Key Takeaways
California has the 3rd highest residential electricity prices in the nation, and they are rising.
California has the most solar capacity in the nation at nearly 47 gigawatts.
In the mild spring when there is less demand for electricity, California can at times produce too much solar power, driving prices negative.
The excess solar power is thrown away, raising prices.
Due to a change in state law, homeowners, who had received retail prices for selling their excess solar power to the grid, now will be paid wholesale prices, which in some cases approach zero.
Homeowners could invest in battery storage to sell the power at a more advantageous time, but battery storage is extremely expensive without government incentives.
Other states are also bumping up against the limits of solar penetration, including Nevada and Hawaii as the federal government continues to incentivize solar power.
California has the third highest residential electricity prices in the country at almost 30 cents per kilowatt hour and they are rising, so one would not expect generation prices going negative when the sun is shining too much and that solar power must be thrown away. California has nearly 47 gigawatts of solar power installed that could supply a quarter of the state’s electricity if it could operate 24/7 and on demand as traditional sources (coal, natural gas and nuclear power) do. But, on sunny spring days when there is not as much demand, electricity prices go negative and solar generation must be “curtailed” or essentially, thrown away. The alternative is to store the excess power in very expensive batteries to be used when the sun does not shine or when there are heat waves or when residents come home from work and turn on their appliances in the evening.
It seems that California regulators and administrators did not study the issue in enough detail to recognize that massive incentives for solar power would eventually have diminishing returns. California was the first state to implement net metering where households got paid retail rates for excess power generated wholesale from their rooftops. The state also mandated that new homes had to have rooftop solar panels. California has now cut back incentives for rooftop solar and slowed the pace of installing panels, which will also reduce its ability to meet its renewable energy goals and cut the demand for fossil fuels by the end of the decade, including ending the construction of new gas-burning power plants which back up solar. The nation and President Biden will also face similar problems as other states build more and more solar plants and add to the nation’s fleet of intermittent and weather-driven solar power.
In 2022, the California wasted 2.4 million megawatt-hours of electricity, 95 percent of which was solar–about 1 percent of the state’s overall annual power generation, or 5 percent of its solar generation as it could not use the power at the time of generation and could not store it. Last year, the state wasted that much power in just the first eight months. To lessen the waste problem, California is selling some excess power to nearby states and is planning to install additional storage and batteries to hold solar power until later in the afternoon. The addition of transmission lines that can carry electricity to nearby regions could help — some of the lost power comes from regions where there are not enough power lines to carry the excess solar power to those who need it.
But throwing away free power raises electricity prices. California’s average residential energy price was 11 percent higher in January 2024 than in January 2023. It also undercuts the benefits of installing rooftop solar. Since the 1990s, due to California law, rooftop solar panel owners were paid about $0.20 to $0.30 for each kilowatt-hour of electricity that they dispatched to the grid. A year ago, the state changed its practice to only compensate new solar panel owners for how much their power is worth to the grid. In the spring, that value can be close to zero and may encourage solar rooftop home owners to install expensive batteries and provide power to the grid in the early evening or morning before the intense sun generates more power. California has a program to subsidize such batteries in lower-income and at-risk communities by as much as $1,000 per kilowatt hour. The compensation change, however, has resulted in California homeowners unhappy and rooftop solar companies’ businesses failing. Wood Mackenzie predicts that California residential solar installations in 2024 will fall by around 40 percent. Some state politicians are now trying to reverse the rule.
Other states, which have been slower to adopt solar, are starting to experience the same thing. Nevada, which generates 23 percent of its power from solar, is beginning to see the problem. Hawaii, which has thousands of homes with rooftop solar, has cut down on the payments those households get from the grid. Hawaii regulators also approved a program in which Hawaiian Electric paid households to add batteries to their rooftop solar systems. Many states are trying to ramp up rooftop solar power and extend its reach beyond affluent households, who can afford expensive rooftop solar systems. The Biden administration recently announced $7 billion in grants to provide rooftop solar to 900,000 low-income households, funded by taxpayers from the Democrat-passed Inflation Reduction Act.
China Does Not Have the Problem
China is ensuring an equitable mix of generating sources. It has more solar and wind and hydropower capacity than any other country in the world, but it also has more coal capacity and is still building coal units at a record pace. It is ensuring enough firm power that it expects its economy to grow by over 5 percent this year as it uses that power to process minerals and manufacture components for the “green” technologies that the West is demanding. While the United States has more coal resources than China and abundant natural gas resources, the Biden administration does not want to use these resources to strengthen the American economy and make it competitive with China. It would rather follow in California’s footsteps, subsidizing energy sources unable to make it in the market without the incentives.
Conclusion
California’s electricity prices are rising even as solar power generation goes negative during spring weather and the state has to throw away excess solar generation that it cannot use. The waste problem is growing despite the state reducing its incentives for solar power, which will reduce the state’s ability to meet its renewable goals and cut its demand for fossil fuels by the end of the decade. Solar power cannot operate 24/7 as coal, natural gas and nuclear generators do, and must be stored in expensive batteries or thrown away if it generates more than the grid can use at any one time. Careful planning can avoid such waste but California has to be the first in the nation to go “green” and be Biden’s example for other states to follow. China, for example, is buttressing its solar and wind capacity with new and existing coal plants that allow its economy to grow and provide the “green” technologies and their components to Western countries demanding them.
