Solar companies in San Diego and elsewhere have long sold the technology as an investment that pays off for both the environment and pocketbooks.

A trio of impending policy changes could collectively change the game.

One is a federal rebate facing extinction. Here’s the second one.


Your relationship with San Diego Gas & Electric changes when you get solar panels. The utility starts buying power from you, too.

The state-mandated arrangement – which requires SDG&E to pay retail energy prices for the power the panels produce – allows solar customers to shrink or eliminate their electric bills. That arrangement is called Net Energy Metering,

We Stand Up for You. Will You Stand Up for Us?

Right now, solar customers who sign up for net metering and cover their own power needs are credited for the energy their panels produce at the same rate they would otherwise pay SDG&E. That could be as much as 42 cents a kilowatt hour, the current rate SDG&E charges residential customers in its highest usage tier.

The Advanced Energy Economy Institute, a nonprofit that pushes the sustainable power industry, has dubbed California’s net metering arrangement “the single most important policy in the state for encouraging solar development.”

But the current deal won’t be around for long, and the new one’s unlikely to be as generous.

Two years ago, Gov. Jerry Brown signed AB 327, a law that required state regulators to set new rules by July 2017, or once rooftop solar customers’ power hit 5 percent of the region’s peak demand.

Many solar experts expect San Diego to reach that cap well before July 2017. At the end of last month, SDG&E was already two-thirds of the way there.

Yet the solar industry and even utilities like SDG&E can only speculate on what the new model will look like.

The uncertainty has added some urgency to how solar companies approach potential customers: Go solar now, they say, and it’ll be easier to predict when you’ll pay off the panels and what your new energy bill will look like.

That pitch hits at the two big ways solar customers tend to recoup the costs of installing the systems: Rebates help soften the blow of upfront costs (a federal rebate is also facing an uncertain future), and lower energy bills over time help make up costs over the long haul.

Customer who get solar panels before the region hits its cap get to stick with the current billing arrangement for 20 years, though future energy rate tier changes or mandated charges could cut into their savings.

Advocates fear the changes could give San Diegans less incentive to make the leap.

Local solar executives including Daniel Sullivan of Sullivan Solar Power and Mike Teresso of Baker Electric Solar say the uncertainty will become increasingly challenging as the region gets closer to the cap.

Teresso said his company’s been careful not to fear monger but that salespeople have to acknowledge they don’t know when the current solar billing arrangement will end – or what the new one will look like.

“We don’t have clear answers for either,” he said.

What he and others in the solar industry do know is that AB 327 requires the state to ensure distributed generation essentially, power produced where it’s used, like rooftop solar systems“continues to grow sustainably” and the deal offered to solar customers matches the actual costs and benefits solar provides.

The state Public Utilities Commission is in the process of analyzing the value rooftop solar adds to the electric grid and the costs that come with it. It’s expected to release a proposal by the end of the year.

The regulatory process allows state utilities, including SDG&E, to weigh in. Utilities have yet to make formal suggestions but SDG&E executives’ comments about the challenges associated with rooftop solar shed some light on what they may propose: a system that’s less favorable to solar customers.

In a recent presentation on the topic and a separate interview with Voice of San Diego, SDG&E executive Tom Brill said the challenge comes from the fact that SDG&E gets a surge of demand in the evening – when solar panels aren’t producing power because it’s dark outside.

SDG&E has said the current net metering arrangement and requires regular customers to subsidize solar customers.

Brill said the cost to serve each residential customer – solar or otherwise – exceeds $10 a month and that it rises along with energy demand. Solar customers add to that demand because their panels don’t produce power at peak hours.

The bottom line: Net metering means many solar customers aren’t paying their fair share, he said.

Utilities across the nation are making similar arguments.

The Washington Examiner reported that measures attempting to curtail net metering had been introduced in nearly half of the 44 states that have it.

An MIT report released earlier this month urged an end to net metering, arguing that the industry needs pricing systems that shift costs to the customers that are creating them.

Solar advocacy groups are adamant that net metering works because rooftop solar is allowing SDG&E and other utilities to buy less power than they’d otherwise need to supply customers – and the power they get from solar customers is good for the environment.

Susannah Churchill, West Coast regional director at solar lobbying group Vote Solar, said there’s no need to change a policy that’s played a major role in encouraging investments that benefit the environment.

Vote Solar and the California Solar Energy Industries Association, another lobbying group, both argue the status quo works.

“We have all these benefits that the state is reaping from the policy and we want to keep solar growing in this state,” Churchill said. “(Net metering) has been a proven tool for achieving that in the past.”

This is part of our quest on whether solar will pay off for San Diego. Check out our previous post, A Big Solar Deal-Sweetener Might Be Dead Soon, here.

    This article relates to: Must Reads, Quest: Solar, Science/Environment

    Written by Lisa Halverstadt

    Lisa writes about San Diego city and county governments. She welcomes story tips and questions. Contact her directly at or 619.325.0528.

    CaptD subscriber

    Just imagine how much less solar and/or storage will be in 10, 15 and 20 years!

    This is why Utility “Death Spiral” is a clear and present danger to Big Utilities and their shareholders profits, especially in the near term and beyond. This is yet another reason that Big Utilities are trying to add their own Solar capacity so that they can buy Solar energy from themselves instead of buying it from their Residential and/or Commercial “customers” that choose to install their own Solar.

    It is past time for all ratepayers to demand that both their Utilities and those that regulate them offer to enable as much non-Utility (aka privately owned) generation as possible, since then ratepayers could not only help provide a solution to our future Energy needs, but also reduce our dependance upon distant generation that has shown itself to be problematic especially during earthquakes, wildfires and other disasters. 

    Chris Brewster
    Chris Brewster subscribermember

    In 2011 SDG&E submitted a proposal to substantially raise rates for net-energy metering (NEM) customers based on its assertions and justifications about costs created by those customers. That provoked community concern due to the potential negative impact on existing incentives for customers to convert to solar energy, along with financial impacts on those who had already done so. To deal with the broad-based reaction, SDG&E created a Solar Stakeholder Collaboration group, which included a wide range of governmental, nongovernmental, and private interests. I was the only solar homeowner in the group. The group conducted a series of meetings over a two year period.  The key question to be answered, in my view, was whether homeowner generated solar is a net benefit or cost to society and in what magnitude. 

    In my view, solar homeowners should be charged no more than they cost society in general; or alternatively should be compensated for the degree to which they benefit society in general. The key is figuring this out and it turns out to be enormously complicated, which allows experts on each side, using different approaches, to arrive at different results. One example: Since solar presumably reduces air pollution (versus burning fossil fuels for electric generation), what value should be ascribed to the benefit to all people in the area (i.e. not just the “grid” but society generally)? 

    The Solar Stakeholder Collaboration group ultimately agreed to engage an independent private consultant to address five objectives:

    1. Identify the services that utilities provide solar customers. 

    2. Identify the services that solar customers provide to the electrical system. 

    3. Develop a transparent methodology determine the cost (both positive and negative) for each of the services identified at different levels of penetration. 

    4. Determine whether the existing net energy metering rate structure allows the utility to recover the costs they incur for PV customers. 

    5. Understand how future scenarios including several photovoltaic penetration conditions and Smart Grid infrastructure affect the results of the analysis.

    Unfortunately, two problems arose. One was that funds to pay the consultant (which were provided by SDG&E) ran out before objectives #4 and #5 could be accomplished. Second was that SDG&E failed to provide key bits of data they had agreed to provide the consultant early on. Specifically, from the final report of the study:

    “The study team relied on SDG&E to provide utility‐specific data that is not generally publicly available. This included data on utility retail loads, PV system interconnection costs, distributed PV program costs administrative costs and projected marginal distribution system costs for voltage regulation. Black & Veatch [the consultant] prepared and submitted a data request to SDG&E in March 2013, with several subsequent follow‐up requests. Over the ensuing several months, SDG&E provided some limited information in the requested format, which the study team incorporated into this analysis where possible and feasible. For instance, Black & Veatch approached the interconnection cost analysis by requesting a detailed breakdown of costs by discrete tasks required for the customer interconnection process and supporting SDG&E activities, however SDG&E provided generally high‐level information on organization function and program administration costs. Similarly, instead of providing forecasted distribution upgrade costs for voltage regulation as SDG&E had initially offered in a stakeholder meeting, they provided a projection of the PV NEM capacity by feeder circuits through 2020. In these cases where the study team did not receive the data it was expecting, we used the information that was provided by SDG&E and developed additional necessary assumptions based on our professional judgment. The result of this is that the study results will not mirror SDG&E costs for these services, nor has the study team validated the SDG&E cost information.”

    I cannot know why SDG&E failed to provide necessary data to the consultants, but I was left with a feeling that participants in the process (including me) had been used and that very possibly when the data began to look favorable to solar customers, SDG&E stonewalled the consultant. In any case, there is little question that, nationwide, utilities, particularly investor owned utilities like SDG&E, are very concerned about solar and its impact on their current business model. Thus the “facts” coming from utilities should be judged with a jaundiced eye and the studies floating around should be carefully vetted to see who funded them. There are no easy answers. 

    SDResident subscriber

    Solar customers typically generate more power than they use during the day and therefore are subsidizing regular customers by reducing demand during the daytime hours when regular customers use the majority of their electricity.  There is a far greater capacity for power in the evening due to reduced demand as AC and other high users are turned off.

    I don't know where the $.42/hour reimbursement figure comes from, the most I ever received for excess power was $.034/kwh.

    Solar customers have reduced the load on the grid making more power available for regular customers without building additional power plants.

    msginsd subscriber

    @SDResident  "Solar customers typically generate more power than they use during the day and therefore are subsidizing regular customers"

    Actually, as the MIT report points out, when residential solar owners get compensated at retail rates, such as what happens with the current net metering scheme, the higher cost to the utility (compared to the wholesale costs that the utility pays for other energy) is passed on to non-solar owners.  So no, solar customers are not subsidizing "regular" customers.

    George in BayHo
    George in BayHo subscriber

    @SDResident As an early-adopter solar customer, I've never felt that I was subsidizing anyone.  Nor do I feel that others suffer higher rates because I happen to generate most of my own electricity.  I pump excess power into the grid during the middle of the day, which is when my neighbors need it most.  At night, when demand is less and the utility shuts down its most heavily-polluting sources, I draw power from the grid and offset the cost with credits from my daytime contribution.  It's a deal that works for everyone.

    George in BayHo
    George in BayHo subscriber

    @SDResident @msginsd

    Please let's not let the utility frame this debate.  It is not "solar customer" versus "non-solar customer".  I am not at war with my next door neighbors.

    It's the "evil manipulative greedy ill-regulated monopoly" versus this community!

    Geoff Page
    Geoff Page subscribermember

    I appreciate the informative artilce.  I just wish you had asked someone from the solar industry to respond directly to SDG&E's main criticism that regular customers are subsizing solar customers at night when the panels can't generate anything.  I don't know much about solar, but I was under the impression that these systems included batteries designed to store power for times when the panels don't produce power.  If SDG&E is correct, I would have to agree that the financial aspects of the solar industry need revising.

    msginsd subscriber

    @Geoff Page The vast majority of solar owners are connected to the grid and do not have batteries supplying them power when the solar panels are not producing.  Therein lies the problem.  Solar owners want all of the benefits of subsidies, buy-back programs, etc, but don't want to own up to the cost of their connection and the fact that their unpredictable production of power puts a strain on the entire system.  I don't have solar because my total bills rarely exceed $80.  I just don't use that much electricity, even with a backyard spa that runs continuously.   The friends of mine who do have solar talk mightily about generating "green" energy, but admit that the real reason is to reduce their monthly bills as much as possible.  One example of that?  They put the panels exclusively on south-facing roofs to maximize their ROI, while it's well-known that the system's best use of solar includes west-facing roofs to take advantage of the sun during the last few hours of daylight when people return home from work and usage peaks.  West-facing panels produce less energy overall, but they continue to produce at a time when the need is greatest.  Truly green owners put in both south and west facing panels if they can, or use tracking.

    I'm all for residential solar.  Scraping huge swaths of desert land and covering them in panels or mirrors is unconscionable.   But let's be honest.  Many (not all) solar owners are a typical case of "wanting their cake..."  and the prior pricing schemes to subsidize both the purchase and operation cannot continue.  Some kind of adjustments have to be made.

    Geoff Page
    Geoff Page subscribermember

    @msginsd @Geoff Page Well, for someone who doesn't know much about solar like me, this discussion is interesting because I'm seeing two different points of view, both well articulated.  I hope there will be more comments on this to consider.

    George in BayHo
    George in BayHo subscriber

    @msginsd @Geoff Page Good point about the panel direction, Geoff.  Half of my panels face east for the morning sun, half face west for the evening.  Net result is nearly the same daily output versus orienting them southward.

    I love your comment regarding the huge centralized solar power plants in the desert.  Sempra reaps its 8% not only from the generating station, but also from the power lines that are necessary to connect the station to population centers.  Residential solar requires no new infrastructure.  The wires and transformers are already installed!