With California’s clean energy landscape constantly evolving, and the recently passed One Big Beautiful Bill Act (OBBBA) bringing even more uncertainty for renewable energy projects across the nation, public agencies are left struggling to adequately and efficiently adjust to rapidly changing regulations, standards, and programs. Decision-makers at municipalities, school districts, and community college districts are often asking the question: is solar still a viable solution for meeting energy goals and reducing costs?

Powering K-12 and Higher Ed

In our May 2025 webinar, “Is Solar Still Economical: Powering K-12 and Higher Ed in California,” we joined up with the School Project for Utility Rate Reduction (SPURR) and the Community College League of California (CCLC) to address this question with a panel of experts. And the general consensus: “The answer is yes, but it depends,” said Kevin Flanagan, Lead Program Manager for SPURR’s REAP Program.

The panel, moderated by Jacob Hoheim (Senior Director of Origination, DSD), included experts Natalie Sidarous (Senior Director of District Services, CCLC), Kevin Flanagan (REAP Program Manager, SPURR), Tom Burke (Former Chancellor and Chief Business Officer for Kern Community College District), and Dan Smith (Vice President of Markets, DSD) to discuss the mandates and regulatory challenges schools are facing. Panelists offered actionable solutions to navigate these hurdles, as well as considerations and best practices for solar project deployment.

The shifting solar landscape

The past few years have brought unprecedented challenges for distributed generation (DG) solar deployments in California. The state’s Net Energy Metering (NEM) program has transformed, while utility rates have continued to skyrocket (see Figure 1) and sustainability mandates continue to push organizations toward the adoption of renewable energy.

With the market becoming dramatically more complex, schools and community colleges need to take a more strategic and site-specific approach than ever before. The days of one-size-fits-all solar solutions are largely gone, and public agencies need to define and understand their specific goals to better determine whether solar is a viable method to meet them.

Understanding the new rules of the game

Net Energy Metering 3.0 fundamentally changed how solar energy is compensated in California. The shift from NEM 2.0 to NEM 3.0 introduced a significant reduction in the compensation for exported solar energy back to the grid, making it more important for not just schools and colleges, but all DG solar customers to right-size projects. “The short story is that the older, more favorable rules for solar – Net Metering 1.0, Net Metering 2.0 – those are being phased out, and utilities have introduced a new sort of regime of solar rules that just, quite frankly, aren’t as friendly towards solar projects,” said Flanagan.

While some projects were grandfathered into NEM 1.0 and 2.0 programs, these program benefits are being phased out. Moreover, original projects deployed under NEM 1.0 or 2.0 are reaching expiration of their 20-year net-metering agreements, meaning those older power purchase agreements or equipment lease contracts will now need to be carefully evaluated or potentially restructured to remain economical as they expire and transition to NEM 3.0.

The strategy has shifted from simply generating as much solar as possible, and exporting the excess generation back to the grid, to now maximizing on-site energy consumption or reducing project sizes to save on costs and meet site specific needs.

A potential silver lining? “Utility rates have skyrocketed, and so that kind of levels out the playing field,” said Flanagan. While not optimal for many utility customers, higher utility rates have become a powerful counterbalance. “Rates have escalated way faster than people can really bear,” Dan Smith noted, adding, “the CPUC has projected additional rate increases of 20 to 49% over the next two to three years” (see Figure 2). This dramatic rise makes solar an increasingly attractive option for cost-conscious public agencies looking to source their own energy.

“Rates have escalated way faster than people can really bear. The CPUC has projected additional rate increases of 20 to 49% over the next two to three years.”

While NEM 3.0 adds a level of complication to making projects pencil, tailoring projects to optimally meet site demands, or even implementing energy storage solutions to store the excess generation instead of exporting it back to the grid, can help make these deployments economically viable.

Sustainability is more than just a checkbox

Public agencies aren’t just looking at solar for cost savings and clean power. Sustainability mandates are a big market driver with the California Community Colleges Chancellor’s Office setting ambitious targets of reaching 50% renewable energy by 2030 and 100% by 2035. Also, CALGreen building requirements now mandate solar and energy storage for new construction and major renovations for K-12 and community college districts.

But it’s not just about meeting the state’s requirements. There’s growing pressure from students, staff, and local community members pushing for more meaningful sustainability efforts. As Flanagan observes, “We see groups showing up at board meetings more and more asking for this kind of stuff.”

Considerations for getting started

For public agencies getting started on their solar journey, panelists agreed that sharing data was critical, and the more granular the data, the better. Sharing as much data about your facility as possible helps relevant partners and stakeholders understand site-specific needs and potential implications of the project upfront. In regards to shifting policies, Sidarous added, “The best thing we can do right now is just preparation, planning, analysis and keeping an ear to the ground, as things are changing outside of our control.”

Facility managers need to think carefully about where solar can physically go and how that fits into overall goals. Parking lots often offer a good solution for solar deployment, while rooftops can sometimes present issues with permitting approvals, the life of the roof and structural integrity, and voided warranties. Having these conversations early on internally can help the process get started much quicker.

For public agencies, it’s also important to consider whether you’re planning to own the solar system or leverage a contract structure such as a power purchase agreement (PPA) to purchase clean energy from the solar project. By taking advantage of a PPA, schools and colleges can avoid the upfront capital costs associated with owning the solar system and can lock in an energy rate for 25 year terms, avoiding increases across utility rates (see Figure 4). Typical utility cost inflation is forecasted at 3%, which could result in unprecedented utility rates in 20 years, making PPAs an attractive option to mitigate the risk of higher rates (see Figure 3).

“What a solar developer should be doing on any project is evaluating the expected solar production for every hour in the year against your utility consumption for every hour in the year,” said Smith. He recommended that, when going through the development process, schools and community colleges need to ensure a detailed energy consumption analysis is conducted to help determine the appropriate size of the system to best meet the school’s needs, as well as whether it makes sense to leverage energy storage at the site. Battery storage has become more than just a project add-on, proving to be a critical component of a comprehensive solar strategy providing more flexibility and future-proofing against potential regulatory changes.

Schools and colleges often don’t have the expertise to understand the full regulation landscape and project structures on their own, to which Burke emphasized, “You want to bring in experts in this field.” Sidarous echoed this point, stating that when it comes to determining site specific needs, “you need someone who’s going to be careful and detailed in that analysis.” Working with experienced partners can help guide schools and community colleges in making these decisions, evaluating the right project types and offtake structures to best meet their goals.

Navigating board approval

Successful proposals require schools and community colleges to conduct detailed feasibility studies and comprehensive economic analysis, as well as clearly communicate the long term value of the project and transparently assess the risks. Therefore, success requires a laser-focused approach, and Burke shared the need for thorough analysis to be conducted. “You have to make sure that you have dotted all the “I’s” and crossed all the T’s,” he advised.

Having deep experience from a Chief Business Officer perspective, Burke shared additional advice: “Another thing that can be helpful is if this board has a finance and audit subcommittee that the proposals and the feasibility study can be brought forward to… it helps facilitate the full Board moving forward with the project.”

What public agencies need to know about OBBBA

Even after accounting for all these state specific nuances to deploying solar, many public agencies are left scratching their heads at the industry’s next major hurdle. The recently passed OBBBA plans to strip future solar projects of vital federal incentives that have helped spur a lot of the renewable energy industry’s recent growth. While new federal policies present a big obstacle, it’s just one of many challenges the industry has faced over the last few decades, and our experts are confident that solar and storage projects will continue to be developed for customers in California.

In our latest webinar (July 2025), “What does OBBBA mean for solar and storage in California?,” Kevin Flanagan and Dan Smith sat down to address the impacts of this newly signed law on behind-the-meter distributed generation projects, and how public agencies can navigate moving forward. Below are some of the main takeaways from this session, including how agencies can act now to still deploy economically viable solar and storage.

Impacts of the Bill

The bill accelerates the phaseout of the Inflation Reduction Act’s solar Investment Tax Credit (ITC), creating an urgent timeline for municipalities, school districts, and county governments to benefit from the tax credit. Projects that are placed in service by the end of 2027 can still capture the ITC. Alternatively, for projects that commence construction within 12 months of the bill’s enactment, there is no 2027 placed in service deadline. While the full impact of the bill could significantly increase project costs, some agencies may still benefit from the ITC before it phases out. For as long as it is available, the ITC is 30% and there are additional ITC adders that could push tax credits to 40% or even 50%, depending on project location and specific characteristics. One important thing to note is that energy storage projects will remain eligible for the 30% ITC through 2033, remaining a valuable solution for public agencies.

Furthermore, starting January 1st, 2026, projects cannot claim the ITC if they are getting a certain amount of material assistance from Foreign Entities of Concern (FEOC), which include certain entities based in or associated with Russia, China, Iran, and North Korea. As outlined in the bill, as of 2026 only 60% of project equipment can come from these specified foreign entities, meaning that projects must procure at least 40% of equipment from non-FEOC sources, which can be domestic or from other non-specified countries.

Solar developers are working quickly to commence construction on projects by leveraging the 5% test method, which is the most efficient path for new projects or customers to lock in tax credits by procuring 5% of project materials before the July 2026 deadline. This can be completed before a project breaks ground at the project site, so it is the most realistic method for customers considering new projects. This means that it’s important that public agencies contemplating renewable energy solutions act fast in order to lock in projects now and ensure economic viability.

The Executive Order

Shortly after signing the bill, the POTUS issued an executive order instructing the Treasury Department to evaluate the current “commencement of construction” standards for projects. Even with the direction provided in OBBBA, a lot still hinges on the IRS reviewing and potentially modifying existing rules for how projects qualify for these still available tax credits. “We have to wait and see what the Treasury Department does,” said Flanagan. There may be changes to the current 5% test method or the physical work test (completing a significant amount of physical work on the projects ahead of the deadline), and even potentially revisions to IRS guidelines that can impact projects retroactively.

The road ahead

Despite challenges and diminishing incentives, the experts remain optimistic. With California’s utility rates projected to continue rising, solar remains an attractive long-term investment and proven strategy for public agencies looking to manage energy costs, meet sustainability mandates, and demonstrate forward-thinking leadership.

The rapidly shifting state and federal policy landscape underscores the continued importance of strategic solar development. The reality is while OBBBA will not stop solar deployment in California, it will make projects far less economical than they are right now. “React to things changing instead of waiting for them to change on you,” Smith advised. Public agencies should act quickly to determine project feasibility and a development strategy that takes full advantage of the IRA’s previously provisioned tax credits.

“React to things changing instead of waiting for them to change on you.”

Programs like SPURR’s REAP Program provide a critical resource, offering pre-negotiated contracts and feasibility studies that can help public agencies navigate this transition and secure solar projects before the tax credit window closes.

The solar landscape is undoubtedly complex, but not unnavigable. Public agencies that approach solar strategically, with expert guidance and thorough analysis, can still achieve significant long-term value.