Earlier this month, the California Public Utilities Commission made news by refusing to make headlines. Facing pushback from many environmental organizations, the commission decided to postpone a vote on a proposed decision that could have upended the state’s rooftop solar program—one of the most popular and successful climate policies in a state that has led the nation in the fight against climate change. The decision has been shelved—for now—but its potential ramifications are profound. At a minimum, the commission could take the momentum away from the state’s flourishing rooftop solar industry. California regulators might even go much further, making it harder for the state to meet its clean electricity goals, an outcome that solar advocates say would ripple across the country. 

“There has been a lot of pushback on this decision because it would be so disastrous for rooftop solar in California,” said Katie Ramsey, a senior attorney with the Sierra Club. “The governor has said there is more work to do. The commission is going to make revisions. The only question is, Are they going to be minor? Or are they going to be more substantive?”

The fact that the commission considered such changes in the first place is a telling example of how fraught energy politics in California can be. The state’s monopoly utilities, including Pacific Gas & Electric, have long viewed rooftop solar as a threat to their business model, and they’ve lobbied the California Public Utilities Commission to rein in the state’s solar program. But they were not alone. Several environmental organizations, including the Natural Resources Defense Council, joined with the utilities to support the proposed decision.  

In its current formulation, the proposal under consideration by California energy regulators would impose a “grid participation” charge of $8 for every kilowatt-hour of energy produced by a rooftop solar system. Solar advocates say that approach would be illegal because it discriminates against a specific type of energy in violation of federal law. The new charge would cost the typical household with a rooftop solar system more than $48 a month—one of the highest fees in the nation.

In addition to the new monthly charge, the proposal would slash the incentives rooftop solar owners receive for the excess electricity they sell back to the grid. The end result is that new rooftop solar systems would take longer to pay off through savings on electricity bills, which undermines the economic case for installing solar. 

Rooftop solar advocates, including the Sierra Club, say the proposal would eviscerate the industry in California. Something like that has already happened elsewhere. In Nevada, similar cuts to rooftop solar incentives in 2015 triggered a steep drop in installations and industry-wide layoffs. Analysts with the market research firm Wood Mackenzie warned that CPUC’s proposal would cut California’s rooftop solar market in half by 2024.

At the center of the debate is what opponents of the rooftop solar status quo call the “cost shift.” When someone installs solar panels on their home, the price they pay for electricity decreases, but the costs of operating the grid stay the same. Utilities offset the cost by increasing electricity rates for those who don’t have solar. A study commissioned by the California Public Utilities Commission last year found that the average rooftop solar customer pays 9 to 18 percent of their total annual cost of service, leaving the rest of the state’s ratepayers to cover the remaining balance. 

Opponents of the status quo argue that this cost shift falls particularly hard on low-income customers who cannot afford solar panels. The commission argues that forcing rooftop solar users to pay higher fees to support the electric grid would help reduce utility bills for low-income residents by between $5 and $10 a month. Data compiled by researchers at the Lawrence Berkeley National Laboratory shows that Californians earning less than $50,000 a year account for just 12 percent of rooftop solar adoption. The majority of the state’s solar customers—58 percent—make more than $100,000 a year. 

“This debate is more complicated than a bunch of utilities trying to strangle rooftop solar,” said Matthew Freedman, an attorney at the Utility Reform Network. “It is about how we fairly collect shared costs.”

But solar advocates say the cost shift argument is a fiction created by the utilities to pit Californians against one another—the solar “haves” against the solar “have-nots,” neighbor against neighbor—all in an attempt to make more money. If there is a shift, they argue, it is not being paid by low-income customers alone but also wealthy homeowners who have not installed solar panels. Meanwhile, the utilities are profiting by reselling electricity they do not generate. 

“This isn’t about how much people are paid for the solar they put back on the grid,” said Bernadette Del Chiaro, executive director of the California Solar and Storage Association. “This is about how PG&E and the other utilities need to make more and more money by building more and more grid.” 

A spokesman for PG&E, the state’s largest utility, did not respond to requests for comment.

Rooftop solar opponents parry by arguing that utilities aren’t trying to increase profits—just break even. In California, the amount of electricity the investor-owned utilities sell is “decoupled” from their bottom line. It’s a model originally championed by environmental organizations in the 1980s and '90s as a way to get utilities to invest in energy efficiency. Under decoupling, the utilities earn a set revenue (authorized by the CPUC) through rate adjustments, no matter how much electricity they sell. 

The utilities' own actions belie the assertion that they don’t stand to gain from the proposed decision. An investigation by Inside Climate News found that the utilities have donated more than $1.6 million to members of a fake grassroots organization that claims to represent low-income ratepayers. The group, Affordable Clean Energy for All, has funded television and radio advertisements attacking rooftop solar.

The current battle for rooftop solar in California has obscured the fact that, in many ways, it is just one minor skirmish in a larger war over electricity rates in the state.

California’s electricity prices are among the highest in the country. PG&E customers pay about 80 percent more per kilowatt-hour than the national average, according to a study by researchers at UC Berkeley’s Haas Business School and the nonprofit think tank Next 10. Utilities are happy to blame rooftop solar, but it makes up a small portion of customers’ bills. Around 11 percent of what PG&E customers pay goes toward offsetting the cost of rooftop solar. Meanwhile, between 66 and 77 percent of Californians’ electricity bills is used to offset the costs of grid maintenance and wildfire mitigation. 

And as wildfires linked to heat waves and a warming planet become more common, the cost of maintaining California’s electricity grid will only increase. PG&E’s equipment has been blamed for a series of deadly and destructive wildfires in recent years. In 2019, the utility pleaded guilty to 84 counts of involuntary manslaughter in connection with the 2018 Camp Fire, which destroyed the town of Paradise. Last month, state investigators said PG&E transmission lines sparked the 2021 Dixie Fire, which burned nearly 1 million acres and destroyed more than 1,300 homes.

All of this raises the question, Why would regulators want to put the future of California’s climate goals in the hands of utilities that have already proven to be inadequate caretakers of the state’s energy infrastructure? 

Maybe it would be better to take the utilities out of the equation altogether, Freedman argues. Maybe paying people for the electricity they produce isn’t the best way to incentivize solar adoption. “Electricity rates are economically regressive,” Freedman said. “They disproportionately harm low-income and working-class people. You couldn’t pick a worse way to collect costs from society.” 

One alternative way to subsidize rooftop solar, Freedman said, is through an income tax. An upfront rebate funded by tax revenues would help finance the initial investment in solar panels, which is often the biggest barrier for low-income customers—who don’t have disposable income and often have low credit scores. Renewable-energy tax credits, similar to those provided by the federal government, could help ensure a 10-year payback.

In a tax-friendly state like California, it just might work. But it would require the state lawmakers to pass legislation in parallel with whatever the utilities commission decides. And, above all, such a vision would require political support from all levels for a California renewable-energy future that includes rooftop solar.