A decade ago Greg Sparks and his wife put 20 solar panels on the roof of their home in California’s Sacramento Valley, hoping that using sunlight to power their electrical needs would reduce their utility bills and help the planet.
“My assumption was that (electrical utility) rates will go up,” Sparks said. “And it was just the right thing to do.”
The panels paid off. Sparks estimates his neighbors now pay about $250 a month for electricity, while his monthly bill is zero. Sparks is one of roughly 1.8 million homeowners who have helped make California a national leader in the adoption of residential solar, typically installed on rooftops.
From 2015 to 2023, California’s small-scale solar capacity, generated largely from residential rooftops and shared community panels on rooftops and solar farms — rose roughly six-fold, according to data from California’s three largest electric utilities. Nationally, small-scale solar capacity grew nearly five-fold over that time frame.
But while supporters champion the benefits of residential solar, including a reduction in reliance on polluting fossil fuels and lower bills, critics say the systems that save money for individual homeowners cause costs to rise for those without the systems as increased rooftop solar creates challenges for utilities that must maintain the stability of a power grid infrastructure with fewer paying customers.
Now, the popularity of residential solar is seeing a steep reversal due to shifting state and federal policies driven by powerful utility interests. And while some say the decline is simply a mild adjustment, others fear the market for residential solar may be on the brink of a long-term slide.
Forty-two states saw a decrease in residential solar installs last year, with residential solar capacity down 39%, according to the most recent report from the US Department of Energy’s National Renewable Energy Laboratory (NREL). In the first quarter of 2025, the trend continued: residential solar installs declined 13% compared to the first quarter of 2024. More than 100 solar companies filed for bankruptcy in 2024.
The decreases in home solar installs started before the Trump administration took office in January, but are expected to accelerate given the administration’s moves to gut key clean energy programs and wipe out tax credits for residents installing solar panels, according to analysts. “It’s not looking good. I don’t know how long I’ll take for it to recover,” Grace Wu, an assistant professor in the environmental studies program at University of California, Santa Barbara, said.
California, the leader in adoption, now is leading the reversal. The state accounted for roughly 48% of last year’s nationwide decrease in residential solar installations.
The backpedaling is angering environmental advocates who say every possible solar panel is needed to reduce harmful greenhouse gases generated by traditional energy sources.
“California leaders have basically turned their back on rooftop [solar energy],” Dave Rosenfeld, executive director of the Solar Rights Alliance, said. “As a result, we’re going backwards.”
A charged debate
Overall, solar energy capacity continues to grow in the US, but most of that growth is generated by utilities installing their own solar panels. In 2024, US utilities increased installed solar capacity 60% compared to 2023. Solar power production increased by 25% in 2024 over the previous year, according to the US Energy Information Administration (EIA).
The agency forecasted earlier this year that other energy sources will remain at the same capacity over the next couple years while renewables, specifically solar, will “drive the growth of US power generation.”
Last year, 24 states generated more than 5% of their electricity from solar — California generated the most at 32.4%. These two divergent paths for solar energy generation — increasing at utilities and lagging at homes — is fueling a national debate over the path forward, and nowhere is the debate more charged than in California, the state with the most solar energy, capacity, potential and controversy.
The debate largely boils down to who should pay — and how much. California utilities and regulators argue that incentives for residents with home solar cost residents without solar more than $8.5 billion in electric bills last year. But solar advocates say that number is wrong and there actually is a $1.5 billion net benefit.
Amid the debate, utility rates are rising. The average cost of electricity for US consumers is 5.5% higher today than last year, and an estimated 59 electric and gas utilities raised or are proposing to raise utility bills this year — representing a nearly $38.3 billion increase for consumers.
A July analysis from the non-partisan think tank Energy Innovation predicts new federal policies will increase rates another 9% to 18% by 2035.
In August, the US Environmental Protection Agency (EPA) announced it was ending a key federal program known as Solar for All, which had earmarked about $7 billion for installation of rooftop solar at an estimated 900,000 lower- and middle-income households.
“California leaders have basically turned their back on rooftop [solar energy].” Dave Rosenfeld, Solar Rights Alliance
Calling the program a “boondoggle,” EPA Administrator Lee Zeldin said the agency no longer has the authority or the funds to administer the program. The move followed the passage of the Trump administration’s “One Big Beautiful Bill,” which makes significant cuts to solar incentive programs — including ending a tax credit that allowed homeowners who installed solar to deduct 30% of the system’s cost from their taxes.
For Shelly Lyser, the program manager for electricity pricing & customer programs at California’s Public Advocates Office, whose mission is to lower bills for California utility customers, rooftop solar is an important part of the energy mix, but she said rooftop customers need to pay the cost of their service on the grid.
“We believe in having a program where you can have rooftop solar where customers are getting incentives that encourages development … but isn’t six times as expensive as other renewables,” she said.
A long battle
The battle over residential solar began more than a decade ago. In 2012, the Edison Electric Institute (EEI), an association that represents US investor-owned electric companies, had an executive meeting that focused on how to keep making money as more and more residents installed rooftop solar. One bullet point from a presentation made the challenge clear: “How do you grow earnings in this environment?”
That EEI meeting was the unofficial beginning of a campaign: More than a decade ago utilities, often working through EEI, started to change their messaging about rooftop solar. They pushed this message through PR firms, lobbied regulators and lawmakers using model legislation and funded community organizations to amplify talking points about how residential solar shifts costs to those without solar at their home. (EEI did not return requests for a comment.)
The messaging has been a key factor in the current slump hitting rooftop solar, according to solar advocates.
One of the key wins for the utilities came in 2022 in a policy called NEM 3.0 (short for net energy metering). Under NEM 3.0, California regulators slashed rates paid to customers with solar installations for their excess energy by around 75% from previous rates under NEM 2.0, with the idea that it would make bills more affordable for all customers. The change was for anyone who installed solar at their home after April 2023 — while those with it installed before that would get the previous rate for the length of their contracts.
Some major environmental groups — including the Natural Resources Defense Council — agreed with the need for reform, even if they didn’t agree with all of NEM 3.0 changes.
Lyser said NEM 3.0’s intent was to prompt more solar storage — not kill rooftop solar — by making midday solar exports less valuable and evening power more lucrative. “What we most need is to reach those goals as renewables during the peak period of 4 o’clock to 9 o’clock at night, which obviously solar can’t always fill… so you need solar paired with storage,” she said.
“We believe in having a program where you can have rooftop solar where customers are getting incentives that encourages development … but isn’t six times as expensive as other renewables.” -Shelly Lyser, California’s Public Advocates Office
Lyser attributed the downward trend in rooftop solar installation in 2024 to a surge in installations in 2023.
The encouragement for more storage appears to be working.
Terrie Prosper, director of strategic communications for the California Public Utilities Commission, which has authority over the state’s investor-owned utilities, said “the percentage of solar installs that now include battery storage is up to 60% of rooftop solar installations as of 2024 in comparison to 10% under NEM 2.0,” citing a Lawrence Berkeley National Laboratory May report.
Elaine Kahan, a California Energy Commission spokeswoman, said while rooftop solar is an important part of the state’s resource portfolio, “it comprises a small portion compared to utility scale solar.”
She said early data trends from the commission for the first quarter of 2025 show residential solar rates closer to what they were four years ago before the slump.
But NEM 3.0’s future hangs in the balance: the California Supreme Court in August sided with environmental groups who challenged an earlier ruling on NEM 3.0 and the state’s Court of Appeal will rehear the case. While rooftop solar’s spread in California could hinge on that decision, the arguments that underpin it — how to properly and fairly incentivize and compensate rooftop solar energy — continue.
Cost-shift controversy
Lyser said her office calculates residential solar’s value by crediting avoided costs such as generation, distribution and emissions and then subtracting what solar customers still impose on the grid: fixed costs, backup capacity, maintenance, nighttime use. The gap is what they call the “cost-shift.” The Public Advocates Office estimated an $8.5 billion cost-shift in 2024 to utility customers without rooftop solar.
Prosper said this accounts for approximately 21% to 27% of the average non-solar customer’s bills.
“If your usage goes down to zero, that doesn’t mean the grid isn’t still paying for you to have power at night, when it’s cloudy, or for the basic maintenance of the grid,” Lyser said.” “If you’re avoiding all those costs, then other customers are paying for that.”
But Nathan Phelps, the managing director at Vote Solar’s regulatory advocacy hub, said the cost-shift argument is misleading. “When you just focus on cost, you’re not talking about benefits provided. When we see local solar deployed, not just solar customers benefiting, everyone benefiting … when we suppress (energy) demand, we alleviate the need for expensive new projects.”
A counter analysis in February from the California Solar & Storage Association alleged the $8.5 billion cost-shift estimate is “error-ridden and takes an analytical approach that does not match the technical questions they purportedly seek to address.”
“Correcting their analysis changes the $8.5 billion cost shift to a $1.5 billion net benefit,” the report said, alleging the state analysis assumes customers are obligated to buy all of their electricity from the utilities, ignores that solar installed in low-income homes reduces subsidies needed, “intentionally ignores” that the average customer with home solar still pays $80 to $160 a month, among other alleged errors.
The report found that utilities’ spending — and incentives for spending — are a major driver in the state’s rate spike, citing data that utilities’ spending on grid infrastructure such as poles and transmission lines has increased between 130% to 260% for each of the state’s utilities over the past eight to 12 years.
Over the same time, customer rates have increased at a high rate: At three of the state’s largest utilities PG&E, SDG&E and SCE rates increased 104%, 81% and 74%, respectively.
“It’s really in crisis proportions,” said Brad Heavner, executive director of the California Solar & Storage Association. “About a fifth of all Californians are behind on paying their utility bills.”
Record profits
David Feldman, an energy researcher and analyst at the National Renewable Energy Laboratory, said “a lot of utilities are trying to make good faith efforts to support rooftop solar” but for investor-owned utilities “it’s not just that they care about the operations of the grid and having reliability and stability … they have to make a profit.” And many utilities are incentivized to spend to make that profit.
In California, for every ratepayer dollar spent on transmission and distribution, utilities earn a guaranteed profit of roughly 10%. PG&E, the state’s largest utility, had record profits in 2024 at roughly $2.47 billion. It was its second straight year of record-breaking profit.
“Electricity prices are so high because of utilities spending increases on poles and wires and other infrastructure,” Rosenfeld said.
The spending trend is national: spending by major US utilities to produce electricity decreased 24% from 2003 to 2023, according to federal data. However, over the same time period, utility spending to transmit electricity nearly tripled over this time and spending to distribute energy increased 160%. “Capital spending on overhead lines, poles and towers increased the most,” according to the report. Just a little over 1% of utilities’ infrastructure costs over this time were on customers’ property, including meters and rooftop solar installations.
“When you just focus on cost, you’re not talking about benefits provided. When we see local solar deployed, not just solar customers benefiting, everyone benefiting.” – Nathan Phelps, the managing director at Vote Solar
In California, utilities point to wildfire risk as causing a spike in spending — with customers paying an estimated $35 billion in wildfire-related utility costs since 2019.
Lyser said reports like the California Solar & Storage Association’s ignore that even customers with net-zero usage still rely on the grid for backup, maintenance and reliability. “And rooftop solar customers trend much wealthier compared to other customers, and so we do see this as an equity issue,” she added.
However, when looking at household income, the largest group in California that has solar energy at their homes is households making between $50,000 and $100,000 a year, according to the Lawrence Berkeley National Laboratory.
“Sixty percent of all rooftop solar users in California are middle and working class,” Rosenfeld said, referring to households making less than $150,000 a year.
Households making less than $50,000 a year, however, do have the lowest rates of solar at their home, representing just 12% of the state total, but behind the rate (14%) for the highest earners making more than $250,000 a year.
“The idea that now is the time to eliminate solar when the most vulnerable populations could now most benefit from solar is backwards … we’re seeing more equity in solar happen,” Phelps said.
Rosenfeld said these arguments didn’t happen by accident. California utilities donated roughly $212 million in campaign contributions over the past 25 years — including $2.6 million to Governor Gavin Newsom.
“Newsom has taken more money from the utilities than [former governors] Schwarzenegger and Brown combined,” Rosenfeld said. “And you can see that in the direction that his administration has gone in rooftop solar.”
Governor Newsom’s office directed questions about residential solar to the state’s Energy Commission and Public Utilities Commission.
While the fate of NEM 3.0 rests in the courts, other battles continue: just this summer California Assemblymember Lisa Calderon put forth a bill that would have broken more than two million contracts backed by the state that guaranteed solar systems installed at homes had a 20-year net metering plan with utilities, regardless of whether the home was sold. The bill was defeated.
“The new administration turns right around in less than two years after promising these people that their contract was going to be safe and push a bill to break the contract,” Rosenfeld said. “We defeated that effort, but it took a massive effort.”
“The sun is going to keep shining”
Despite headwinds, many advocates of rooftop solar remain convinced it is the long-term answer to consumer energy demands.
“The sun is going to keep shining and utility bills are incredibly high,” Heavner said. “Solar is still a very good investment for customers.”
Phelps said residential and rooftop solar can be much more nimble with urgent energy needs.
“When it comes to large scale projects, when they come online – it’s a large amount of solar coming online at once but there are also delays in those projects,” he said. “Large projects can take years, local solar can take just months.”
California alone has the potential to produce more than five times more energy from solar on rooftops and in parking lots and commercial buildings, according to estimates.
Phelps said there are a couple states that have found ways for rooftop solar to fit better within the utilities’ best interest. In 2021, Hawaii, for example, adopted “performance-based regulation,” which ties utility revenue to performance on things like reliability, cutting bills and expanding clean energy rather than the previous spend more, earn more model.
Hawaii saw a 7.5% increase in solar systems, most of which are residential. Dozens of other states — including New York, North Carolina and Minnesota — have adopted some performance-based regulations or are considering it.
But performance-based regulation is imperfect. Hawaii still has some of the highest electric bills in the nation, however, the state’s utility commission estimates the performance-based changes will have saved customers more than $70 million over the past four years.
Sparks, the Sacramento Valley resident with rooftop solar, said he hopes that even with reduced incentives his fellow neighbors can find ways to take advantage of rooftop solar’s benefits — for their bills and for the planet.
“We’re just trying to do what we can to reduce our carbon footprint and this is one of the easiest ways that it can happen,” Sparks said.
(Featured image: Getty Images/Unsplash +)
