Solar Panels (Photo – Allagash Brewing).
The action of the CPUC jeopardized California’s 2030 climate goal.
By Cheryl Auger
Recognizing that reducing our reliance on fossil fuels is an essential component of climate action, in 2019 California increased its renewable energy goal to 60% by 2030. Early last year, EIX, Southern California Edison (SCE)’s corporate parent, announced that California will not meet the 2030 climate goal.
Given that we are behind schedule, one would think the state would start subsidizing rooftop solar, structured solar over parking lots, batteries, and bidirectional cars to try and meet that goal. The CPUC has gone in the opposite direction.
During record breaking heat-waves during September 2022, batteries and solar systems helped California avert brown-outs and black-outs, conservation measures were re-introduced to reduce demand, and utilities asked people to unplug devices that weren’t in use. The wasted plug load power represents from 5 to 55% of residential and commercial officeIn 1998, the California Public Utilities Commission (CPUC) changed the incentives for Investor Owner Utilities (SCE, PG&E and SDG&E) by separating generation from transmission and distribution. Third parties were allowed to sell their energy, and the IOUs only were able to make money for transmission & distribution (T&D). The shareholders of the IOUs maintained a guaranteed 10% rate of return for expenditures to extend and maintain the grid. Since the IOUs are incentivized to build, maintain and charge for as much transmission as possible, it is no surprise that rooftop solar, parking lot solar, and battery storage are not on their list of recommendations.
The best type of solar is locally distributed solar. This is not what is being proposed, however, because of a misalignment of incentives for the IOUs and our climate goals.
In December 2022, the CPUC unanimously decided to reduce payments for energy created by local rooftop solar by 75%, as recommended by the IOUs Payment reductions initially were proposed as legislation in 2021 but failed in the Assembly because of strong opposition from climate activists, local rooftop solar companies and solar employees fearing job losses and business closures. The CPUC has the authority to act without the approval of the Legislature. This approach has killed new solar installation in other states because it increases the payback period from about six years to over nine years.
The CPUC approval incentivizes the IOUs to build out their transmission infrastructure to reach more large scale solar and wind farms, and to charge for that transmission to generate the 10% rate of return for investors. This will disincentivize local rooftop solar.
An important downside of large scale generation is that it typically takes about ten years for large scale generation projects and associated interconnects and grid upgrades to come on-line. Local rooftop solar can be on-line in about a month or two per installation. If we rely on large-scale solar, the build-time ensures that we won’t meet California’s 2030 climate goal.
Thank you for the clear explanation as to why the Investor Owned Utilities’ (IOU) incentives are NOT matched to our state’s climate incentives: (1) since 1998, the IOUs are only able to make money for transmission & distribution (T&D); (2) the IOU shareholders maintained a guaranteed 10% rate of return for expenditures to extend and maintain the grid. Not meeting our state’s goals due to this mismatch – and not due to a technological reason – would be so stupid. How can CA fix this mismatch? Thanks again for this concise and clear explanation.