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California’s New Solar Policy to Cut 2024 Solar Market in Half

published: 2022-01-27 9:30

According to a report from the energy consultancy company Wood Mackenzie, the regulations on the new solar encouragement plan from the California Public Utilities Commission (CPUC) may cut the solar market of the state in half during 2024.

CPUC swung a heavy punch at the solar encouragement mechanism on December 13th 2021, where the new NEM 3.0 also adds US$50-80 of electricity tariffs each month for users, aside from the additional US$8/kW of grid maintenance cost per month. 

The recycle period for solar systems has extended as a result of amplified cost. As indicated by Wood Mackenzie’s analysis on the tariffs charged by the two public utility companies PG&E and Southern California Edison in California, the change to the regulation will elevate the payback period from 5-6 years to 14-15 years. Analyst Bryan White commented that the payback period will exceed 10 years under NEM 3.0 for these two aforementioned companies, which lowers the willingness of investment in solar systems for clients, and decreases the degree of participation of installers.

Should the new regulation come into effect, the residential solar installed capacity of California will be reduced by 42% between 2022 and 2023, before another decrement of 10% in 2024, when the annual installed capacity of residential solar would only be half of that of 2021, and become the lowest level since 2014.

Given that California had served as a leader in renewable energy construction in the past, and that the adverse effects of the NEM 3.0 policy are also likely to spread to the entire country, the proposal of CPUC is strongly opposed by various solar companies, renewable energy advocates, and even the governor.

CPUC will be consulting with various major electricity companies, solar industrial representatives, and consumer groups, before deciding on the final proposal on 27th this month.

With that being said, potential risks for the solar industry not only include the new NEM 3.0, but also the Investment Tax Credit (ITC), which is expected to reduce starting from next year, and the two aforementioned implementations will establish an extremely hazardous commercial environment for a certain period. White commented that numerous solar companies will not be able to survive under the simultaneous impact, and a consolidation wave is expected to be seen from the shrunken residential solar market in California.

 (Cover photo source: pixabay)

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