Changing California Solar Economics
If there is a time to pull the trigger on solar the time is now. There are 3 key 2022 deadlines that will negatively impact California solar economics.
1) Net Metering 2.0 – August 2022
2) Rising Solar Equipment Costs Due to U.S. Tariffs and Global Supply Chain Issues by Q2
3) Dwindling Federal Tax Credit by 2023
Let’s address each.
1) Net Metering
Net energy metering (NEM) is a critical policy that makes solar economically viable. Net metering is a billing mechanism that credits solar energy system owners for excess electricity they add to the grid.
There have been two iterations of NEM policy, we are currently at NEM 2.0, with the newly revised NEM 3.0 set to take effect sometime this summer for fall. A date has not yet been announced yet as of 4/17/22.
Current NEM 2.0 policy allows California homeowners to pay off their solar panels in ~5-10 years due to how much more they are credited when sending excess electricity back to the grid and being able to roll over credits month to month up to a year.
In January 2022 California’s CPUC scheduled to decrease net metering rates in NEM 3.0 (how much you are credited) and the amount reset every month. The initial NEM 3.0 initial terms were so outrageous in favoring the utilities and halting new solar adoption, they received widespread pushback. Over 500 people voiced their frustration and anger during a public hearing Zoom call.
After the public outrage, the CPUC decided to revise NEM 3.0 terms. Experts say they won’t be as bad as initially proposed, but still considerably worse than NEM 2.0. The new policy is set to take effect sometime this summer.
The best guess right now is if you get solar installed past August 2022, you’ll be forced into NEM 3.0. Instead of paying off your solar panels in 5-10 years with NEM 2.0, it will become more around 20+ years to pay back your solar panels.
If residents install solar by August 2022, they will be grandfathered into NEM 2.0 for 20 years, which secures a higher retail rate per unit of production, and can roll over credits for up to a year.
Under NEM 3.0, homeowners can expect to be credited at a MUCH lower rate and see their credit balance reset at the end of each month, nearly doubling the time it takes to recoup the solar investment compared to NEM 2.0 rules.
2) Rising Solar Equipment Costs Due to U.S. Tariffs and Global Supply Chain Issues
The solar world was thrown into disarray March 28th when the U.S Commerce Department opened an investigation to assess additional tariffs on solar manufacturers in several Asian countries outside China, as well as tariffs on U.S. manufacturers for imports on any components to make solar modules from those same countries.
This has effectively caused two major manufacturers to pull out of the market, and since the tariff is retroactive to April 1st, all remaining manufacturers have instantly raised their prices to cover the potential cost of these tariffs if the commerce department rules they are due in August.
Which local California solar companies have secured supply with manufacturers is case by case. The company I sell for Powur, is the same company who is installing solar on our own home (using a local installer team) has secured these panel orders for the remainder of the year.
The entire industry is needing to be fed by a handful of manufacturers at this point, and there simply isn’t enough supply to meet demand. Companies are having to choose their manufacturer partners very closely and just buckle up with them for the next 9 months to get through this. And manufacturers are playing God, choosing who is going to have product and who isn’t. This means rising panel prices.
3) Dwindling Federal Tax Credit
The current federal tax credit allows you to write off 26% off your solar system cost if installed in 2022. For example a $30k solar system, you’d save $7800 that would otherwise go to Uncle Sam. For systems installed in 2023, the write off is 22%, and by 2024, the tax credit is gone entirely. If you work from home, you can write off a portion of your solar panels for your home office. This is what we are doing for our home office business. Make hay while the sun shines, no pun intended.
There are real economic urgencies in play here. We are going solar on our own home here in Los Osos, CA. Our bill is ~$150/month. We live near the coast. Small home without much need for heating or cooling. We have a hot tub and plan to get an electric vehicle which is a huge energy suck. We are getting a 1.5% 25 year solar loan for a system at $75/month that offsets 140% of current consumption to plan for a future electric vehicle.
Monthly electric bill will be $0 thanks to the sun and 100% offset. Financing rates are still attractive, making money cheap. The ROI is immediate, as the new solar payment is less than our rising PGE bill. Once the loan is paid, it’s free electricity on our roof. It’s a serious no-brainer given rising PGE electricity rates and now rising solar costs.
We sought quotes from different companies sitting through their sales pitches.
Powur presented the best education, product, service, price for the customer, and the best terms for sales and lead generation professionals such as myself. These use local vetted install teams, have the best access and pricing to top of line equipment, and the better warranty terms.
My mentors Rick and Ryan are local to us in SLO, incredibly knowledgeable and worth 15 minutes of your time to explain everything clearly. He is not always available as he is in such high demand so if you request a call, you need to show up.
California is supposed to be a leader in climate initiatives, and now they are gutting one of the most impactful carbon reduction technologies that benefit everyone. Just like rent vs. owning your home, solar is the same asset where you can own your electricity instead of renting it from PGE who have raised the rent 140% since 2000.
If you’re interested in scheduling a free solar education workshop with Rick and myself, call or text me at (805) 602-7191.
Can go over more economic specifics for your home, and show you what your solar payment would look like with a loan or cash. If you’ve received previous proposals, Powur can beat any of them in price, we’ve seen it countless times for us, our friends and family.