California Could Cut Solar Incentives. What This Could Mean For Apartments and Schools

California has nearly two million homes with rooftop solar — a major success. But that scale-up has largely left out nearly half of Californians who rent.

In Los Angeles, that number is even higher: more than 60% of people rent, according to 2021 data from the Southern California Association of Governments.

Now the California Public Utilities Commission is set to vote on Thursday on a proposal that could significantly cut current incentives for apartments, businesses and schools to put solar on their rooftops.

What does the proposal say?

The proposal changes the rules around “Virtual Net Energy Metering,” or VNEM, and “Net Energy Metering Aggregation,” or NEMA. The programs as they currently stand allow properties with multiple electric meters — such as apartments, schools, strip malls, etc. — to get paid back for the amount of excess electricity they generate on their properties and sell back to the utility grid, thus making solar more affordable for a wider array of people and businesses.

While the newly revised proposal still allows this credit for apartment residents, though at a lower compensation rate, it excludes energy use in apartment common spaces, such as shared laundry, outdoor lighting, gyms, and electric vehicle charging stations. Solar advocates and rental industry associations argue that makes apartment owners even less likely to install solar because the savings don’t pencil out.

Putting more solar panels on rooftops can help offset the need for utility-scale solar fields, but experts say both are necessary to generate the amount of electricity needed for a cleaner energy future.

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Patrick T. Fallon

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For schools, the proposal not only reduces the compensation for the excess electricity they send back to the grid we all rely on, but also requires them to pay the full retail price for the electricity they consume, even during the day when using the power from their solar panels.

The proposed changes don't apply to qualifying low-income apartments.

“We need to sprint, and we're throwing up these barriers to actually building renewable energy, while at the same time patting ourselves on the back like we're climate change heroes,” said Bernadette del Chiaro, executive director of the solar trade organization the California Solar and Storage Association.

She said a similar cut to rooftop solar incentives for single-family homes last year has already led to a steep drop off in the solar market — 80% year over year by her organization’s calculations. The L.A. Times reported that the nation’s largest solar installer, Sunrun, laid off 1,000 people since the policy change.

Investor-owned utilities including Southern California Edison argue the change is needed to avoid what they call a “cost shift” — that apartment dwellers and businesses without solar are bearing the burden of higher electricity rates and fixed costs, while those with solar disproportionately save on those costs under the current rules. They also say the complexity of accurately crediting multifamily properties is another challenge and added cost because it’s difficult to understand who is using how much solar energy and when in a multi-family or multi-business building.

Last year, California cut incentives for installing solar on single-family homes. Now the state is proposing cutting incentives for buildings such as apartments and schools.

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“At SCE, we want to make sure that customers are paying a fair price for power,” said Jeff Monford, a spokesperson for the utility. “We believe that the incentives for producers of energy via solar are no longer needed to establish that industry like they were in the past. As we move forward into the clean energy future, we think it's time to reduce those subsidies and not introduce more of them, especially because the cost of power has such a disproportionate effect on customers who are not able to participate in solar generation.”

A renter’s perspective

Sean Draper rents an apartment in Simi Valley and has worked in the solar industry for the last seven years. He’s kept a close eye on solar decisions made by the state. He wants to talk to his landlord about installing solar, but worries the proposed changes to current policy make it unrealistic.

“I feel like it is going to be, as I try to engage in that conversation with ownership here, a bit of an uphill battle,” Draper said.

While he said leaving the credit for residents is a step in the right direction, the lack of inclusion for similar credits in shared spaces in apartments, such as EV chargers, doesn’t make it cost-effective for apartment owners.

“Gas where I am is up to $5, $6 dollars a gallon and we're all feeling the pinch,” he said. “I'm currently contemplating purchasing an electric vehicle and without that access to low cost energy, it’s just becoming rapidly less and less practical.”

He also has concerns for his friends with small businesses, because the credit would only apply to residential tenants in rental properties, not commercial tenants.

“I think that the only thing that makes sense is to continue to allow onsite netting of power for all tenants, commercial and residential,” Draper said. “I think the proposed rule for residential strikes a really good balance between providing benefits to residential tenants who are – many of us – living paycheck to paycheck, but also provides a small amount of relief to the utilities in terms of them being able to provide less compensation for the [power] generation.”

More than that, he said more solar is needed for a healthier planet. He worries this rule change will set California further back on its clean energy goals.

“I've got kids,” he said. “The world they live in hinges on us making the right decisions now.”

What schools say

With already extremely tight margins, school districts across the state have raised alarm bells about the effects of the proposed decision. They’re particularly concerned about the changes that would require them to pay the full retail price for electricity, even when using their own energy generated onsite.

Solar panels on the top of Playa Vista Elementary School.

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“These unfair practices help utility companies and hurt students,” L.A. Unified School District wrote in a statement posted to X, formerly known as Twitter. “Rising energy costs will make it harder for Los Angeles Unified [to] reach its climate goals, and these costs will come out of our classroom, hurting our ability to reduce emissions, electrify our schools, and invest [in] safe and healthy learning environments for our children.”

Schools are being mandated by state law to electrify school buses and add solar panels, among other things. Solar installation costs come out of their facilities budgets, but the state doesn’t have an ongoing funding source for school bonds that power those budgets — that’s why we see school bond measures on our ballots every few years.

Solar panels in a parking lot outside South East High School, an L.A. Unified School District campus in South Gate. (Photo courtesy of LAUSD)

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At the same time, to receive financial benefits under the new proposal, schools would need to install battery storage for each meter — batteries are still expensive and new technology that would require modernizing meters on their campuses. But the state only provides funding for modernization every 25 years, said Nancy Chaires Espinoza, executive director of advocacy group the School Energy Coalition.

“California’s over 10,000 schools are critical to the state’s ability to meet its clean energy goals,” Espinoza wrote in an email to LAist. “We are excited to be a part of this transition. We simply ask that new mandates be feasible for us to implement and adequately financed to avoid further depleting our resources for educating students.”