California’s Rooftop Solar Market Faces Setbacks as Utility Giants Tighten Grip

California's rooftop solar market is currently under pressure from the state's three major utility giants: PG&E, SCE, and SDG&E. These companies have introduced policies that hinder the growth of distributed solar energy, aiming to solidify their monopoly in the energy market.

The NEM 3.0 policy has significantly reduced net metering subsidies, directly impacting solar users' financial returns. The AB 2143 bill imposes strict labor regulations on commercial solar installations, increasing development costs.

Additionally, policies that set low feed-in tariffs and high electricity charges for schools, farms, and other property owners are further squeezing market potential. Furthermore, starting in 2024, California will levy a fixed monthly fee of up to $24 on solar users, adding to the financial burden on distributed solar energy consumers.

As shown in the graph below, the rooftop solar market had been thriving before the implementation of NEM 3.0, but after the policy changes, the market has contracted sharply. Middle-income households, earning between $50,000 and $100,000 annually, had been significant drivers of this market. However, with the new policies in effect, this segment has seen a steep decline, which has also dampened the growth of energy storage installations. Despite the increasing ratio of rooftop solar systems with storage, from 15% to 60%, the overall decline in solar installations has prevented a significant increase in California's energy storage capacity.

According to Solar Insure, a major solar insurance provider in California, 75% of the state’s rooftop solar installers are now at risk of bankruptcy following the policy changes, and several key installers have already gone out of business. Moreover, the reduction in net metering subsidies in California has started to spread across the nation.

In response to utility companies' claims that distributed solar increases grid operation costs, known as the "cost shift" theory, multiple authoritative studies have refuted these claims. Research from Lawrence Berkeley National Laboratory and other institutions shows that the cost-shifting effect of solar is minimal, and the real cause of rising electricity prices is inefficient investments and soaring capital expenditures by utility companies.