend-setter in many ways, and the debate the state is now facing about the future of net metering is likely to begin soon in other states that have embraced solar energy. Let’s hope that California policy-makers resolve that debate in ways that maintain the state’s progress toward a clean energy future and ensure that ordinary homeowners have an opportunity to participate fully in making that future a reality.