If your California business or nonprofit is thinking about going solar, there’s no better time to act than now! The present is always a great time to start benefiting from lower power bills and the many other benefits of solar. But now, there’s another reason not to delay going solar.
Starting on January 1, 2024, commercial solar projects in California will be subject to new rules set forth by AB 2143, which was signed into law in September 2022. Under AB 2143, any commercial-scale, non-residential net energy metered (NEM) solar project over 15 kW is considered a public works project and is therefore subject to prevailing wages. That requirement includes any energy storage associated with a project. The law applies to all construction workers and apprentices who work on these projects.
What does this mean for your solar project? That depends.
When does your project start?
AB 2143 applies only to projects that start after January 1, 2024. But it’s not always clear when a project has officially started.
The California Public Utilities Commission (CPUC) is currently in the process of defining what it means to start a project before January 1, 2024 for purposes of AB 2143. The proposed decision issued by the CPUC on August 2 stipulates that a project “start date” is determined by the interconnection application submission date. The CPUC will likely be voting to finalize its proposed decision on September 21.
Sounds simple, right? Just get your interconnection application in by December 31, 2023, and your project won’t be subject to the prevailing wage requirement?
Not surprisingly, it’s not that simple.
Your utility can reject your interconnection application for a variety of reasons. If your application is sent back for minor adjustments, you generally have the ability to make minor modifications without having to submit a new application and be assigned a new interconnection application date. But if major adjustments are needed (such as an increase in the kW system size), you might have to start a new application and lose your original submission date. That new application could change your project’s “starting date” to next year, when it would be subject to the requirements of AB 2143.
You also need to be prepared for the possibility that your interconnection application could be denied. But you can make this scenario less likely. The most important thing to do is to plan your project carefully to ensure that it doesn’t increase in size after you submit your interconnection application. Even a small size increase can trigger the need for a new application. The farther along your project is by the end of this year, the lower the risk of running into problems. But careful planning will go a long way to ensuring that your interconnection application is accepted without major changes.
What are prevailing wages, and who’s responsible for them?
A prevailing wage is the basic rate of wages and benefits paid to workers employed in similar positions in a specific region. The State of California maintains information on prevailing wages for various trades.
For projects subject to AB 2143 requirements, it’s up to your contractor to pay prevailing wages. But if you are the project owner, your business or nonprofit needs to ensure that your project complies with this requirement.
It’s important to ensure that your contractor is complying, because noncompliant projects will not be eligible to receive electricity service under NEM. AB 2143 requires that solar contractors submit payroll records twice a year to the CPUC to verify their compliance.
Apprentices, like other workers, are subject to the prevailing wages requirement, though their wages are lower than those of journeymen. The specific apprenticeship requirements for solar projects under AB 2143 are still being determined.
How will the new requirements affect your project?
Again, that depends.
It’s true that the requirements of AB 2143 might make some projects a bit more expensive, but that won’t be the case across the board. Project costs vary depending on a number of factors, and many solar projects in California are already paying good wages. It’s possible that the new law will not have a significant effect on your project costs because employees are already being paid near or at the prevailing wage standard.
For larger projects, labor costs may not represent a significant portion of the entire project cost. In those cases, paying prevailing wages might not place a major burden on a project. And very large projects are already subject to a prevailing wages requirement independent of the California law. The Inflation Reduction Act (IRA) requires projects that are 1 MW or larger to pay prevailing wages in order to get the full Investment Tax Credit or Production Tax Credit.
Whatever the economic impacts on your project, the fact remains that for projects starting after this year, you will have to pay prevailing wages. If you want to avoid that requirement, now is the time to get your solar project going.
Paying prevailing wages may seem like a burden, but these requirements may have some upsides for solar projects. As demand for renewable energy increases in California and across the U.S., the solar industry is experiencing significant labor shortages. Paying good wages will help ensure that we have the workforce we need to meet our clean energy goals.