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April 9, 2024
min read

The Role of Prevailing Wages in Solar Renewable Energy Companies

April 9, 2024
min read

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The renewable energy sector, particularly solar energy companies, has been rising due to increasing demand for sustainable and clean energy sources.

One significant legislative development, Assembly Bill (AB) 2143, enacted in 2022 by Carillo, is set to profoundly impact this landscape. Starting January 1, 2024, AB 2143 mandates that large customer-sited renewable electrical generation facilities, including solar installations and any associated battery storage that enroll in specific tariffs like net energy metering or net billing tariffs, must pay prevailing wages to all construction workers and apprentices.

This legislation aims to ensure fair compensation to skilled workforce in the renewable energy construction sectors, particularly solar energy projects. Prevailing wages, as defined by the Department of Industrial Relations (DIR), are standard wages determined for each locality for different types of work and craftsmanship levels.

AB 2143 brings to light the significance of prevailing wages within the burgeoning renewable energy sector, especially within solar companies. By comprehending the implications and benefits of such legislation, stakeholders, including contractors, workers, and energy companies, can navigate the evolving energy landscape with greater insight and preparedness. This blog post delves into the role of prevailing wages in solar renewable energy companies, exploring its impact, significance, and anticipated benefits for the industry and its workforce.

Understanding AB 2143

Definition and Overview

Assembly Bill (AB) 2143 marks a significant legislative effort to integrate prevailing wage standards within the renewable energy sector, particularly targeting the solar industry. Adopted in 2022 and effective from January 1, 2024, AB 2143 mandates that all construction workers and apprentices involved in eligible large customer-sited renewable electrical generation facilities, including solar installations and any associated battery storage systems, are paid prevailing wages. This requirement applies to projects enrolled in specific tariffs like net energy metering or net billing tariffs. AB 2143 represents a pivotal move toward ensuring fair labor practices in the burgeoning solar industry while aligning with goals to expand California's renewable energy infrastructure.

Eligibility Criteria for Solar Renewable Projects

To fall under the purview of AB 2143, a solar renewable project must be large and customer-sited and enrolled in certain tariffs designed for these projects, such as net energy metering or net billing tariffs.

Important exclusions apply to this rule:

  • residential facilities expected to generate no more than 15 kilowatts of electricity,
  • projects already defined as public work under existing law,
  • facilities serving modular homes, communities, or multi-unit housing of up to two stories.

Eligibility is assessed during the interconnection application process, where projects must comply from the outset to avoid violating state law.

Exclusions under AB 2143

Not all solar projects are covered by AB 2143. Key exemptions include projects with a maximum generating capacity of 15 kilowatts or less, installations on single-family homes, projects already categorized as public works, and facilities exclusively serving modular or low-rise multi-unit homes. These exclusions balance the intent to foster fair labor wages without overburdening small-scale or residential solar energy initiatives.

Implications of AB 2143 on the Solar Industry

Prevailing Wage Requirements

Prevailing wages, as defined by the Department of Industrial Relations (DIR), are now a requirement for construction workers and apprentices involved in eligible solar projects under AB 2143. This introduces a standardized wage floor for labor in large customer-sited renewable energy projects, ensuring that workers are compensated fairly according to the prevailing standards in the industry. Contractors must maintain accurate payroll records and submit these records biannually (July 1 and December 31 of each year) to the Commission to demonstrate compliance.

Compliance and Enforcement Mechanisms

To ensure adherence to AB 2143, contractors are mandated to submit digital copies of certified payroll records for workers on eligible projects twice a year. The California Public Utilities Commission (CPUC), supported by GCAP Services, plays a pivotal role in outreach, education, and the collection of payroll records through the CPUC Solar-Utilities Reporting, Guidance, and Education (SURGE) platform. Non-compliance, evidenced by willful wage violations, could result in the disconnection of the project from beneficial tariffs such as net metering or net billing tariffs, underscoring the importance of compliance from the outset.

Potential Impact on Project Costs and Development

While enforcing prevailing wage requirements under AB 2143 aims to ensure fair compensation for workers, it introduces potential implications for project costs and development timelines in the solar project sector. Compliance could result in increased labor costs for eligible projects, potentially affecting overall project budgets and financial feasibility. However, aligning wage standards with prevailing rates might also contribute positively by attracting skilled labor and improving work quality, which benefits the long-term viability and success of renewable energy initiatives. This complex interplay between labor costs, project development, and industry growth underscores the nuanced impact of AB 2143 on the solar industry.

The Role of Prevailing Wages in Promoting Fair Labor Practices

Definition and Determination of Prevailing Wages

Prevailing wages are a vital aspect of labor standards, particularly in sectors such as renewable energy, including solar facilities. These wages are set and defined by governmental bodies—in the United States, often by the Department of Industrial Relations (DIR). They are determined based on the wages that are regularly paid to workers in similar occupations within a specific geographic area. This ensures that workers on renewable energy projects receive a fair, competitive wage that aligns with industry standards.

The introduction of prevailing wage requirements for large customer-sited renewable electrical generation facilities, as stated in Assembly Bill (AB) 2143, underlines the commitment to equitable labor practices within the renewable sector. The legislation, effective from January 1, 2024, mandates that all construction workers and apprentices involved in eligible projects be paid no less than the prevailing wage.

Navigating Compliance: Best Practices for Solar Companies

Keeping Accurate and Up-to-Date Payroll Records

Compliance with prevailing wage laws entails meticulous record-keeping. Solar companies must diligently maintain and verify payroll records. Accurate payroll documentation helps avoid potential disputes and ensures transparency.

Under AB 2143, eligible project contractors must submit digital copies of their certified payroll records to the Commission biannually. This systematic approach towards payroll management ensures that companies remain compliant and workers are justly compensated in accordance with prevailing wage standards.

Utilizing Resources like the CPUC SURGE Website for Guidance

The CPUC Solar-Utilities Reporting, Guidance, and Education (SURGE) website serves as an invaluable resource for contractors working on projects that qualify under AB 2143. This platform not only houses the payroll records submission portal but also provides comprehensive guidance on compliance procedures.

Engaging in Outreach and Education Efforts

Educational outreach is crucial for ensuring all stakeholders know and understand the prevailing wage requirements. Solar companies should engage in and support outreach and education efforts led by industry associations and regulatory bodies. Programs and workshops like those organized by GCAP Services in collaboration with the California Public Utilities Commission (CPUC) play a pivotal role in informing stakeholders about key compliance information. Participation in these educational initiatives not only aids compliance but also fosters a community of practice committed to fair labor standards within the solar renewable energy sector.

The Future of Prevailing Wages in Renewable Energy

With the advent of Assembly Bill (AB) 2143 in California, the landscape for prevailing wages within the solar and broader renewable energy sector is experiencing a significant shift. This legislation, enacted to ensure fair compensation for workers on large-scale renewable energy projects, serves as a bellwether for similar laws that may emerge across the United States. The expansion of such regulations has the potential to reshape the industry, fostering a more equitable and sustainable growth trajectory for renewable energy deployment.

Possible Extensions Beyond California

As California leads with AB 2143, mandating prevailing wages for workers on qualified renewable electrical generation projects, other states are taking note. The successful implementation and outcomes of this policy could inspire similar legislative efforts outside of California. The appeal of creating more equitable labor standards in burgeoning industries like solar energy is strong. It aligns with broader movements toward sustainability and social justice, which are gaining momentum across the country. Additionally, as the renewable energy sector continues to grow, the need for a skilled workforce becomes increasingly critical. Implementing prevailing wage laws could be a strategic approach to attract and retain the necessary talent by ensuring competitive compensation.

Long-Term Effects on the Solar Industry and Workforce

The introduction of prevailing wages in the renewable energy sector, starting with solar companies, is expected to bring about several long-term effects:

Workforce Development: By mandating fair wages, the industry is likely to attract a more skilled and committed workforce. This can lead to higher quality work and more efficient project completion rates. Prevailing wages can act as an incentive for workers to enter and remain in the renewable energy sector, thereby tackling potential labor shortages.

Project Costs and Pricing: In the short term, the implementation of prevailing wage requirements may increase project costs due to higher labor expenses. However, over time, the increase in efficiency and reduction in workforce turnover could offset these initial costs. Moreover, as the practice becomes more widespread, economies of scale and increased competitive bidding could mitigate cost increases.

Industry Standards and Reputation: Implementing prevailing wages can enhance the reputation of the renewable energy industry as a leader in sustainable and ethical practices, not just in terms of environmental impact but also in its treatment of workers. This could increase public support and consumer demand for renewable energy solutions, further accelerating the industry's growth.

The move towards prevailing wages in the solar and renewable energy sector represents a convergence of environmental sustainability and social equity goals. By compensating workers fairly, the industry not only ensures its projects are built on a foundation of justice but also secures a more resilient and dedicated workforce for the future.

As the renewable energy sector continues on its robust growth path, the introduction of Assembly Bill (AB) 2143 marks a pivotal step in ensuring fair labor practices within the burgeoning solar energy sector. Effective January 1, 2024, AB 2143 mandates prevailing wage rates for construction workers and apprentices involved in certain solar energy projects. This legislation not only underscores the importance of fair compensation within the renewable energy industry but also emphasizes compliance and ethical labor practices as integral components of sustainable development.

Prevailing wages, as defined by the Department of Industrial Relations, are now a cornerstone of California's push towards a greener future, ensuring that the growth of the solar sector is both equitable and inclusive. The comprehensive approach taken by AB 2143, involving detailed requirements for record-keeping, digital submissions, and stringent compliance measures for contractors, showcases a model that could inspire similar initiatives in other states or regions.

The California Public Utilities Commission (CPUC), in collaboration with GCAP Services, has taken proactive steps toward facilitating this transition. Through educational workshops, the development of the CPUC SURGE website, and continuous guidance, stakeholders are equipped with the necessary tools and knowledge to navigate the changes this legislation brings.

In essence, AB 2143 is more than just about prevailing wages; it's a testament to California's commitment to responsible and equitable development in the renewable energy sector. As solar energy continues to play a critical role in our transition towards cleaner power sources, ensuring that this growth benefits all sector participants is imperative. The effective implementation of AB 2143 holds the promise of advancing renewable energy objectives and fostering a more just labor environment, marking a significant step forward for the industry.

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