A California regulatory judge preliminarily rejected a move by Sunnova Energy, one of America’s biggest rooftop-solar companies, to serve as a micro-utility to new residential communities in the state. The company was trying to use an obscure law relating to a 1920s ski resort to force its way into the highly regulated electricity Utility business.
A formal rejection would be a blow to residential solar and battery providers that have begun eating into the customer base of California’s big three privately-owned utilities — PG&E Corp., Edison International and Sempra Energy’s San Diego Gas & Electric. All three have fought to protect their territories as new technologies have eroded their monopolies.
Texas-based Sunnova, in September submitted an application to the California Public Utilities Commission to build and operate microgrids as part of new master-planned residential communities. But an administrative law judge said in a proposed decision issued Tuesday that Sunnova had failed to provide the information required for a so-called certificate of public convenience and necessity.
Sunnova is one of the biggest US corporations at the forefront of the struggle for more rights for off-grid energy producers. It supplies solar rooftops under a variety of innovative financing arrangements, allowing property owners to install now and pay later.
Extreme weather and higher electricity prices are leading American households to bolt a record number of solar panels to their rooftops, loosening ties to the power grid and the utilities that run it. About 5.3 gigawatts of residential solar power capacity were installed in 2022, the biggest year for new installations and roughly equivalent to total rooftop solar capacity nationwide in 2015, the US Energy Information Administration has said. Installations jumped about 40 per cent year on year with about 180,000 US homes adding systems in the second quarter, according to data compiled by consultancy Wood Mackenzie. Home electricity prices rose only 7.5 per cent in 2022 – compared to much steeper rises in Europe, and 4.3 per cent in 2021.
Rates have climbed largely because of higher prices for natural gas used to fuel power plants. “You’re going to continue to see some pretty big increases in monopoly utility bills over the next few months and quarters and we’re seeing growth because of that,” said John Berger, chief executive of Sunnova.
Berger said the utilities were defending a “Soviet-style” system that prevents competition in the power sector because they worry that the growth of home solar will eat into their market. “Consumers don’t have choices. They don’t get to choose their power provider, and I think they should be able to and I think more and more people are demanding that,” he said.
Executives and analysts also point to the numerous storms, heatwaves and fires across the country that have exposed deep vulnerabilities in the reliability of power grids across the US. Hurricane Ian last month knocked out power to 2.6mn customers in Florida. The storm came just days after Hurricane Fiona caused blackouts in Puerto Rico.
“In Puerto Rico right now, sales are just vertical . . . they’re just off the charts. I expect that is what’s going to happen in Florida behind this storm [Ian]. It’s just natural human emotion,” Berger said.
More households are pairing solar panels with back-up batteries that can keep the lights on when the sun is down during outages, in addition to saving surplus energy for later use. About 20 per cent of home solar installations include battery storage, a share that has roughly doubled since 2020, according to EnergySage, a solar market research group.
On his house outside of Houston, Kevin Lee said he installed solar panels and a Tesla Powerwall battery after a severe winter storm knocked out much of the Texas power grid in February 2021. “I never wanted to go through something like that again, and having this really does make us feel safer when there are storms coming, whether they’re hurricanes or freezes,” he said.
A US energy department study on how to hit its goal of making the economy net emissions free by 2050 found that as much as 200GW of rooftop solar could be deployed by the middle of the century, up from about 26GW now. It said about 10 to 20 per cent of total solar capacity deployed would be bolted to rooftops.
Sunrun, the largest US home solar installer, outpaced its projections of 25 per cent growth in installed capacity it had expected for 2022. Even as it expands, rooftop solar only accounts for about 1 per cent of total US power generation. Residential systems are also dwarfed by large, “utility-scale” solar facilities, typically built on the ground in vast arrays that feed directly into the grid.
The EIA expects about 21.5GW of large-scale installations this year. Sunny southern states like California, Florida and Texas are the fastest areas of growth. The upfront cost of home solar systems is about $20,000, according to the Solar Energy Industries Association, a trade group. Customers are able to defray these costs with loans to lessen the upfront expenses as well as state and federal tax credits. The new Inflation Reduction Act raised the federal tax credit available for new installations to 30 per cent, or about $6,000 off the average system. Homeowners in some states are also able to defray expenses through “net metering”, which requires electric companies to buy excess energy generated by solar systems. The policy has triggered a backlash from utilities, which argue it is unfair when homeowners are paid for producing electricity but do not have to share the costs of operating and maintaining the grid. Utilities also fear that rooftop solar could dent demand for their electricity. California’s public utility commission is expected in the coming weeks to announce new net metering rules that solar advocates fear could reduce incentives for rooftop solar.
In April this year, Florida governor Ron DeSantis, a Republican, vetoed a bill passed by lawmakers from his party that would have rolled back the net metering solar incentive. He said he did not want to impose new costs on Floridians amid rising inflation. The fight over home solar energy has exposed splits within the clean energy industry. One of the backers of the vetoed bill was utility Florida Power & Light. FPL is a subsidiary of NextEra Energy, which also owns the US’s top developer of large-scale solar and wind power projects and has declared aggressive goals to end its carbon emissions. The company did not respond to a request for comment.