California’s Next Great Energy Innovation: Use the Resources We Already Have

Back Commentary Apr 18, 2016 By Hayes Barnard

California leads the nation in harvesting the sun’s energy. We boast more rooftop solar installations, more installed solar power generation capacity and more solar jobs than the next several leading states combined.

This is a very good thing. Unlike fossilized generation, installed solar panels require no fuel or water to generate electricity. Rooftop solar creates more jobs per unit of energy than any other energy source. Distributed solar turns unused real estate — rooftops — into clean power.


A series of technical, financial and regulatory innovations have spurred the Golden State’s solar revolution thus far, but it’s still in its infancy. If California truly wants to unlock solar’s potential for the economy and environment, electricity providers and regulators will have to work together to create a cleaner, more resilient grid.

Up until the last decade, solar technology was simply out of reach for the average American homeowner, because very few had an extra $25,000 or more to spend on solar arrays. But the economic barriers to using solar power have been obliterated: Innovative solar service agreements and financing allow customers to pay for the power that their rooftop panels produce each month, rather than having to pay upfront for the entire system. Solar-as-a-service suddenly made going solar as easy as signing up for utility services or cable TV.

Equally as important, “net metering” became the key policy in every state that would develop a thriving rooftop solar industry in the U.S. Net metering gives solar customers credit for the electricity they provide to the grid when their solar panels are producing more power than they are consuming on site. California enacted its net metering policy 20 years ago, and now more than 40 other states have adopted their own net metering policies.

With those two key barriers out of the way, solar started to take off. More than 450,000 homes, schools, churches and businesses have gone solar. As of November 2015, California’s solar industry employed more than 75,000 people — more than the state’s five largest utilities combined. Best of all, that economic growth is spread across the state — a rooftop solar installation by definition occurs locally, and so do the jobs created by it.

Even positive changes often need a nudge to get started

Of course, those who benefit from the way things used to be will resist even the most positive change. The status quo beneficiaries of the current electricity regime—utilities and fossil fuel interests — feel threatened by rooftop solar, because rooftop solar is in many ways the first competition they’ve ever faced.

We’ve seen this before. Two decades ago it happened to our telecommunications system. In the early 1990s, cellphones were a niche novelty, limited by the fact that in a monopoly territory system, a phone that worked in Manhattan might not work across the river in New Jersey. In 1996, the Federal Telecommunications Act opened telecommunications up to competition — despite fierce opposition from the monopoly telecom industry — and allowed wireless providers to enter the telecom space and compete for customers.

The Telecommunications Act paved the way for the ubiquity of cellphones today. The landmark regulation created competition that eventually spurred once-in-a-generation technological innovations: the invention of smartphones, a multi-billion dollar smartphone app sector, competitive pricing options for consumers, and other variations driven by the demands and interests of newly liberated customers.


Across the country, the utility industry is still catching up to these developments, and in many cases is actively resisting competition and innovation. California itself is not devoid of rearguard monopoly interests, but the moral imperative to move beyond an antiquated power grid and its dirty energy is stronger than ever. The path to a brighter energy future is laid out in front of us if we are willing to follow it.

In January of this year, California’s Public Utility Commission took a bold step to sustain the state’s solar momentum by preserving a net metering policy, even as incumbent opponents discouraged it. The CPUC’s decision builds on the mounting national and global consensus that we need more clean energy, not less. That’s the clear message we heard when 192 countries reached a historic climate change agreement in Paris last year, and as both U.S. political parties came together in Washington, D.C. to extend tax credits for wind and solar power.

Now is the time to pursue the next wave of technology and policy innovation that will push California’s solar leadership even higher.


Unlocking that clean energy innovation will require a paradigm shift in the way we think about our power grid and the financial incentives of incumbent utilities. Today the utilities’ financial incentives are not geared toward promoting distributed energy resources like rooftop solar — even if those DERs can provide cost-saving benefits to the utility, such as reducing peak electric demand, shoring up the voltage of electricity flowing through the system, and extending the lifespan of power distribution equipment in neighborhoods. Instead, utilities are strictly rewarded for building and owning large, expensive infrastructure; they pass on the full costs to customers and also collect a generous rate of return.

An electric grid embracing rooftop solar and storage offers a substantially better economic alternative to today’s centralized grid design. If California were to proactively adjust its grid strategy to accommodate DERs, the state would unlock billions of dollars in cost savings and societal benefits. To accomplish this, we’ll need to change the way utilities are compensated to incentivize them to take advantage of rooftop solar, instead of making costly investments in fossil fuel-based infrastructure. Once utilities are incented to incorporate DERs, they will begin to plan for them as they plan for other generation infrastructure today.

California has been at the forefront of a range of technology revolutions, from the semiconductor to the personal computer and the Internet. Californians have never allowed the status quo to rule when the opportunity for innovation exists. By leading on utility reform, California will not only accelerate an industry, it will show the nation how to address one of the greatest challenges to the future of humanity.