Solmar Insights
The California State Assembly advanced several bills in late August 2026 designed to boost distributed solar and energy storage resources, aiming to lower electricity costs and improve grid efficiency. The legislation addresses both compensation rates for exported energy and expansion of distributed generation, as the state faces some of the highest electricity prices in the country.
Key figures
SB 905 directs utilities to seek new distributed resources
SB 913 sets compensation rates for exported energy at peak
AB 1738 authorizes statewide remote inspections for solar and storage
Legislative focus on grid and cost relief
The passage of Senate Bill 905 marks a central element in the state’s legislative push to adapt its grid infrastructure for growing distributed generation. Introduced by Sen. Josh Becker, the bill instructs California utilities to identify sections of the electrical grid that could absorb additional energy loads, prioritizing the integration of commercial and residential solar resources. This legislative action responds directly to the state’s rising demand for electricity and widespread concerns about affordability for utility customers.
Industry advocates point to the measure as a necessary step for maximizing existing grid assets while aiding efforts to reduce ratepayer costs. California’s high electricity prices have heightened the urgency for scalable solutions, and the new mandate is designed to support both grid operators and project developers in situating distributed resources where they add the most value.
This approach seeks to not only advance the deployment of solar and storage assets, but also to put downward pressure on utility rates statewide. According to the legislative summary, the expectation is that utilities will develop frameworks to pinpoint circuits best suited to additional generation, accelerating targeted investment in distributed energy.
New compensation mechanisms for distributed resources
Senate Bill 913, also passed in late August, establishes a method for compensating customers who export energy during periods of heightened demand, such as when stored battery electricity is provided back to the grid at peak times. This new rate structure is intended to encourage the use of home energy storage by ensuring that exported electricity is valued at times when the grid requires it most.
The introduction of standardized compensation addresses a long-standing policy gap that has affected project economics for distributed and behind-the-meter assets. By creating a defined pathway for revenue during peak pricing events, SB 913 aims to scale up participation by commercial and residential systems in supporting critical grid needs. This provides developers and homeowners with more predictable income streams and could enhance project bankability.
With California continuing to experience frequent price spikes and volatility during periods of high demand, the compensation reforms are likely to further integrate distributed energy storage into broader reliability strategies. The policy shift signals intent to more fully harness home battery assets and their grid-supporting potential.
Community solar and storage program launch
In addition to circuit and compensation reforms, the Legislature passed a bill introducing a statewide community solar and storage program. This measure responds to active calls within the industry for mechanisms allowing broader participation in distributed generation, particularly for customers without suitable onsite space for solar installations.
Under the newly passed legislation, community solar projects are expected to provide greater access for renters and low-income households, while enhancing local grid resilience. The move follows several years of policy debate about appropriate frameworks for collective solar ownership and energy sharing models in California.
By supporting community-based energy assets, the program is intended to drive incremental capacity additions that can be sited according to grid need, further complementing the targeted circuit deployment encouraged under SB 905. Implementation will require coordination with utilities and local authorities to manage interconnection and allocation of project benefits.
Remote inspections and balcony solar legalization
California Governor Gavin Newsom signed Assembly Bill 1738 and Senate Bill 868 into law to further broaden access and streamline permitting for solar and storage. AB 1738 enables remote inspections of home energy upgrades, such as solar and storage installations, eliminating a major bottleneck for residential project delivery, especially in hard-to-reach or rural areas.
SB 868 legalizes the use of small plug-in, or “balcony” solar systems. These systems, commonly sized for urban apartments or smaller commercial settings, expand the universe of distributed solar participants by reducing technical and permitting barriers traditionally associated with rooftop or ground-mounted arrays.
Together, these measures are structured to accelerate market access and project throughput, directly responding to industry input on regulatory inefficiencies and untapped customer segments. Both provisions are anticipated to serve as models for other states examining regulatory modernization for distributed resources.
Implications for distributed asset deployment
The legislative actions in California underscore a multi-pronged strategy to address both cost containment and the technical integration of distributed renewables and battery storage into the state grid. By formalizing processes for circuit selection, compensation structuring, community solar, inspection modernization, and plug-in system deployment, these bills collectively lower barriers to entry and improve clarity for investors, developers, and utilities.
The full effect will depend on follow-through in implementing these frameworks, including how utilities prioritize circuits and how compensation levels are set for export during peaks. However, the legislation provides clear signals that distributed assets will play a larger role in the state’s decarbonization, reliability, and affordability efforts over the next several years, especially as California prepares for further load growth and electrification trends.
For institutional buyers and distributed asset developers, the new legal environment is likely to streamline site selection, accelerate approvals, and reduce uncertainties tied to project economics. The suite of recent bills represents the most substantive rewrite of distributed energy policy in California since the last net metering reforms.
What this means for buyers
Distributed energy and interconnection opportunities in California could shift rapidly in the wake of SB 905, SB 913, and associated legislation. The new requirements for utilities to map circuits for distributed resource additions, plus compensation reform for battery exports, create a trackable pathway for project siting and revenue modeling. Buyers will need to re-evaluate eligible circuits, potential off-take structures, and prioritize projects that can capitalize on these procedural and compensation updates during this quarter’s origination cycle.
Reporting via the original publisher
