California is about to side with PG&E–again–this time to kill community solar projects

The state Public Utilities Commission plans to vote on a proposal that could effectively doom solar projects to help renters and low-income residents

You would think, given California’s ambitious clean-energy goals, that the state would be eager to incentivize solar projects of all shapes and sizes.

Think again.

In 2022, the California Public Utilities Commission drastically slashed the rate that utilities pay homeowners with new solar panels for excess energy sold to the grid — cratering demand for residential solar and sparking thousands of layoffs of solar workers. In 2023, the commission significantly reduced incentives for schools, businesses and apartment buildings to install solar panels.

On Thursday, the commission is scheduled to vote on a proposed decision that could effectively doom community solar projects, smaller-scale facilities often paired with battery storage intended to be located relatively close to the communities they serve. Renters, low-income residents and others who can’t afford or access home rooftop solar panels can “subscribe” to the clean energy produced by these facilities and receive bill credits for the environmental value and energy provided to the grid.

Community solar is a win-win: more clean energy available to a wider range of people. These projects can reduce the need for larger facilities and expensive long-distance transmission infrastructure, limiting some of the uglier adverse impacts of the transition to green energy. And they represent a cost-effective way for builders to comply with state regulations requiring most new construction to be connected to solar power.

But community solar has been slow to get off the ground in California, largely due to complex and stringent regulations, low to nonexistent returns on investment for developers and volatility for customers.

Assembly Member Chris Ward, D-San Diego, wanted to change that with AB2316. The 2022 law directed the Public Utilities Commission to establish a community renewable energy program that would ensure at least 51% of its electricity went to low-income customers, prohibit costs from being covered by people who aren’t subscribed to the program and pay prevailing wages — which are essentially union wages — to facility construction workers.

These provisions help explain why a highly unusual coalition of interest groups that often fight each other tooth and nail — including solar developers, ratepayer advocates, climate activists and labor unions — joined forces and urged the Public Utilities Commission to support the same community solar plan. Central to that plan is a new compensation structure they say will make it easier for community solar projects to pencil out and stabilize customer credits — incentivizing both developers and ratepayers to participate.

But California’s private utilities, including Pacific Gas & Electric and Southern California Edison, don’t like the idea. They argue this payment structure is illegal under federal law. The utilities put forth alternative proposals to tweak, rather than overhaul, current programs — which they admit have resulted in few projects.

Nevertheless, the Public Utilities Commission sided with the utilities and issued a proposed decision that closely resembled Southern California Edison’s ineffective blueprint.

This horrified pretty much everyone — other than the private utilities.

Neil Chatterjee, who led the Federal Energy Regulatory Commission under former President Donald Trump, warned California Public Utilities Commission President Alice Reynolds in an April letter that the proposed decision would “unsettle markets across the country” and undermine other states’ community solar programs by questioning their legality. John Podesta, President Joe Biden’s clean energy adviser, and New York Gov. Kathy Hochul reportedly raised similar concerns. A bipartisan group of California lawmakers also urged the commission to reject the proposed decision.

Experts aren’t persuaded by the commission’s argument that the coalition proposal violates federal law. In his letter, Chatterjee noted that the federal government has historically declined to intervene in state regulations for community and home solar programs.

The proposed decision “would absolutely eviscerate the incentives and the opportunities for community solar,” Ward told the editorial board. “We need to make a program viable rather than tweaking an unworkable program.”

We agree. 

The commission should get behind a more reasonable plan. The coalition framework is a good place to start. Some details merit further discussion — such as facility size and distance from customers — but the commission needs to move quickly.

Given the uncertain outcome of the November presidential election, a delayed decision could hamper California’s ability to use or maximize federal funding, such as the $250 million it was recently awarded to develop community solar programs “that enable low-income and disadvantaged communities to deploy and benefit from residential solar.”

“The Biden administration has made community solar a priority. They want to get to 20 gigawatts of community solar by 2025,” enough to power 5 million homes, Derek Chernow, Western regional director at the Coalition for Community Solar Access, which developed the coalition framework, told the editorial board.

“We can’t get to our national numbers without California. It’s that simple.”

Nor will California be able to reach its own climate goals without an aggressive, all-of-the-above approach that encourages solar projects of all sizes — from rooftop panels to community facilities to utility-scale developments.

Instead, the state is going out of its way to ensure that the green energy transition remains the exclusive domain of private utilities and their chosen partners.

In a world increasingly ravaged by climate change, utility-scale developments shouldn’t be the default. Just as we need more infill housing, we need more infill power.

California residents are grappling with the nation’s second-highest energy bills. The Public Utilities Commission says it wants to lower these costs, but its recent approval of a flawed plan to allow private utilities to charge customers a monthly fixed fee in exchange for a slight reduction in electricity rates leaves many ratepayers in the dust.

The commission should be empowering communities to produce more of their clean electricity locally, sustainably and cheaply.

Opinion Piece