California’s Solar-Power Welfare State

The rich and famous object to a rollback of subsidies for home solar power

WSJ editorial.

"The dirty little secret about green energy subsidies is that they are welfare for the wealthy. And like any entitlement, they are hard to reform once people get hooked. Witness the revolt by the rich against a California proposal to scale back subsidies for rooftop-solar panels.

At issue is the state’s net-metering program that rebates homeowners with solar panels for the excess power they generate and send to the grid. Utilities compensate solar customers at the retail electricity rate, which can be up to 10 times the wholesale price that other power generators are paid.

Renewables and natural-gas prices have plunged since the mid-2000s. Yet retail rates in California have increased 50% over the last decade as utilities have had to spend more to integrate renewables into the grid and harden power lines. California’s cap-and-trade program and “public purpose programs” like battery subsidies have also raised retail rates.

Wholesale prices don’t differ all that much across the country, but retail rates in California are about 80% higher than the national average and twice as high as in neighboring states. Net-metering is driving rates even higher. Solar customers use the grid to consume and export power. Yet they avoid much of the grid costs, which are shifted to other customers. 

Net-metering is highly regressive and becoming unsustainable as more affluent homeowners install solar panels. The bottom 40% of income earners in California account for only about 13% of solar customers. A study by the left-leaning outlet Next 10 last year estimated that this cost shift translates into $230 more for an average annual electric bill.

Even the Sierra Club says in California “the solar industry has matured to a point where a smaller [solar] incentive is appropriate.” Greens worry that skyrocketing retail rates due to net-metering and other green subsidies may discourage lower- and middle-income folks from buying electric cars and appliances.

Rooftop-solar is also making the grid less reliable. The state sometimes generates so much solar power that it must pay other states to take it to stabilize the grid. As wholesale power prices have plunged during the day, natural-gas generators have struggled and shut down. Then there’s less power available at night after the sun goes down.

Liberals say the solution is batteries to store solar power that homeowners generate during the day to use at night. But net-metering subsidies are so generous that they may be a disincentive to buy batteries.

Enter the state Public Utilities Commission. An agency administrative law judge last month proposed scaling back credits for excess solar power sent to the grid and adding a fixed monthly charge averaging $20 to $40 to solar customer bills to cover their grid costs. Battery subsidies would grow. These changes would affect new solar customers and current ones only after 15 years.

Greens support the proposal, but the celebrity class has blown a fuse. Former Gov. Arnold Schwarzenegger recently wrote a New York Times op-ed denouncing it as a “solar tax.” Actor Edward Norton tweeted that it “will destroy the rooftop solar market.” Elon Musk, whose Tesla sells solar panels, calls it “a bizarre anti-environment move.”

After punting a vote on the proposal two weeks ago, the utilities commission president last week said it needs more time to consider revisions. Renewable subsidies were intended to be temporary. But as California shows, once the rich and powerful are hooked, the handouts are hard to take away."