Hello there, solar enthusiasts! Today I want to delve into the state of the solar industry, particularly in California, and how policies have adversely affected the growth and job market of the sector. As you may already know, California was once hailed as the trailblazer for clean energy. However, it appears the golden state has veered off its path to its clean energy objectives.
In 2018, California boldly passed a bill targetting 100% carbon-free electricity by 2045. Moreover, Governor Gavin Newsom has recently set an intermediate target of 90% carbon-free electricity by 2035. However, these targets may sound more challenging when you consider that electricity demand is projected to increase sharply in line with plans for whole home electrification and the cessation of new gas-powered car sales by the same year.
While pacing steadily towards its ambitious goals, it seems California has inadvertently hindered the solar industry by passing the Net Energy Metering (NEM) 3.0 policy. This policy reduces the compensation for customers who export power back to the grid, causing the economics surrounding rooftop solar to deteriorate. Subsequently, we see a dramatic fall in demand for rooftop solar panels for your homes, causing solar companies to lose revenue and shed thousands of jobs.
The collective effects of these policy changes have led some major global equipment providers to cut their workforce significantly. The situation has also increased the number of solar companies considered “high risk” for bankruptcy.
The introduction of NEM 3.0 was intended to transition the state from a standalone solar-only market to a combined solar and energy storage model. Though this new structure does support solar-plus-storage projects over standalone ones, it doesn’t provide a cash flow-positive benefit for homeowners. This ultimately makes it a tough sale, as the costs of adding battery storage almost doubles the original system price.
In addition to these issues, higher interest rates have put more pressure on the industry, making systems more expensive as it costs more to borrow money for installations. As a result, a solar array for homes, coupled with the higher financing costs, could increase the cost of power for consumers.
These adversarial changes have caused sporadic business disturbances. To illustrate, HES Solar, a regional installer in California, witnessed a massive rush of consumers looking to secure NEM 2.0 rates leading to a 20% increase in sales in Q1 compared to the entirety of 2022. However, once NEM 3.0 kicked in April 2023, their sales declined dramatically.
In light of these crises, the California Solar and Storage Association (CALSSA) has proposed some potential solutions, from simplifying legislation protecting small businesses installing solar and storage, to launching a Million Solar Batteries Initiative to make investments in energy storage. They also recommend preventing more damage by rejecting a proposed $30 income-graduated fixed charge and significantly expanding virtual power plant programs to sever the red tape slowing the industry down.
While these solutions may address some issues related to job loss and inefficiency within the sector, many might agree that the core issue lies within the utility profit model. The existing structure incentivizes utilities to spend heavily on transmission projects, and the customer-sited solar model counteracts this inefficiency by reducing transmission needs, systemwide costs, and transmission line losses.
In conclusion, to continue promoting the installation of solar panels for your home or creating a solar array for home use, a shift in the utility profit model should be considered. Changing this would ultimately promote a system that prizes efficiency and cost-effectivity, bringing power back into the hands of the customer. As always, stay sunny!
Original Article: https://pv-magazine-usa.com/2024/01/23/california-unlikely-to-reach-clean-energy-targets-without-rooftop-solar/
