(Bloomberg) -- California regulators dealt the struggling solar industry a fresh blow, adopting rules that renewable advocates warn will discourage smaller projects.

The rules decided Thursday come more than a year after the state most responsible for making solar power mainstream slashed incentives for residential systems, prompting rooftop installations to plunge. 

The rules cover so-called “community solar” programs that allow renters and low-income households to participate in small-scale solar projects built on nearby vacant land or commercial rooftops. To encourage the spread of these projects, a coalition of California ratepayer advocates, environmental justice groups and unions put forward a proposal aimed at making them affordable for subscribers and attractive to developers.

The California Public Utilities Commission rejected that plan in favor of another backed by the state’s electric utilities that is designed to avoid shifting costs onto Californians who don’t participate in community solar projects. 

“We need to be very focused on this downward pressure on bills at this moment because we’re in the midst of an affordability crisis in electricity bills,” said Alice Reynolds, California Public Utilities Commission president. “Keeping the bills affordable is also key to unlocking our climate change objectives.”

Solar advocates say under the new rules compensation for developers will be too low to encourage investing in such projects. When an earlier draft of the rules was released in March, Neil Chatterjee, a Republican former chairman of the Federal Energy Regulatory Commission, sent the CPUC a letter saying the move could “unsettle markets across the country.”

“You can’t deploy the amount of community solar that the federal government wants without California,” Steve Campbell, western regulatory director for advocacy group Vote Solar, said in an interview. “Nationally speaking, California is critical.” 

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