Solar Continues to Shine in the Golden State

California’s Rising Utility Rates: A Renewed Call for Solar Adoption

California, already among the most expensive states for utility energy pricing, has recently experienced abnormally high grid infrastructure costs. These unexpected costs have led to extreme and unprecedented utility power rate increases, impacting residents and businesses alike. As climate change continues to strain the grid, these rate hikes who no signs of abating.

PG&E Customers Experienced a 22% Rate Hike in the first half of 2024

In early 2024, Pacific Gas and Electric Company (PG&E) surpassed San Diego Gas & Electric (SDGE) as California’s most expensive power provider with a 13% rate hike. PG&E approximately 15 million people in a 70,000 square mile area covering most of northern and central California. The utility company first proposed the rate increase in 2021, citing higher than expected wildfire mitigation costs. According to its 2023-2025 Wildfire Mitigation Plan, PG&E spent $9.3 billion more than regulators authorized on vegetation management costs during a three-year period from 2020-2022. Adding insult to injury, a separate 4.5% rate hike went into effect in March to allow PG&E to cover 2023 storm damage expenses. When combined with a jaw-dropping average price increase of 22.3% for PG&E customers since the beginning of 2023, recent rate hikes have placed an extreme strain on California homeowners and businesses. Rates are likely to go up again next year as the CPUC is allowing PG&E to request additional rate hikes in order to cover energization projects. 

Energy Prices Outpace Inflation 

Even before the devastating California wildfires of 2020-2021, energy customers in the Golden State have seen their bill prices increase aggressively. Electric rates for California’s big three investor-owned utilities (PG&E, SCE, SDGE) are among the highest in the country, with a blended average energy price of >$0.25/kWh. EnergyToolbase, an industry leading software platform for renewable energy project modeling, recently analyzed 10 years of historical energy price trends in California and published the results in a whitepaper entitled “Electric Bill Inflation in California – a 10-Year Lookback Study at Electric Cost Inflation in California’s Big Three IOU Territories.” The study found that from 2014 to 2023, utility electric bills in California rose by roughly 70%, approximately 2.5 times higher than the 28% cumulative Consumer Price Index inflation rate during the same period. The average annual price increase for commercial & industrial customers in PG&E, SCE and SDGE service territories during the 10-year study period was 5.9%, 4.8% and 8.6%, respectively. 

Average year-over-year (2014-2023) electricity price change for C&I users by utility in CA. Source: “Electric Bill Inflation in California” – EnergyToolbase Whitepaper.  

Solar is the Solution

Considering the exorbitant utility energy costs, it’s no wonder that California is the #1 state in the U.S. for total solar installation capacity by both nameplate capacity and percentage of national solar generation. Despite last year’s transition from NEM 2.0 to a Net-Billing Tariff, the economics of onsite solar for C&I users in California remain attractive given the breakneck rate of utility price escalation. Given that the recent utility price hikes have largely been put in place to recoup unexpected costs from climate disasters in the state, solar is a two-sided sword in the fight against climate change and ever-increasing operating costs. When paired with a Battery Energy Storage System (BESS), solar photovoltaic arrays can also effectively increase resiliency for businesses, as well as strategically reduce costly peak demand and time-of-use energy rates. 

Catalyze Your Business with Solar + Storage

Ready to re-evaluate onsite solar + storage as a long-term energy hedge? Did your company miss the NEM 2.0 application window and abandon its onsite renewable energy project? There is no time like the present to shield your business from recent utility rate hikes while simultaneously reducing Scope 2 emissions. Catalyze’s team of renewable developers is experienced in evaluating onsite solar + storage opportunities in California’s complex landscape and can provide your business with a comprehensive analysis to enable a quick go/no-go decision.  Contact a Catalyze energy advisor here to learn more. 

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As California’s energy landscape rapidly evolves, staying ahead of regulatory changes and understanding new opportunities is critical. Don’t let rising utility rates catch your business off guard—solar and energy storage solutions are more relevant than ever.

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