California Supreme Court Requires New Review of Rooftop Solar Policy

New York Times

07-08-2025

The California Supreme Court on Thursday ordered a lower court to reconsider a state policy that reduced how much utilities have to pay homeowners with rooftop solar panels for the energy that they send to the electric grid.
The court did not deem California's policy illegal but said a State Court of Appeal had erred in affirming the policy without fully reviewing it and by being too deferential to state regulators.
The rooftop solar industry and its allies hailed the decision as a big win and said it could open the door to reversing a policy that has sharply reduced the installation of solar panels on California homes over the last two years.
'Justice is served, and the sun shines a little brighter on California today,' said Bernadette Del Chiaro, senior vice president for California at the Environmental Working Group, one of the parties that challenged the state policy.
In 2022, California's Public Utilities Commission significantly reduced the compensation that homeowners receive for the excess electricity they send to the grid, undercutting a business that had its origins in the state. The new policy applied to solar systems installed starting in April 2023.
Other states have made similar changes in recent years, making it difficult for rooftop solar companies to operate. Partly as a result, several big rooftop solar companies, including Sunnova and SunPower, have filed for bankruptcy in recent years.
With roughly two million rooftop systems, California leads the country in such installations. Because much of the state is very sunny for a lot of the year, it is widely considered one of the best places to install solar panels.
California's high electric rates also make it easier for homeowners to justify spending money on rooftop solar because they are likely to recoup their investment in just a few years through savings on their electric bills.
But utilities, unions whose members work for utilities and state regulators contend that California's old approach to compensating rooftop solar owners was unfair. Before the state's regulator changed the system, the credits that homeowners received for the electricity they sent to the grid offset the watts they used on a roughly one-to-one basis.
Critics of the old approach said those credits were too generous and allowed residents who could afford rooftop solar to pay little or nothing for a connection to the electric grid. As a result, the critics said, households that could not install solar panels were bearing more of the cost of operating and maintaining the grid.
Utility companies also contend that the electricity they bought on the wholesale market was cheaper than the value of the credits they were forced to offer owners of rooftop solar system under the old system.
Rooftop solar, the utilities said, also produced lots of power in the afternoon, when the supply typically exceeds the demand in California, but not much in the evenings, when demand surges as people return home.
Rooftop solar executives and some energy experts counter that home systems help everybody by reducing the need for expensive new power plants, long-distance power lines and other equipment. In addition, rooftop systems can be built a lot faster and face less opposition than natural gas power plants, big solar and wind farms, and the transmission lines needed to carry power from those large projects to cities and towns.
In their 2022 decision, California regulators sided with the utilities and their labor unions by lowering the benefits of rooftop solar and redirected some of those incentives toward the purchase of battery systems that could help meet energy demand in the evenings.