Features & Columns

Rooftop Solar Expected to Surge
with Passage of AB 327

Independent rooftop solar installers call new legislation
a victory against investor-owned utilities
rooftop solar HEATING UP: A new bill signed by Gov. Jerry Brown paves the way for a dramatic increase in solar rooftop installations in California.

With fall and winter energy bills costing George Disses and his wife thousands every year, the couple took the leap this summer and installed rooftop solar panels on their 40-year-old Morgan Hill home.

Instead of buying 20 panels at the typical cost of roughly $14,000, they entered into a Power Purchase Agreement (PPA), where they put no money down and pay only a $100 monthly lease payment. Disses calls his switch to solar an offer he couldn't refuse, although the change didn't come under threat of having his legs broken.

An independent solar company maintains ownership over the panels, while the Disses family now pays a fraction of the cost it normally would to Northern California's investor-owned utility, PG&E. (The state's other IOUs are Southern California Edison and San Diego Gas & Electric.)

Disses' decision is part of a growing swarm of middle-class homeowners in California breaking free of the stranglehold PG&E and its profit-obsessed, energy-peddling siblings hold over the state's power grid.

Since having the panels installed, Disses says his monthly bill has fallen from the typical $180 for this time of year to $30 a month. And considering his energy costs during the winter months typically range between $300 and $500, Disses says the deal made sense in more ways than one. "The winter months' costs were outrageous," he says. "Every place we can save is a good idea. This was the better way for us, and it keeps the environment clean."

Earlier this week, Gov. Jerry Brown signed into law AB 327, a bill out of the State Assembly that provides much-needed stability for California's solar energy market. The bill provides several key protections for the future of solar, including the safeguard of the state's regulation of net-metering rates, which allow solar consumers to sell their surplus energy back to the grid for credit. Had the bill not passed, an expiration date set by the California Public Utilities Commission (CPUC) would have forced an end to the entire net-metering program next year.

The bill's passage was not only a victory for solar ratepayers, but particularly for third-party solar companies, which can now better compete with utilities, such as PG&E. A key aspect of the bill lifted a cap on how much energy these third-party companies could sell back to the grid.

Rooftop solar among middle-income households has increased dramatically in just the last few years. According to the Solar Energy Industries Association, California has the largest installed solar capacity of any state in the nation—actually three times more than any other state. The vast majority of residential homes that have rooftop solar work under the PPA system, similar to the Disses household.

But with the passage of AB 327, industry experts say, the David and Goliath gap between independent solar installers and IOUs has diminished, if only slightly.

"Utility companies have to re-examine their decades old model of doing business," says Ted Ko, an executive director with Clean Coalition, a Palo Alto nonprofit that works with utility and solar companies on policy advocacy. "The bigger utilities have not been supportive of net-metering in its current form. At the same time, they have to be knowledgeable of what's coming down the pike. They've fought distributed generation energy, because it doesn't work with their model."

Will Craven, a spokesman for San Mateo-based Solar City, which installed panels on Disses' home, says utility companies—not the public—benefited most from prior rules, such as the arbitrary cap on net metering and exhaustive paperwork that PG&E and others have been accused of using as a roadblock to innovation.

"We always thought it was a way to suppress the market as much as possible," Craven says. "Now that solar has become widely used, the utilities have become threatened by the competition in their territories. We can only guess at the reasons. Certainly, we think it should be easy. A lot of the delays are not necessary."

Delays have included not only stalled legislation, but also a backlog of unnecessary paperwork for solar panel installations, according to Barry Cinnamon, owner of Cinnamon Solar in Campbell. Cinnamon says he employs fewer people to install panels than he does to handle paperwork for PG&E, which controls nearly all of Northern California's power grid and is required to buy back surplus energy from customers. The cost of paperwork for each installation is typically $6,000, Cinnamon says.

"The utilities make solar so expensive by making the paperwork more burdensome," he says. "I go through dozens and dozens of pages. If you put a small 20-panel system on your roof, you gotta jump through a lot of hoops. It takes building permits and permission from the utility."

In addition, Cinnamon, who began his career in solar energy in the late 1970s as a researcher, says PG&E often drags its feet for a couple months to approve installations—even after the building department has signed off. "But if you say, 'I want to put in a big air conditioner and use up a lot of electricity,' they'll say, 'go ahead.'

"It's because solar is gradually adding electricity to the grid and they are losing money."

But with an average of 1,800 customers signing up for solar per month, according to PG&E spokesperson Denny Boyles, the demand exceeds the company's ability to process orders quickly.

"We're trying to get it down to about a month," Boyles says. "It's a complicated process. There's a state rebate, federal tax credits, a lot programs to incentivize."

PG&E opposed removing the cap on net metering, but later changed its tune in support of AB 327 because of a late amendment, Boyles says. That amendment flattened the current four-tier rate system down to two tiers, thereby distributing some of the costs from high watt energy users across all customers.

"You have to understand that our profit as a company doesn't depend on the amount of energy used," Boyles says. "We operate under a strict set of guidelines and we wanted to make sure all along that the law was followed and customers were protected."

How this will actually affect consumers is still uncertain, as the CPUC will have to set rates.

While rolling blackouts and brownouts haunted California in the early aughts, the solar industry appears to be the reverse of that Enron-induced fiasco: supply greatly exceeds demand at the current moment. Material costs have dropped sharply in recent years, and in turn there is a worldwide capacity to produce solar cells that "just happened really fast," Ko says.

"The solar industry (a few years ago) started crashing and, yes, some companies went under," he adds. "But for the installers, that was good for them and their business model."