California regulators are looking into proposed changes to the solar incentive program. These would decrease California’s solar market by 50%, according to Wood Mackenzie.

California Public Utilities Commission proposed decisionOn Dec. 13, the proposal would decrease payments for solar customers that generate more power than they use. This is called net-energy billing. This proposal will also increase monthly hook-up costs for customers.

This could increase the solar system’s payback time, which is the amount of time it takes to make the system pay off. If you are considering rooftop solar, it is important to consider this number.

Wood Mackenzie’s review of the charges from found that the proposed changes could increase the payback time by more than doubling it from 5-6 years to 14-15 years. PG&ESouthern California Edison (the state’s largest utility company) and Southern California Edison (the state’s other two largest utilities companies).

Bryan White, coauthor of this report, stated that both utilities’ payback times under NEM 3.0 are significantly longer than the 10-year threshold. Beyond this threshold customers will not be as inclined to invest and installers won’t want to make a profit on solar projects.

According to the firm, state residential solar capacity will drop by 42% and 20% in 2022-2023 respectively and 10% in 2024. This year’s new residential solar installed capacity will fall to about half the volume of 2021, its lowest annual output since 2014.

California is a leader in renewable energy buildingout. The updated NEM policy will have “major consequences” for all of California.

The proposal of the CPUC has been met with strong opposition by solar businesses, renewable advocates, as well as even some politicians. Governor Gavin Newsom.

Although the final decision was to be made on January 27, it has now been postponed. CPUC is not binding on the December proposal. The commissioner responsible for the decision was also removed.

Another blow to the sector is the upcoming decrease in the Investment Tax Credit. It supports renewable energy projects. Part of the Build back Better plan was an ITC extension. The ITC was previously supported by both parties and extended last year under Trump’s administration. This means that it can still be extended with or without the Build Back better plan.

White stated that “Ultimately the NEM 3.0 PD will cause a difficult business environment in near-to-mid-term.” The double-whammy policy headwinds will cause many solar firms to fail, leading to consolidation of the California residential solar market.