Is the California Government Helping the Utilities Shut Down Solar?

Solar political rally over AB 1139

As the world slowly emerges from the shutdowns of 2020, California state Assembly Bill 1139 from Lorena Gonzalez of the 80th District (southern San Diego) has unexpectedly become a significant threat to the solar industry in the state. If passed into law, the bill would destroy the financial viability of solar systems owned by homeowners and businesses as well as undermine the strides and investments California has made in renewable energy production and distribution. Over one million California homes are powered by solar and all would be negatively impacted if the bill becomes law. 

To take action to help stop AB 1139, which is heading for a vote in Sacramento as early as June 1, please use the links below to find then contact your representative and tell them you oppose AB 1139. 

Call your representative

Email your representative. 

Ross Williams, the CEO of HES Solar, one of the top solar companies in San Diego that installs both commercial and residential systems, gave a quick overview of the bill that is fast-tracking through the State Capitol and threatens existing and future solar ownership. “AB 1139 was crafted under the veil of a coalition that is really the utilities and their constituents; it’s a classic case of the utility trying to work through a politician to get something in place under the radar, without the public knowing, that dramatically affects the public. It’s truly sad because it’s big business going after small business, and it’s trying to put us all under.” 

HES Solar is a family-owned, San Diego-based company that employs over 60 Californias and is growing and hiring in 2021. Mr. Williams has been called by a sense of duty to solar and its industry to help battle down the incursion that claims to be about equality and representing lower income Californians. “The guise they’re putting this bill under is pretty blatantly clear. It’s unfortunate because they’re saying that solar is currently an unfair cost shift and NEM [Net Energy Metering, the agreement by which excess solar is sold back to the utility during the day] is costing all the other rate payers money. Their claim is that it’s dramatically affecting everybody’s rates and rooftop solar is the reason why rates are going up. In reality there’s no evidence of that whatsoever. In fact, when we transitioned from NEM 1.0 to NEM 2.0 years ago that was the utility’s argument then. They provided their evidence to allegedly support that and the PUC [Public Utilities Commission] said, ‘Look, there’s nothing substantial here. We can’t change our minds based on the evidence you’ve provided.’ And it’s the same today with AB 1139 – everything that they’re arguing is not based on fact, it’s based on their opinion. When you really look at the facts, their true issue is that we are reducing their ability to make more money. And to understand that you need to understand how the utility makes money; they make money by installing infrastructure. When they install infrastructure they are able to do what I call rate-basing, where they take all the costs that they’ve invested through that infrastructure and they charge more through the electricity rates to all of their customers, and they are guaranteed a rate of return of 13 percent. The irony here is that building more power distribution and transmission lines actually gives them the ability to raise rates on all people. It’s interesting to look at their argument of electricity costs through that lens. But they are using the tactic of claiming unfair cost burdens on lower income Californians to alarm the public, to try to point the finger at solar and say it is robbing from the poor. I’ll give them this, it’s a brilliant argument to make, except for the fact that it is simply not true. 

“Understanding how the utilities make money, you can see this really isn’t a fight where the utilities are against solar or against renewables, they’re not. What they’re against is our niche within renewable energy, which is distributed generation solar. We’re the small businesses that design and install rooftop solar, which is precisely distributed generation solar; we install the source of energy at the location in which it’s used. What the utilities are talking about when they talk about solar is building a huge solar farm out in the desert or out on some virgin piece of land and then taking the production from that solar farm, wind farm, or whatever form it uses to create electricity, and piping it to the big city for use. The utilities don’t actually invest in the generating asset, they don’t own the solar farm, but they do own the transmission lines that distribute from that facility to the big city; that is how they make their money. So when a large company builds a big solar farm out in the desert, the utility connects it to their transmission lines, or builds new transmission lines – and that costs billions of dollars. They can then take that billions of dollars of investment and they rate base it. They are entitled to make money off of that grid investment at 13 percent, and they spread those costs by increasing electricity rates for everybody. So whenever rooftop solar – distributed generation solar – is installed at the place where the energy is being used, it reduces the need to build those transmission lines. Distributed generation solar actually reduces costs on the grid and reduces fees that the utility can charge to their customers. Also, with privately-owned solar, you’re putting solar panels on buildings or in parking lots that already exist. That reduces the need for more transmission lines, some of which are destroying swatches of our forests and our desert land.”

“The cost of these multi megawatt systems in the desert, at a per-watt cost, is significantly less expensive than distributed generation solar panel systems. You could build a 50 megawatt system in the desert for probably fifty cents a watt. Here on someone’s business rooftop, the much smaller and more difficult build would cost probably two dollars to $2.50 a watt; on someone’s home, an even smaller system would probably cost three dollars or more per watt. So the solar farm cost is, from only that perspective, financially much more efficient… But then you still need to transport all that energy into the city where it’s consumed. And those costs aren’t factored when you see most comparisons of the two. You should consider those costs, because generating facilities are owned separately from the transmission lines, but both are required to provide usable energy to the city.” 

The attack on independent solar installation companies is an attack on small business ownership and the entrepreneurial spirit of the United States. “We see this often in this world where, you know, the little guy is crushed by the big guy. You think of examples, like Amazon putting out shopping malls, or Walmart putting out mom and pop shops on Main Street, that all happened. And it’s unfortunate because all those people didn’t have much of a chance, all those big businesses have very deep pockets and they have the ability to spend the time and resources on this.” AB 1139 takes the uneven playing field a step further, altering the state tariffs to favor the big concerns. “The small guy, the small businesses simply don’t have a lot of resources. We just don’t. That’s the nature of small business and that’s why in this country it’s happening over and over and over again. We’re fighting against that today and I hope people’s eyes are opened to that, which is really what’s going on here at the core of it.”  

The new bill is also an attack on the citizen who’s made a smart investment choice that pays back not only financially but also helps reduce emissions. “Whenever a person goes solar, it is an investment. They could instead invest in the stock market, start a business, invest in their kids’ future. There are many ways that they could invest. So they do their research – ‘What is the risk here, and what is the reward? How much money do I get back? How quickly does it come back? What is the lifetime of this investment – how long do I expect it to last?’ All those things they take into consideration. When they look specifically at solar, the metrics that they look at are, ‘Okay, I can sign up for this net metering program. Net metering allows me to sell energy to the grid and then that energy flows over to my neighbor and the utility charges my neighbor the same amount of money that they buy it from me, so it’s a wash. But they guarantee me that I get to do that for 20 years, that’s great, that’s the promise they make. Awesome, great, so now I know that I have this thing that I can invest in now that’s, as long as the solar operates, I’m going to get my bill reduced, and I’m going to have this return, and then I’m going to have a return in five to seven years [once the system gets through its payback period], and then I’m going to have a nice fifteen years or so of free, steady cashflow that is essentially going to help me retire, or put my kids through college, or help me do whatever, it’s going to make my lifestyle better.’ However, what’s happening now, and what’s on the table with this bill, they’re saying retroactively, ‘You know what, 20 years, that’s off the table. We’re going to change that. We’re gonna pull the rug out from under you on your analysis and the investment that you’ve made, we’re going to make it 10 years.’ So after a five to seven year timeframe for the system to complete its payback period, they’re only going to have three to five years of free cash flow. After that then they’re going to have to pay the utility; at that point it becomes a cost liability. It’s going to cost money to own a solar system. That’s what’s happening with this radical bill. How is the government doing that to the people? Not really ‘how’ is the government doing that to people, the bigger question is ‘why?’ Why are they doing that? How does it benefit the people? It doesn’t, it benefits the utility.  

And when you start to think along those lines, you need to think, ‘What’s best for the customer? Is it better that the customer has their own asset that they’ve invested in, that they’re getting a healthy ROI that’s a smart investment for them that’s good for the environment that doesn’t require destroying the deserts and forests? Or is building out in the desert, with expensive, unnecessary transmission lines that are destroying our forests and deserts and eventually costing all these rate payers a lot of money so the utility can continue to make a 13 percent guaranteed rate of return on their investment – what’s best for the customer?’ Start to think about it in those terms. 

“Additionally, you can start to think about safety. These transmission lines that go over our deserts and go over our forests – they are the cause of forest fires. This has happened, as we’re all aware of the fire in PG&E territory that bankrupted them. They started a forest fire with the exact type of transmission lines that we’re talking about right now. Distributed generation solar, energy produced where it is used, eliminates the need for these high power lines. So with this bill they are literally fighting to increase the risk of forest fires. And we are, by converse, reducing the risk of forest fires because we reduce the need for those transmission lines. 

“The state of California, starting in 2007 with the establishment of the California Solar Initiative with governor Schwartzenegger, invested $3.3 billion into solar. The idea behind that program was to jumpstart the solar industry and establish California as a leader in renewables by creating a rebate program for rooftop solar – distributed generation solar – exactly the industry that small business solar installation companies function within. AB 1139 would essentially undermine the success of the whole investment that the state – the taxpayers – have made. The program worked so well; it did exactly what it was supposed to do. It established the industry and it allowed the manufacturers to ramp up and get efficient and get prices down. Prices for rooftop solar are 80 percent of what they were ten years ago; that’s an incredible price drop. And the initiative got the industry established in such a way that we’re now sustainable. We can continue to grow without the aid of the government. That program went away, what, five years ago now, and we’ve been operating without it. This bill, AB 1139, would literally stop that progress in its tracks. If it passes it will literally throw away all that money that the state put into this program over roughly a decade. It’s really sad to see that happen. It’s really sad that the government would be even playing with an idea like this. Why would we go backwards? Why would we start going backwards now when the state is committing to 100 percent renewable energy use by 2045? This bill would be a huge slap in the face to the progress the industry has made in the past 15 or so years. 

“Can they still get there without us, without home and business solar? Yeah, of course they can, but it’s going to cost the rate payers an incredible amount of money, and they’ll be paying for it for years and years and years. And the power won’t be in the hands of the rate payer, it’ll be in the hands of the utility. That’s what this is all about. So it’s really frightening to see that. I’m not saying distributed generation should be the only thing, in fact distributed generation is only solar. The answer should be a mix of hydro, wind, biothermal, and emerging technologies. We need both distributed generation and utility scale, there are efficiencies there. But what this bill, AB 1139, would do… it would just completely annihilate distributed generation.” 

With overwhelming power backing AB 1139, what can be done? Does the power still remain with the people? “What we can do now, it’s really important that we talk to as many of our assembly members as we possibly can. It’s pretty easy to do. Call and email both. Call your rep and say, ‘Hey, I’m against this AB 1139. I’m frankly embarrassed that you’re even considering it. it’s basically going to hurt a lot of hard working Californians because they will lose their jobs, it’s going to hurt a lot of consumers, it’s not going to help anybody but the utilities and in the long run will ultimately cost everybody significantly more than the situation that we have in place right now.’ I think that’s the most important thing we can do, and each of us can do it. If we all did this the power to stop AB 1139 would be overwhelming. We can defeat AB 1139 if we contact as many of our elected officials as we can and let them know how we feel about it.”

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Robert Laverty

Senior Energy Consultant, Residential

Robert Laverty joined the HES team in the summer of 2018, bringing his ten years of solar design experience and his Bachelor’s degree from the University of Puget Sound with him. Robert is dedicated to finding solutions to help families produce and store electricity in order to reduce their reliance on grid power as well as help reduce their household’s carbon footprint. Robert’s experience as a newspaper editor as well as his involvement with the sustainability-focused Rocky Mountain Institute drives him to constantly seek out innovative ways to meet energy needs through renewable resources as well as helps him share those ideas with Southern California homeowners. When not at work or volunteering time with his church or community, Robert spends time with his wife and two sons or pursues his passion of fly fishing.
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