A battle over where California will get its renewable power is poised to heat up in coming months — as the thriving rooftop solar industry faces off with the state’s most powerful electric utilities.

At stake is the extent to which solar power will be generated atop homes and businesses, as opposed to using massive solar arrays in the desert and other remote locations.

Experts say the outcome could dramatically influence the cost of power in the state — and, by extension, the speed at which residents adopt electric appliances and cars.

Ratcheting up the tension, private purchases of solar panels have outpaced expectations over the last decade. Former governors Jerry Brown and Arnold Schwarzenegger celebrated this week the installation of a million solar roofs across the state.


“We always have big goals here in California, and we go after it and build it,” Schwarzenegger said Thursday at a press event in the Central Valley.

Advocates said the milestone has come despite escalating efforts by utilities to undermine rooftop solar installations. They said those attacks include everything from hefty fees on ratepayers to calling for dramatic cuts to the credits residents receive for generating energy from the sun.

Former Governors Arnold Schwarzenegger and Jerry Brown, and other elected officials, joined local high school students, solar business leaders and workers, renewable energy advocates, and community leaders to celebrate achieving one million solar roofs across California at Buchanan High School on Thursday. (Tomas Ovalle)

Electricity providers across the state, from San Diego Gas & Electric to Redding Electric Utility, have said that they are not against rooftop solar in principle.


However, power companies have acknowledged their efforts to claw back money from residents with solar panels — arguing that the state’s program to compensate owners of rooftop solar, known as net metering, has resulted in higher rates for everyone else.

“The long-term implications for our non-solar customers are serious, because they will continue to see annual bill increases due to the solar subsidy,” said SDG&E spokesman Wes Jones.

“We will seek sensible solutions that continue to encourage solar power but don’t adversely affect working families who can’t afford solar systems,” he added.


Advocates have said that utilities are exaggerating the challenges that rooftop solar creates and downplaying the value it adds to the overall system.

“They trot out this cost-shifting argument that looks on the face of it like they care about equity, but really the opposite is true,” said Dave Rosenfeld, executive director of the Solar Rights Alliance, a new consumer rights group funded by ratepayers and rooftop solar companies. “If you do the numbers right, solar is contributing to a reduction in the cost of operating the electricity grid now and in the future.”

Rooftop solar under fire

Many electric service providers in California have, in recent years, adopted or recommended policies that’ve increasingly drawn the ire of the rooftop solar industry.


For example, SDG&E recently proposed raising its minimum bill from $10 a month to $38 a month. Officials were frank about their intentions to target solar customers. State regulators will consider the proposal in coming months.

The Sacramento Municipal Utility District floated a similar fee earlier this year but walked it back after a public outcry. The utility also caught flak from advocates after it proposed a workaround to the state’s mandate that most new home construction include solar panels starting in 2020. Regulators have so far declined to approve the utility’s idea, asking for more information on the proposal.

“With SMUD in Sacramento, they are extremely hostile to rooftop solar,” said Benjamin Davis, a policy associate with the California Solar & Storage Assn. “Back in March, they tried to put a $40 to $50 per month fee on rooftop solar, which would have killed the cost effectiveness.”


The Imperial Irrigation District went so far as to stop offering net metering compensation in 2016 to all new solar customers. The move was to “ensure that everyone pays their fair share for their use of the energy grid,” according to the utility’s website.

The Merced Irrigation District approved this year a $65-a-month fee on electricity customers who install solar panels starting in January.

At the same time, a bipartisan Solar Bill of Rights that would have, to a certain extent, prohibited such fees died earlier this year in the state Legislature after being heavily criticized by utilities.

“Clearly there’s been a concerted effort to fear monger on this idea of cost shifting,” said Adam Browning, executive director of the national advocacy group Vote Solar.


In the shadow of solar

California’s net metering program — which determines how homeowners and businesses with solar panels are compensated — is more than two decades old. Under the rules, customers essentially run their meters backwards based on the solar power they put on the grid.

The program was attractive to Cindy Lingard, who recently installed about $29,000 of solar panels and battery storage on her home in El Cajon. She said she was inspired by her mother, who installed solar several years ago.

“I saw how well it worked out for her,” said the 25-year-old Lingard, “so I knew I wanted solar and I knew I wanted the battery, so at night we don’t have to worry about running the AC or the heater.”


Sullivan Solar Power, that did the installation, estimated that its average customer can pay off such an investment in about seven years, given federal and state tax credits. Customers typically install just enough capacity to cover their usage because utilities offer very limited cash rebates for any excess power generated.

In some cases, homeowners can take out a loan with monthly payments roughly equal to what they pay for electricity without solar, said Tara Hammond, a spokeswoman with Sullivan Solar Power.

“People saving money is the number one reason why people are going solar today,” she said. “SDG&E regularly has one of the highest electricity rates in the continental U.S., and SDG&E regularly has rate increases. Those reasons drive people to at least explore solar.”

When the program first started, state and utility officials weren’t too concerned about the financial implications of the program. Solar panels were prohibitively expensive, and the share of energy generated was negligible.


However, the cost of residential solar is now roughly a third of its cost two decades ago, according to the Lawrence Berkeley National Laboratory. And rebate programs from the state and federal government have continued to offer robust savings.

Since Schwarzenegger signed the Million Solar Roofs Initiative in 2006, the state has gone from having about 130 megawatts of rooftop solar capacity to nearly 8,000 megawatts — now accounting for about 14 percent of the state’s total renewable power generation.

Mark Hughes stands in between his Tesla Model 3 electric car and his LG Chem residential energy storage unit, background, while in the garage of his condominium on Tuesday. (Hayne Palmour IV / The San Diego Union-Tribune)

One of those customers was Mark Hughes, 63, who first installed panels in 2015 and then added a battery in March.


“I want to help accelerate the transition to a renewable energy economy,” said the retired mechanical engineer. “This is a key piece of doing that.”

The California Public Utilities Commission made modest changes to the net metering program in 2016, largely at the behest of utility companies, such as Pacific Gas & Electric and Southern California Edison, who had by that time been raising concerns about cost shifting.

Power providers specifically argued that homeowners with solar panels weren’t paying their fair share of the costs associated with building, maintaining and operating the state’s extensive energy grid as well as fees associated with state-mandated energy efficiency and other programs.

Over the last century, the price tag of expanding the state’s electrical infrastructure to service remote communities and hook up to new power plants has largely been socialized, spread evenly over the customer base through rate increases approved by the utilities commission.


All of those costs get baked into electric bills, but because the net metering program credits rooftop solar at the retail rate, rather than the wholesale rate, utilities say folks with solar panels have been getting something of a free ride.

Utility officials have said that as a result they have had to shift those costs onto customers without solar.

“Through the existing net energy metering policy, rooftop solar customers are subsidized by customers without solar rooftops,” said Ari Vanrenen, spokesman for PG&E.

Officials said that the added costs for a typical residential customer without solar panels are rising fast — about $130 a year for PG&E customers, $36 a year for SCE and $200 a year for SDG&E.


Advocates of rooftop solar strongly disagreed with this assessment. They said the technology, especially when paired with batteries, will eventually bring down the cost of electricity for everyone — specifically by reducing the need for costly upgrades to the power grid.

They argued that investor-owned utilities oppose rooftop solar because it will eventually curb the growth model that companies have long used to reward shareholders and pay out large salaries.

SDG&E and others have an incentive to build solar out in the desert because it requires building long power lines, which are then used to justify rate hikes, said Bill Powers, a prominent electrical engineering consultant and consumer advocate.

“The motivation is transmission,” he said. “Transmission lines have historically received higher rates of return (for utilities) than any other steel-in-the-ground project.


“As we add more and more rooftop solar it is driving down the cost of power,” he added.

Brad Heavner, policy director with California Solar & Storage Assn., echoed that position.

“They have an incentive to build as much stuff as possible, and that’s just what they do,” he said. “Their profit motive is entirely on capital expenditure.”

Still, many experts agreed with the utility companies that ratepayers are currently seeing higher bills as a result of the state’s rules for compensating people with solar panels.


They said the situation should be addressed when the Public Utilities Commission considers overhauling the rules for net metering next year, a proceeding that was initially slated to start this year.

“There’s a lot of cost shifting going on under the existing solar tariffs for net metered customers,” said Matthew Freedman, staff attorney with The Utility Reform Network.

“We’ve now seen widespread adoption of solar at the rooftop level, and the cost of solar has plummeted to the point where net metering is now over-subsidizing customers,” he added.

The utilities commission is required by state law to design a program that balances customer equity with ensuring that rooftop solar “continues to grow sustainably.”


The cheapest solar

Most industry insiders as well as researchers agree that the future of solar power in California will involve a mix of rooftop and utility-scale installations.

However, there’s been vehement disagreement over how much of each the state should pursue.

Severin Borenstein, faculty director at UC Berkeley’s Energy Institute at Hass, has long maintained that rooftop solar is significantly more expensive than utility-scale installations, even when factoring in the cost of transmission.


He said the state does not need another million solar roofs.

“I’ve done all those calculations,” he said. “It’s absolutely cheaper to do it at grid scale.

“We should continue to ramp up wind and solar,” he added, “but if we do it on rooftops, rather than grid scale, we’re going to end up with massively higher rates.”


California has some of the highest electricity rates in the country, but many resident don’t feel it because the state’s relatively mild climate keeps energy use low.

That could change as the state, in its fight against climate change, encourages the electrification of everything from vehicles to water heaters to heavy-duty shipping and construction equipment.

“These are potentially big parts of reducing greenhouse gases, and you’re not going to do that when you’re charging people 30 cents a kilowatt hour,” Borenstein said. “It just doesn’t pencil out.”

Others disagree. They say academics like Borenstein aren’t seeing the long-term picture.


Beyond avoiding costly upgrades to the electrical grid over the next few decades, the value of land must also be taken into account, said Tom Beach, solar power engineer and principal consultant at Crossborder Energy, which provides regulatory and market expertise on energy issues.

“If we put all of our eggs in the big solar farms basket at some point there may be issues with land,” he said. “Already people object to putting solar farms all over the Mojave Desert.

“If you’re having to use land near an urban area that could have another profitable use, housing or whatever, then it starts to become a significant factor as well,” he added. “Whereas with rooftop solar, you’re already using the built environment. We have a lot of buildings and a lot of parking lots where you can put solar.”

Advocates of rooftop solar have also pointed to the advantages of having backup battery generation in a time when utility companies have said blackouts will likely become a routine part of wildfire season.


Experts, including Borenstein, said the cost of rooftop solar could eventually come down even further, especially if it’s integrated into the construction of new homes and other buildings.

Mark Jacobson, environmental electrical engineer at Stanford University, said that reality may not be far off.

“It’s definitely a good idea to put solar anywhere on the building where you don’t have shading,” he said. “Even in the walls, it’s definitely worthwhile. Why put other material, when you can put solar material. Every finish you put on a building costs money.”

Despite all the acrimony, one thing nearly every expert and industry watcher has agreed on: If you’ve got the sunshine, now is a lucrative time for Californians to throw up some panels on their roofs.


*Correction: An earlier version of this story stated that regulators ultimately rejected a proposal by the Sacramento Municipal Utility District concerning the state’s mandate that new home construction include solar panels. The California Energy Commission declined to approve the utility’s proposal in November. However, the commission is seeking more information and could eventually allow some form of the proposal.