Environment & Science

Sales of rooftop solar see drop in California

A SolarCity employee installs a solar panel on the roof of a home in Los Angeles in 2014.
A SolarCity employee installs a solar panel on the roof of a home in Los Angeles in 2014.
Bloomberg/Bloomberg via Getty Images

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California saw installation of rooftop solar panels plummet during the first three months of this year, according to new data from a clean-energy analyst.

The numbers from Greentech Media (GTM) show residential solar installations in California fell more than 30 percent in the first quarter compared to the same period last year.

The state also captured its smallest share ever of national solar installations in the first quarter - 35 percent versus 42 percent in the first quarter of 2016. 

Overall, national installations fell 11 percent with the drop in California -- the leading state for solar energy -- playing a major role. Austin Perea, a solar analyst with GTM, predicts the decline in installations will continue. 

"We are anticipating annual installations in California to drop in 2017, really for the first time since we've been tracking the market," he said.

Solar installations in California fell significantly from Q4 2016 to Q1 2017.
Solar installations in California fell significantly from Q4 2016 to Q1 2017.
GTM Research

Perea said some of the drop in installations has to do with the new way solar is sold. Big installers are now pushing homeowners to buy panels themselves rather than leasing them. 

Installers are betting that the new business model will yield bigger profits because they plan to take on the role of lender, offering homeowners financing to buy the panels. Under the old model, revenue came from lease payments. 

"It's a very easy way to get solar onto rooftops, but it isn't great from a cash-flow perspective," Perea said of the old model. 

Panel leasing made up 50 percent of solar sales at the beginning of 2016 - but today, it's dropped to 35 percent. Perea says the new system is meant to bring in more revenue for the companies, but right now it's costing them sales instead. 

And California is ground zero for the outcome of these changes. "When we see such an outsized reduction from these large national installers, it really has an outsized impact on the state," he said. 

California is also switching to a new formula by which utilities rebate solar homes for excess energy they send to the grid. The new formula will likely reduce those rebates, making solar panels less attractive. 

Solar homes will likely receive less money for excess energy sent in the mornings and evenings, so-called "time-of-use" rates. These rates are still being figured out by utility companies, so solar installers can't quote them to potential customers - which might be turning them away, Perea explained. 

New solar customers will also pay a one-time "interconnection fee" of between $75 and $150 -- depending on the utility  --  to connect solar panels to the grid. 

And new "non-bypassable charges" will add 2 to 3 cents per kilowatt hour of energy that solar residents buy from their utility company.

Yet part of the dip in installations in the first quarter can also be explained by rain.

The past winter's storms made it harder to both install and sell solar panels, said Bernadette del Chiaro, executive director of the California Solar Energy Industries Association.

"If you're in the construction industry, that actually puts a damper on the ability to get up on a roof and make an installation happen," she said. 

But even with lower rates in the first quarter, California still made up more than a third of national solar installations, according to GTM.