Florida and California consider changes that could 'decimate the rooftop solar market,' experts say

California and Florida are considering revoking a policy that has encouraged homeowners to install rooftop solar panels — causing fear among solar panel owners and installers, and creating divisions in the environmental community.

Utility companies in the two states, some sympathetic politicians and even some environmental advocacy groups are taking aim at subsidies to purchase and install solar panels because they say those costs are ultimately passed on to other ratepayers.

The crux of the issue is a practice called “net metering,” in which the electricity solar panel owners send back to the grid is removed from their monthly bill. The credits are applied at the same retail rate at which electricity is sold to consumers. That’s a higher rate than the wholesale price at which utilities buy electricity from large-scale producers. For example, if the retail rate is 30 cents per kilowatt hour, the amount a utility would pay a bulk producer — like a commercial wind farm — might be 15 cents per kilowatt hour. The difference covers the costs of building and maintaining the electric grid and the utility’s other overhead costs. (Utilities’ profit margins more typically come from their capital investments.)

Net metering encourages homeowners to plunk down the high upfront costs of solar panels, which often cost upwards of $15,000, because they enjoy bigger savings on their electricity bills than they would by selling energy at the lower wholesale price.

As more and more solar panels are installed, the burden of paying for the utility’s overhead and grid maintenance costs grows more concentrated on non-solar customers — or, at least, so the utility companies say.

In Florida, state Sen. Jennifer Bradley, a Republican, wrote a bill that would switch from utilities paying solar customers the retail price to the wholesale price, with current solar panel owners getting a reprieve for 10 years. The Miami Herald and the nonprofit newsroom Floodlight reported that a lobbyist for Florida Power & Light (FPL), the largest electric utility in the state, wrote the bill and sent the text to Bradley’s office. The measure passed the Senate Regulated Industries Committee in January by a vote of 6-2, but it has many more hurdles to clear before becoming law.

Workers installing solar panels
Workers installing solar panels on the roof of a home in Granada Hills, Calif. (Mel Melcon/Los Angeles Times via Getty Images)

Although the Republicans who have weighed in so far on the legislation have supported it, the bill is opposed by some conservatives who favor net metering. “If net metering is eliminated, it will shift rooftop solar into a luxury only affordable for the wealthy,” George Riley, the state director for Conservatives for Clean Energy and the former executive director of the Republican Party of Florida, wrote an op-ed for the website Florida Politics. “That would be a giant step backward, when we should be working to ensure that the free resource of Florida’s sunshine is available for all.”

FPL and its allies argue that net metering is unfair to customers who don’t have solar panels. “The annual subsidy paid for by all FPL customers to support rooftop solar is approximately $30 million today. By 2025, that subsidy is expected to nearly triple to more than $80 million,” FPL spokesperson Lisa Paul wrote in an email to Yahoo News. “We do not oppose net metering, we oppose the subsidy received by 0.5% of our customers and paid for by the other 99.5%. We support this legislation that aims to create an equitable playing field for everyone, because left unchecked, current rooftop solar rules in Florida will cost FPL customers even more in the coming years.” (Bradley’s office did not respond to a request for an interview.)

FPL also argues that it is making the transition to solar on its own. “Large-scale, universal solar is the fastest, most cost-effective way for us to bring more solar to Florida, while keeping bills low for customers over the long term,” Paul wrote.

Of course, it’s in FPL’s financial interest to pay less for rooftop solar, and to maintain a monopoly on power provided to its customers. One reason only 0.5 percent of FPL customers have solar is because Florida was one of just a few states that didn’t allow homeowners to lease solar panels, so that they could pay off the cost in more affordable increments. FPL and other local utilities opposed changing that law.

But changing the regulation in 2018 opened the door to a residential solar boom: There were over 35,000 residential solar installations in 2021 in Florida and it is the only state besides California that has had 100 megawatts installed in one quarter.

The solar industry predicts that ending net metering will make that progress stall, because it would double the average time it takes to pay back a rooftop solar purchase, which is currently seven to 10 years.

“We’ve seen in some states, notably Hawaii — which did this in 2015 — which essentially cratered the market,” Will Giese, the southeast regional director for the Solar Energy Industry Association (SEIA), told Yahoo News. On Oahu, the most populated island in Hawaii, new solar permits dropped by more than one-third from 2015 to 2018 and the number of active solar companies on the island decreased from 300 in 2015 to 98 last year, according to GreenTech Media.

In Nevada, the rate of new rooftop solar adoption went down 47 percent in 2017, the year after the state’s public utilities commission raised fixed costs on net-metering customers and reduced the price paid for the solar energy they create. In response to public complaints, the Nevada Legislature reversed the changes, and solar deployment picked up again.

Solar panels on rooftops of a housing development
Solar panels on rooftops of a housing development in Folsom, Calif. (Rich Pedroncelli/AP)

The SEIA also disputes the claim that net metering is leading to higher electricity rates for other consumers. “We’ve seen in states with much higher rooftop solar penetration levels, this cost shift is just not a thing,” said Giese. According to a 2016 study by the Brookings Institution, it is actually solar users who are subsidizing other customers because of those avoided costs and the other universal benefits of clean energy, like the health improvements associated with burning less fossil fuels and cleaning up the air.

According to a 2019 survey by the Pew Research Center, 52 percent of American homeowners either have installed solar panels or have “given serious thought” to installing them. The most commonly cited reason they gave, cited by 96 percent of those respondents, was “to save money on utility bills.”

California, which has 1.3 million home solar arrays, is also considering changes to net metering. The California Public Utility Commission (CPUC) — which is appointed by Gov. Gavin Newsom, a Democrat who called for spending over $1 billion on tax incentives for developing green energy technologies — has proposed to make the economics of home solar much less attractive. Instead of the retail rate, utilities would pay solar panel owners the “actual avoided cost,” which is a lower amount. Utilities would also collect a “grid participation charge” of $8 per kilowatt of solar-generating capacity that would pay for maintaining the grid. That would cost about $40 to $48 per month for the average residential solar panel owner.

“Net metering, as currently constructed in California, due to the extremely high retail rates that we have, is literally the most expensive strategy for promoting clean energy that we have on the table today,” Matthew Freedman, a staff attorney at the Utility Reform Network (TURN), a nonprofit that advocates for the interests of utility ratepayers in California, told Yahoo News. “Retail rates are substantially higher than the cost of new [electricity] generation.”

TURN argues that it is more efficient to invest in renewable energy at wholesale prices — for example, by building utility-scale solar farms. “We can get way better bang for the buck,” Freedman said.

The consumer advocacy group also believes that non-solar customers are getting taken advantage of, pointing to analyses that show the standard retail Californians pay for electricity is 10 percent higher because utilities are compensating for all the revenue lost from solar panel owners by charging more to everyone. Based on that, Freedman counterintuitively maintains that reducing the cost of solar subsidies is actually essential to combating climate change, because higher electricity costs make consumers less likely to switch from fossil fuels to electric cars, stoves and heating systems.

“We proposed significant reforms to the net metering program that are different from those that are contained in the proposed decision, but the general framework that is being proposed is something that we support,” Freedman said. One element of that framework, which Freedman argues will do more to help boost access to solar energy, is shifting some of the savings from ending net metering to upfront subsidies for buying solar panels to low-income households.

California’s proposal has drawn criticism from many politicians and activists who are concerned about climate change. Sen. Dianne Feinstein, D-Calif., sent the commission a letter warning that the proposal “may impact the state’s conservation goals as we address climate change.”

Former Gov. Arnold Schwarzenegger, a pro-environment Republican, wrote in a New York Times op-ed that the plan “should be stopped in its tracks” and that the “grid participation charge” is really “a solar tax.”

Opponents also say it’s unfair to solar consumers who expected to get the retail rate when they bought solar panels. “This is a bait and switch,” Jamie Court, a strategist for the nonprofit advocacy organization Consumer Watchdog, told the Los Angeles Times. (While the lower rates would apply to all new solar customers, existing solar customers would be allowed to keep the old rate for 15 years.)

Those who want to end net metering say that solar consumers shouldn't get away with paying less for grid maintenance because they tend to skew towards wealthier homeowners. “The current Net Energy Metering program disproportionately hurts lower-income Californians who don’t own homes and can’t afford rooftop solar,” Kathy Fairbanks, a spokesperson for Affordable Clean Energy for All, a coalition that includes Pacific Gas & Electric (PG&E), the largest utility company in California, wrote in an email to Yahoo News.

That position has some support in the environmental advocacy community. The Natural Resources Defense Council, for example, has praised the plan.

Solar panels on the roof of the Los Angeles Convention Center
Solar panels on the roof of the Los Angeles Convention Center. (Mario Tama/Getty Images)

But most environmental organizations are closer to the solar industry’s viewpoint, which emphasizes that solar panel owners do still pay for grid maintenance because they pay the retail rate for the electricity they use, and also that solar customers lower the costs of grid maintenance and expansion by reducing the amount of electricity needed.

“We support net metering; we support rooftop solar growing in as sustained a way as possible,” Laura Deehan, state director of Environment California, an advocacy group, told Yahoo News. “What was proposed here in California would be the most backward-looking policy imaginable from our perspective. Right now, we’re racing to get to a 100 percent clean-energy future in our state as fast as possible ... and rooftop solar, paired with storage, is one of the best solutions to the current crisis that we’re in.”

Deehan also notes that distributing electricity generation across millions of existing homes, rather than building new utility-scale solar in the desert, protects natural areas and makes the grid more resilient to natural disasters, which California is especially susceptible to now because of climate change. Environment California is one of 70 groups that signed a joint letter to Newsom opposing the CPUC’s proposal.

“The proposed decision, as it is, has the potential to really decimate the rooftop solar market in California,” Katherine Ramsey, a staff attorney for the Sierra Club's environmental law program, told Yahoo News. Ramsey describes the grid participation charge as “very steep” and the proposed reimbursement rate for the energy exported by solar panel owners as “way too low and [it] way too suddenly drops.”

“What we have proposed is a gradual transition: more like a ramp as opposed to a steep cliff,” Ramsey added. “Both consumers and the solar and storage industry need time to adjust.”

The reason Ramsey raises the issue of storage is that the current challenge to a more fully solar-fueled energy grid is that solar power isn’t generated during the early evening hours when demand peaks. Freedman contends that shifting subsidies towards storage will therefore be more beneficial, while SEIA counters that utilities could try to manage demand by charging more for power at peak times.

Demonstrators in Sacramento, Calif.
Demonstrators in Sacramento, Calif., urge Gov. Gavin Newsom to reject proposals penalizing rooftop solar consumers, Dec. 8, 2021. (­bal Martel/Anadolu Agency via Getty Images)

In response to an interview request, California Public Utility Commission spokesperson Terrie Prosper sent the following statement via email: “Comments from parties on the Proposed Decision have been received for this extremely important policy matter. We have two new Commissioners, one of whom has not started yet. We will provide more information once a schedule has been determined.” And, Prosper added, “The Proposed Decision is subject to revisions based on comments.”

Newsom has said that unspecified changes need to be made to the CPUC’s proposal. On Jan. 11, he said at a press conference, “That draft plan that was recently released, I just had a chance to review, and I’ll say this about the plan: We still have some work to do.”

In response to a query from Yahoo News, a Newsom spokesperson wrote in an email, “The Governor continues to closely monitor this issue and believes that more work needs to be done. Ultimately, the California Public Utilities Commission, which is an independent constitutional commission, will make a decision on this matter.”

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