What California's Solar Policy Changes Mean for You

California has long been one of the most solar-friendly states, with plenty of sunshine and generous financial incentives.

With big changes to its solar policy last year, the calculus for going solar in the Golden State has shifted significantly. There's still good reason to invest in home energy upgrades if you live in the state, but your strategy might look a little different than it did a year ago. For one, it's likely going to take longer to recoup your investment.

"It depends on why you want rooftop solar, [and] how important it is to you that your rooftop solar system pay off its costs in a certain time period," said Jeff St. John, director of news and special projects at Canary Media.

Here's your guide to what changed in California solar policy, and how it affects you as a solar customer.

What happened to net metering in California?

For a long time, California had a pretty standard net metering policy, which meant homeowners with solar would get paid the full utility retail rate for excess power they generated and sold back to the grid. This was a key piece in the economics of investing in solar, as that utility payback helped customers pay off the upfront cost of solar panels.

In 2013, the state started to scale back the incentive, implementing additional fees to make net metering less profitable, according to Sequoya Cross, vice president of energy storage at Briggs and Stratton Energy Solutions.

But the big change came in 2023, with a third iteration of the program that cut back on customer incentives in a big way. In place of traditional net metering, new solar customers in the state are now subject to a net billing tariff. Under this arrangement, ratepayers still get compensated for their excess solar production, but how much is determined by a complex "avoided cost calculator" that depends on the time of day and year.

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"The amount that homeowners will get now is about 75% less than what they were receiving before," said Cross. That's the biggest impact for homeowners who are looking to invest in solar: They won't be able to recoup nearly as much money from net metering as they would under the old policy (existing solar customers are grandfathered into whichever net metering policy was in effect at the time they installed their system).

Other states may soon follow in California's footsteps. Duke Energy in North Carolina is currently implementing its own version of a net billing tariff and Arizona is also working on a new policy that would reduce compensation for solar customers.

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This month, a California lawmaker introduced a bill to revise some of the state's most recent net metering policies, but it's too early to know if it will gain any traction.

Does it still make sense to go solar with weaker net metering?

To answer this question, you first have to decide why you're investing in solar to begin with. If you only care about the environmental benefits and money isn't as much of an issue, then of course it would still make sense to install solar panels.

If you're concerned about your payback period, there's a weaker case for solar now in California. Installing panels alone is unlikely to result in a big financial payback because you'll generate the most power during the day (when you might not be home to use it) and won't get paid very much for sending it back to the grid.

"It really does force you to store that power in battery storage," said Cross, highlighting a key solution to this issue. If you're able to install solar panels alongside a home battery, the economics start to make a lot more sense. Instead of sending your excess power to the grid for a low payback, you could store the energy and use it yourself later, therefore lowering how much power you buy from the grid.

St. John agrees, noting you could also boost your financial benefit by storing solar energy in a battery, and then selling it back to the grid during summer evenings when the net billing tariff pays the highest rates. The software that comes with home batteries now often allows you to make those kinds of decisions on how and when to deploy your stored power.

Do I have alternatives to buying rooftop solar?

Maybe you don't want to invest in rooftop solar under California's new policy or simply are unable to; there are still ways for you to access the benefits of solar.

Community solar

This is always a great alternative to rooftop solar. With community solar, you are able to subscribe to a chunk of the output of a large solar farm nearby. This usually results in similar or lower energy rates, while also helping you support green energy.

"Community solar makes a ton of sense when you're dealing with urban areas … or areas where people just can't invest in renewables," Cross said.

Community solar in California has lagged behind rooftop solar, thanks to state policies that are getting a second look. Other states already have more robust community solar programs or are poised for an expansion.

Third-party ownership

Buying solar panels outright is a costly enterprise, often costing tens of thousands of dollars. If you can't afford to buy or finance a solar system, you might consider a lease or power purchase agreement. This is where the solar company owns and installs the panels on your roof, and you pay a monthly installment for the system itself (as in a lease) or the solar energy you're using to power your home (as in a PPA). Often, you can start saving as soon as the solar panels are installed, but read the fine print and make sure you understand any rate increases over the lifetime of the agreement.