California’s New Solar Subsidy Plan Is Really About Batteries

A plan unveiled Thursday would give homeowners bigger incentives to install batteries along with solar systems instead of just panels alone. The plan threatens to slow the pace of rooftop installations, but would strengthen a state grid that’s buckled during repeated summertime stretches of extreme heat.

California’s proposal signals a new direction for state-level solar policies across the US. While subsidies were once designed to move rooftop systems from the niche to the mainstream, panels are now ubiquitous in many communities. Today, state policymakers are focused on the reliability of a grid that’s become dependent on renewable power that fluctuates with the whims of the sky and air.

“All the additional rooftop-solar-and-storage systems will provide more grid stability,” Pol Lezcano, an analyst at BloombergNEF, said in an email. “The new rates will speed up the transition to solar-plus-storage.”

The solar industry recoiled at an original proposal issued nearly a year ago that would have required new solar customers to pay monthly grid connection fees, prompting Governor Gavin Newsom and Hollywood celebrities to urge regulators to go back to the drawing board.

The new plan ditches those grid connection charges. It still reduces how much credit solar customers would get for exporting their excess power. It would also change electric rates to encourage people to store their solar energy during the day and either export it or use it later in the evening when power is more expensive.

Solar investors cheered the proposal.  Sunnova Energy International Inc.’s shares surged nearly 20% on Thursday. The shares of Sunrun Inc., the biggest US residential installer, were up more than 27%.

The plan calls for a 75% reduction in the credit that new customers would get for exporting excess power to the grid, according to the California Solar & Storage Association, which criticized the plan.

If that’s adopted, “I wouldn’t be surprised to see fewer installations in the market next year than this year,” Meghan Nutting, executive vice president of government and regulatory affairs at Sunnova, said in an interview. “That’s a big change for the market.”

Today, the subsidy program — known as net metering — offers rooftop customers full retail credit for green power they supply to the grid. The incentive, adopted more than 20 years ago, has spurred the installation of 1.5 million home solar systems, or about 45% of the nationwide total.