CPUC has finalised details of its community solar, which has been dismissed as 'unworkable and destined for continued failure' by CLASS.
Why it matters: If your local regulator starts talking about 'avoided cost' models for energy communities, start pivoting your pipeline—it’s a signal that utilities have won the lobbying war.
California just gave a masterclass in how to kill a market while pretending to support it. By finalizing a community solar framework that ignores the Net Value Billing Model favored by developers and instead leans on a complex, utility-friendly avoided-cost structure, the CPUC has effectively ensured that third-party projects will never pencil out. For those of us across the Atlantic, this isn't just 'US news'—it is a cautionary tale about utility capture that is currently being mirrored in several EU member states.
The 'Avoided Cost' Trap
The core of the failure lies in the compensation mechanism. When a regulator ties solar value to 'avoided costs'—the price the utility claims it saves by not buying power elsewhere—they are letting the fox guard the henhouse. We’ve seen this pattern in Spain and Italy. If the rate doesn't account for the grid resilience and the avoided transmission upgrades that decentralized PV provides, the LCOE will always sit uncomfortably close to the revenue line. In California, this decision protects the rate base of giants like PG&E, but it leaves developers with a project that no bank will touch because the margins are razor-thin and the regulatory risk is sky-high.
A Warning for EU Energy Communities
Under the EU’s RED II and RED III directives, member states are mandated to create frameworks for Renewable Energy Communities (CERs). However, look at the friction in Italy with the GSE’s delayed implementation or the bureaucratic hurdles for Mieterstrom in Germany. The California 'failure' proves that 'legalizing' community solar isn't enough; if the tariff structure doesn't offer a clear, 15-year predictable upside for the subscriber, the model dies.
Don't get distracted by the 'green' rhetoric from Brussels. If the math doesn't work for a pension fund looking for 6-8% yields, the project is just a hobby, not a business.