California’s rooftop solar is a benefit, not a cost, to the state

In other words, PAO is ​“assuming the customer is obligated to pay the corporate utility the retail rate” for the power customers generate and use themselves — ​“and anything they do otherwise is stealing,” McCann said.

In terms of assessing who owes whom, that’s little different from saying that a customer who uses less electricity by insulating their home or switching to more efficient appliances owes the utility money for the electricity they’re no longer consuming, he said.

“If you’re growing vegetables in your garden, you don’t pay the grocery store the retail rate for those vegetables,” he said. ​“You own those vegetables — and you own the solar you generate.”

PAO’s calculations also ignore the reality that solar-equipped customers still pay utility bills, McCann said. His review of PAO’s work indicates that its cost-shift calculations fail to include the average of $80 to $160 per month that solar-equipped customers pay to the state’s three big utilities. Including that amount shaves another $1.4 billion off the PAO’s total.

Nor does PAO calculate the value of rooftop solar for low-income customers using special-assistance rates, he said. The lower rates for these California Alternate Rates for Energy (CARE) customers, whose annual earnings are at or below the federal poverty level, are subsidized by additional surcharges on all other utility customers’ bills. Not having to collect that money for the solar power those CARE customers generated themselves will save about $720 million in 2024, he said.

PAO’s analysis also contains some fundamental errors in calculating the true average costs of electricity paid by customers of the state’s three major utilities, McCann said.

For example, about $2.46 billion of the PAO’s $8.5 billion total is derived from assuming that solar-equipped customers are being charged significantly more than the true average rates they pay, and that their solar panels are generating more power on average than what official state-distributed generation data shows. That inflates PAO’s valuation of how much money those customers are saving from not using utility power.

How distributed solar can make the grid cheaper for everyone 

One of the most glaring errors in PAO’s analysis is that it fails to account for how the state’s enormous rooftop solar resource has reduced the amount that utilities would have needed to spend on purchasing energy and building out their grids, McCann said.

That’s an important point, because utility cost-shift arguments are inextricably tied to the idea that solar-equipped customers aren’t paying their fair share for the power grids, power plants, and purchased energy that are bundled into utility costs.

McCann’s analysis finds that since California launched its Million Solar Roofs initiative in 2006, distributed solar has displaced about 15,000 megawatts of peak load compared with state forecasts from that time. Peak load — the maximum amount of power needed to serve every customer on the grid — is a key determinant of how much utilities have to spend on their power grids and on purchasing expensive peak energy resources.

Utilities in California earn back the cost of the energy they purchase — and earn a guaranteed rate of profit on the capital investments they make — through the rates they charge their customers. Many of those costs are spread out for years or even decades after they’re incurred, which means that money saved in not buying energy or building grid infrastructure years ago translates into lower rates today.

McCann’s analysis found that this rooftop solar cost reduction adds up to $2.17 billion in 2024. That final benefit pushes the calculation for rooftop solar firmly out of the realm of extra costs for utility customers at large, and into the realm of net benefits for all customers.

To be clear, these benefits are backward-looking, he said. Since 2006, the peak loads on California’s grid, which are largely driven by air-conditioning use during heatwaves, have shifted from the midafternoon into later in the evening, which is when California has faced its most significant grid emergencies in the past few years.

In the years to come, California needs more batteries to soak up its ample solar resource to meet the state’s new evening peaks. That’s why the state’s new rooftop solar policy rewards customers who add batteries — although rooftop solar groups fear that those rewards aren’t rich enough to balance out the cuts made to the old net-metering rules.

But rooftop solar should still be credited for having helped reduce the grid costs from 2006 to today, McCann said. And state agencies shouldn’t use faulty estimates of past costs to undermine Californians’ ability to buy solar panels and batteries to save money and help combat climate change in future years.

A growing body of research indicates that distributed solar and batteries play a vital cost-cutting role in achieving a clean grid, compared with relying solely on large-scale solar and wind farms alone. Rooftop solar can also help people afford the electric vehicles and electric heating needed to cut carbon emissions from transportation and buildings — especially in California, where utility rates make electrification a tougher proposition.

Del Chiaro said M.Cubed’s new findings are yet more evidence that California policymakers and regulators need to push back harder against the utility-led cost-shift argument.

“They’ve gotten themselves into this weird mindset that all of the electrons” that solar-equipped customers are ​“generating and sharing with their neighbors are the property of the utility,” she said.

But the past two decades of rooftop solar growth show that ​“if we give customers a little bit of a boost, they’re going to meet us more than halfway with their investments,” she said.