California Solar Rule Changes Seen Speeding Up Battery Adoption

(Bloomberg) -- California’s proposed cut in incentives for small clean energy systems means home rooftop solar would lose its economic incentive, unless paired with batteries, according to BloombergNEF.

The changes would increase the payback period for residential solar to as many as 11 years, BloombergNEF said in a report Thursday. For a solar system paired with a battery, however, the payback period would range from six to eight years. Homeowners’ interest in investing in solar typically starts once the payback time is eight years or less, according to the report. 

“The changes are pretty dramatic, but the market in California will remain pretty big for residential and commercial solar.” said Pol Lezcano, a BloombergNEF solar analyst and author of the report. Lezcano said the changes won’t halt new installations in California, but will speed up the adoption of solar systems with batteries.

California regulators rattled the solar industry when they proposed sharply lowering the credit for excess power from home solar along with new connection fees. Solar advocates say the proposal would be devastating to the industry if enacted in the largest U.S. solar market.

Regulators said the subsidy reforms are needed to make sure solar customers pay for their share of the costs of the power grid. They are also designed to encourage the adoption of batteries that can store energy for use later in the day when the sun goes down. 

If the California proposal passes in its current form and federal solar tax credits get extended for 10 years, new residential solar installations in the state will be slightly lower than an earlier forecast, Lezcano said. 

California regulators will make their final decision on the rooftop solar incentives early next year. 

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