ICYMI: Energy Expert Calls State’s Rooftop Solar Subsidy Program “Extremely Inequitable and Inefficient”

Posted on May 25, 2022

Sacramento – In a recent blog post in Nature Energy, California’s foremost energy policy expert reinforced the inefficient and regressive nature of the state’s current rooftop solar subsidy program, Net Energy Metering (NEM) and said “It’s time for California to abandon disproportionate subsidies for rooftop solar and place it on a level playing field with large-scale solar, wind, and other technology options.”

Severin Borenstein, E.T. Grether Professor of Business Administration and Public Policy at the Haas School of Business and Faculty Director of the Energy Institute at Haas, UC Berkeley, also recommends that if California leaders believe in keeping NEM’s excessive subsidies, then the subsidies should be paid out of the state general fund where our progressive tax structure means the wealthy will primarily be on the hook, not low-income Californians.

Here are some additional excerpts:

  • “Residential rooftop solar photovoltaics (PV) systems produce electricity at a cost of 15–22 cents per kWh, while large-scale solar farms do it for 3–4 cents and even mid-scale ‘community solar’ costs 6–9 cents. So why is about 40% of California’s solar capacity on rooftops? Because the state’s Net Energy Metering (NEM) policy creates massive subsidies for residential PV, which don’t exist for larger solar or wind power generation.”
  • “California residential customers pay among the highest retail electricity rates in the country, about twice the price in any other western state…so when one customer is compensated at the retail rate for their solar production — as prescribed under the NEM policy — more than half of their electricity bill savings is just shifted to other customers. The most recent data indicate that the average income of solar adopters is 58% higher than non-adopters in the same county, so it’s a cost shift onto poorer households. With growing costs of climate mitigation and adaptation expected to further increase retail rates, this cost shift is only going to worsen.”
  • “Zero-carbon technologies that are nascent and show real promise should receive extra support during their developing years, but that support cannot last indefinitely.”
  • “The fact that some people love this technology, or that some companies will lose profits, doesn’t mean we should be locked into rooftop solar any more than we should be locked into ethanol as a replacement for gasoline because many Iowa voters benefit from it.”
  • “Even if some politicians still think we should blanket rooftops with solar despite the cost, it’s time to recognize the extremely inequitable and inefficient way we are funding those subsidies through NEM. Not only is the money coming disproportionately from low-income customers, the cost shift is contributing to higher rates, which undermine customer incentives to reduce fossil fuel use by electrifying space heating, water heating, and personal transportation.”
  • ‘If California’s leaders believe that rooftop solar should continue to get special treatment, the extra funds should come from the state budget, financed primarily by progressive income taxes. It still would not be good climate policy but at least it would be paid for by the wealthy, who most benefit from it, and it would not undermine electrification by driving up power prices.’