California taxpayers will foot an $8.5 billion bill for rooftop solar subsidies

Californians are facing an $8.5 billion bill in rooftop solar subsidies following an overhaul of the state’s alternative energy subsidy scheme.

According to a Reuters reportThe California Public Utilities Commission two years ago overhauled its subsidy regime for rooftop solar, making the installations less attractive by offering lower rates for the electricity their owners sell into the grid.

However, those who signed up for subsidies before that year will continue to receive higher rates, while Californians without rooftop solar will have to pay higher electricity rates, effectively bearing the burden of the subsidies.

The cost calculation comes from a report by the Public Advocates Office, which is a unit of the California Public Utilities Commission, which offered some solutions to the problem. These include switching rooftop solar owners before 2022 to the new lower rates for feeding solar into the grid after 10 years or after they sell their home.

Another solution is to set the rates paid to solar owners at the electricity rates at the time they joined the state’s solar scheme, rather than the current, higher rates, Reuters also reported.

California consumers have seen their electric bills rise in recent years and double in the past decade as utilities invest more in wildfire prevention and transmission lines to cope with growing renewable energy production.

California is looking to quickly move away from fossil fuels and make its grid more resilient, but while power generation costs may be falling, transmission and distribution costs are rising, leading to higher spending by utilities .

Another problem is the so-called reductionwhich boils down to removing excess electricity from solar panels during periods of low demand. Because solar generates at its peak during periods of minimum demand, and given California’s substantial solar capacity, the amount that is reduced is quite substantial. It was part of the reason regulators overhauled the subsidy regime for solar generators.

By Irina Slav for Oilprice.com

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