What's Happening in California?... Outlook for US Solar Industry This Year 'Cloudy'

California, the largest green energy market in the United States, has significantly cut subsidies for rooftop solar panel installations last year, causing related companies to struggle, the New York Times (NYT) reported on the 14th (local time). California is the state with the most proactive green energy promotion policies in the U.S. The industry expects the solar energy market size to shrink this year due to the policy changes in California.

Since April last year, California reduced credits provided for excess electricity produced by households installing solar panels on their roofs by up to 75%. The existing solar panel credit system resulted in excessive benefits going to wealthy households, which in turn caused low-income households unable to afford panel installation to bear more of the costs to maintain the state’s electrical system, according to California state authorities.

California became a "green energy paradise" after then-Governor Arnold Schwarzenegger strongly promoted solar energy use in the early 2000s. After reaching the government goal of one million rooftop solar panel installations in 2019, the number has now increased to about 1.8 million, accounting for approximately 10% of the electricity produced in California.

However, the solar industry has been facing operational difficulties following the state’s subsidy cuts for solar panels. Sunrun, the largest residential solar company in the U.S., laid off 2,000 employees after the California government implemented the policy. Solar installation company Construct Sun announced it would cease operations in California just four months after the subsidy cut policy took effect, instead focusing on businesses in Florida, North Carolina, and Ohio.

According to solar market research firm OMM Analytics, rooftop solar panel installations in California plummeted by 85% after the credit cuts. The solar industry predicts a 40% decrease in installations within the state this year, with this downward trend expected to continue through 2028.

The solar industry is seeking new opportunities by encouraging savings methods such as installing charging batteries alongside solar panels in homes and businesses. According to the NYT, the proportion of consumers purchasing solar panels with batteries increased from 5% before the policy implementation to as much as 50%. However, since solar panels with charging batteries are 1.5 times more expensive, it is expected to be difficult for customers to proceed with purchases and installations in the current high-interest-rate environment.

According to the Solar Energy Industries Association, the rooftop solar panel industry grew by 13% last year but is expected to decline by 11.5% this year. The NYT reported that "this decline is due to California’s policy changes." Analysts suggest that California’s green policies, which aim for carbon neutrality by 2045, have hit a roadblock.