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Q1 2023
Rooftop Solar Outlook
March 22, 2023
California NEM 3.0 highlights long-term state policy risks
US rooftop solar installations have grown at an impressive 23% compound annual growth rate over the last four years, enabled by rising utility rates, low interest rates, and supportive policy. However, growth is poised to slow beginning in 2023 as recent interest-rate increases affect customer payback periods and state policy changes—namely California's Net Energy Metering 3.0 program—come into effect. California's changes center on the practice of net metering, where rooftop solar customers receive credits from their utility for electricity exported back to the grid.
We expect net metering to remain in the regulatory crosshairs as rooftop solar penetration increases in the coming years. While rising utility rates and supportive federal policy (the Inflation Reduction Act) provide tailwinds for long-term growth, investors may be overlooking the potential for further state policy changes. We see a rollback in state policies like net metering as inevitable as regulators seek to balance paying for the electric grid with higher levels of rooftop solar penetration.
US rooftop solar installations have grown at an impressive 23% compound annual growth rate over the last four years, enabled by rising utility rates, low interest rates, and supportive policy. However, growth is poised to slow beginning in 2023 as recent interest-rate increases affect customer payback periods and state policy changes—namely California's Net Energy Metering 3.0 program—come into effect. California's changes center on the practice of net metering, where rooftop solar customers receive credits from their utility for electricity exported back to the grid.
We expect net metering to remain in the regulatory crosshairs as rooftop solar penetration increases in the coming years. While rising utility rates and supportive federal policy (the Inflation Reduction Act) provide tailwinds for long-term growth, investors may be overlooking the potential for further state policy changes. We see a rollback in state policies like net metering as inevitable as regulators seek to balance paying for the electric grid with higher levels of rooftop solar penetration.