If you flipped through the December 2023 issue of Time magazine, you might have seen an article focused on fraud in the solar industry and the bad actors perpetuating it.
In the 20 years since founding installer Independent Solar, I’ve seen these bad actors and their shady business practices firsthand. While I’m saddened to say that these companies have eroded some of the public’s trust in our industry, they aren’t the only ones to blame. Thanks to changing regulations, customers don’t always see their promised savings and if customers feel like solar power is just a bait-and-switch followed by an endless maze of shifting regulation, it’s no wonder fewer and fewer households are willing to sign solar contracts.
I’ve already seen that shift beginning. Regulatory winds are blowing and solar customers have been thrown into what can only be called a sea of confusion. This has been evident since it washed over California in April 2023 in the form of new net energy metering tariff NEM 3.0.
NEM 3.0
If you aren’t familiar with the situation, NEM 3.0 drastically reduced the amount of compensation solar homeowners receive for unused electricity which is sold back into the grid.
Before NEM 3.0, California did what most states do — it used one-to-one net metering, so customers were credited the same amount for exported solar power as they’d pay to use that amount of electricity from the grid. That meant that their electricity often paid for itself.
NEM 3.0 moved from net metering to net billing. It’s a small change in terminology but a big change in practice. With net billing, the reimbursement rate is calculated based on the day, time, and even month the customer uses the electricity. It’s a deliberately complicated system and the bottom line is that customers are being reimbursed about 75% less than they were before.
Industry suffering
As a result, some solar customers are, understandably, starting to panic. They aren’t alone. Research firm Wood Mackenzie has predicted that, in 2024, solar installation rates in California will decrease by 38%. Investment bank Roth Capital Partners expects something even more dire — a 50% contraction in the solar market in 2024.
Unfortunately, customers who purchased solar power systems for the savings are seeing those returns evaporate before their eyes. Under the new regulations, customers can still save almost as much as before by installing a battery but that is pretty costly so it’s not an option for everyone.
If you live in another US state, you might be relieved that you aren’t dealing with NEM 3.0 but the truth is that many other states are following suit. In fact, Arizona actually beat California to the punch when it came to lowering overall customer energy savings. It drastically reduced customer savings in 2016, far ahead of California.
Further hit
The Arizona legislature is now considering whether it should lower compensation rates even further. Sadly, I think it’s likely that Arizona will lower those compensation rates.
I believe this was always the legislative plan: incentivize homeowners to install solar panels with artificially low rates and then placate utility companies by reducing reimbursement levels. This is hardly a regional issue. Several other states – including Arkansas, Hawaii, Idaho, and North Carolina – have recently made similar changes to slash savings.
As a result, it’s an uncertain time for customers. Unless something changes, solar companies nationwide will see a continued reduction in solar power installations and this is especially true for states with turbulent legislation like Arizona, where panels are installed with the promise of significant savings, they are then reduced, and the legislature is already considering reducing them again.
I think the executive director of the Arizona Solar Energy Industries Association, Autumn T. Johnson, was spot-on when she said, “It’s hard to argue that you should invest $30,000 or $40,000 or $50,000 into a solar system on your home when you have absolutely no idea how the [public utilities] commission is going to treat that from a regulatory perspective tomorrow or next year because they cannot be counted on to maintain the decisions they’ve previously instituted.”
Incentive
Solar is a major upfront investment that is meant to reduce long-term costs but it only works in customers’ favor if they save enough on utility bills to make the solar panels pay for themselves. The less consumers save on energy, the longer that takes.
From a customer vantage point, if they’re still paying almost as much for utilities as they did before, why bother with the cost of solar power?
As an industry, we are responsible for showing our customers that solar is still good for their wallets. It’s still good for the environment, after all.
We also have a responsibility to advocate against billing adjustments that decimate consumer savings. NEM 3.0 might make solar power seem like a bait-and-switch, and without adjustment on our part, it will be. However, with trust, open communication, and intelligent advocacy, we can help customers move toward the new frontier of truly on-site solar power.
Randy French, owner and founder of Phoenix-based Independent Solar, began the company in 2003.
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There are a few things not mentioned in this opinion piece.
1) the large number of people who signed up, upset the financial viability and assumptions of the net metering plan
2) the duck curve is showing that investment in solar only won’t fix the power : cost problem. We need storage. Everyone is scrambling to create those products and mature them. Cost is also going down, 5KWh is dropping below 1000$ for the first time, and looks like $500 is possible in 2-3 years
3) Grid planners should have emphasized the value of adding or installing only batteries would help the grid balance out the loads, and save long distance wiring cost increases. Making balanced pockets of solar and storage in local zones will leave grid to handle offsets only, instead of the whole load.
4) the public needs utilities to be forthcoming on spot data for trends before they require policy changes. Ie, current grid is 1GW short of batteries, you can sign up for 5 year contract to provide storage at xx$/kWh. Same with production cost per hour. Make new trends in this data accessible every month or live.
The California Public Utilities Commission’s decision to drop NEM 2.0 in favor of net billing was awful, but I have a hard time calling it a bait-and-switch. Why? Because the CPUC grandfathered in anyone who got solar panels prior to the change *for twenty years* post-install. It’s still a horrible policy choice, but getting switched well after my system is paid off isn’t a grand injustice. The article’s failure to mention the long grandfathering period seems like a big omission.