American Census Survey, Public Use Microdata Sample (PUMS), 2021. Analysis by Beacon Economics.
Highlight
- California has been a pioneer in the adoption of rooftop solar energy, with some jurisdictions adopting it as early as 2015. The emergence of solar energy in owner-occupied housing began slightly earlier than in renter-occupied housing. Between 2018 and 2019, there was a noteworthy surge in adoption rates for both types of housing. However, in 2021, while renter-occupied housing powered by solar energy as share of total units grew by 10.1 percent in 2020 (from 2019) and decreased by 1.9 percent in 2021 (from 2020), owner-occupied housing’s solar share grew 8.9 percent in 2020 and increased by 0.92 percent in 2021.
Challenge
- The share of rooftop solar adoption in owner-occupied housing in California reached almost 2.0 percent in 2021 (i.e., two percent of owner-occupied homes have installed rooftop solar). In the last decade, the compound annual growth rate (CAGR) in owner-occupied housing has been more than 80 percent higher than renter occupied housing. However, the annual average growth has decreased in the last five years, from 48.3 percent from 2012 to 2016 to 15.2 percent from 2016 to 2021. The new version of the Net Energy Metering policy (NEM 3.0)187 that took effect on April 15, 2023, will have an impact on how solar customers are compensated for their excess energy production and could influence the future adoption of rooftop solar in the state. These changes may make solar adoption less financially attractive for some customers, potentially leading to a slowdown in the rate of rooftop solar adoption.188
187 Net Energy Metering (NEM) is a policy that allows customers who generate their own electricity through solar or other renewable sources to receive credits for any excess energy they produce and send back to the grid. These credits can then be used to offset the cost of electricity they consume from the grid when their renewable energy system is not producing enough power.
188 For example, under NEM 3.0, the value of the credits that customers receive for excess energy they produce may be reduced, and there may be additional charges for using the grid to send excess energy back. The changes to California’s net metering policy will cut the value of solar energy credits by about 75 percent for PG&E, SCE, and SDG&E customers. Energy Sage: NEM 3.0: what does it mean for you? January 11, 2023. Accessed June 22, 2023. Available at: https://news.energysage.com/net-metering-3-0/
Opportunity
- However, new tax incentives for residential solar in the federal Inflation Reduction Act (IRA) could help offset the reduced compensation for homeowners following the NEM changes. The Solar Investment Tax Credit (ITC) in the IRA provides a federal income tax credit, worth 30 percent off the entire system cost, for homeowners who install designated solar systems between January 1, 2022 and the end of 2032.189 Several state-funded solar power rebate programs are also still available in California to help further reduce the cost of installing solar, such as a program that will cover the entire cost of a solar system for low-income and at-risk households. Some municipalities in California also offer their own incentives.190
189 “IRA Updates to the Solar Investment Tax Credit (ITC).” University of Cincinnati News. January 18, 2023. Available at: https://www.uc.edu/news/articles/2023/01/gc-ira-updates-to-the-solar-investment-tax-credit-itc.html
190 “California Solar Tax Credits, Incentives and Rebates (2023).” MarketWatch. Updated July 20, 2023. Available at: https://www.marketwatch.com/guides/home-improvement/california-solar-tax-credits/