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California moves closer to becoming the first state to mandate solar panels on new homes

California is poised to become the first state in the nation to mandate solar panels on most new homes as part of a program to harness clean technology and reduce the impact of new homes on the environment.

The California Energy Commission is expected to vote on the plan Wednesday. If approved by the five-member board, it would become effective Jan. 1, 2020, on most single-family homes as well as multi-family residential buildings of three stories or less, including condos and apartment complexes.

"California would be the first to do this, and it's well positioned to do it," said Jacob Corvidae, a manager at the Rocky Mountain Institute, a Colorado-based green nonpartisan research and consulting nonprofit. "Utility prices are high and solar access essentially is very good in California."

California — now the world's fifth largest economy — already has a reputation for pushing the boundaries when it comes to going green. The state's renewable portfolio standard requires power companies to have 50 percent of total energy sources from renewable energy such as solar, wind, geothermal and hydroelectricity by 2030.

"California has been a leader in solar in the U.S. for a long time and it's paid dividends both economically and to our environment here," said Sean Gallagher, vice president of state affairs for the Solar Energy Industries Association, a national trade association of manufacturers, developers and installers in the U.S. solar-energy industry. "California is taking a step further basically recognizing that solar should be as commonplace as a front door welcoming you home."

Extra construction costs

According to the commission's estimates, the state mandating new homes have solar will add an extra $10,538 in upfront residential construction costs but would result in $16,251 in energy savings over a 30-year period. There are other mandates in the new 2019 standards that also apply to everything from current ventilation to indoor air quality.

The plan still allows new home construction to continue with some natural gas but it looks to reduce gas need over time and facilitate a shift to high-efficiency electric appliances, such as heat pump water heaters. All-electric homes using solar are seen as having lower greenhouse gas emissions and less energy consumption than those that use natural gas.

Under the state's proposal, new homes are expected to cut energy use by more than 50 percent by adopting standards that require solar photovoltaic systems. For residential homeowners, the commission estimates that the standards will add about $40 to an average monthly payment over a 30-year period but essentially save consumers $80 on monthly heating, cooling and lighting bills.

"Obviously, climate change is a big deal and it's great that the state is being so progressive with its clean energy goals," said Kelly Sanders, assistant professor at the University of Southern California's Viterbi School of Engineering. "This is a big push in the right direction, but that being said, there's a lot of policies that need to go into place to support this program."

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Housing affordability

For one, Sanders said the state already has a "huge problems with home affordability. You have to think through how this going to affect lower socio-economic populations."

"At the end of the day, this could have mixed effects on the housing market," said Svenja Gudell, chief economist at Zillow, the real estate marketplace site. She said solar is usually associated with higher-end properties due to cost and that could potentially "hurt the housing market even more so when it comes to availability of lower-end homes."

The Zillow economist added that it is "relatively hard to build homes in California," contributing to the state's housing shortage. A state housing report released earlier this year found hundreds of cities were making "insufficient progress" in affordable housing to keep up with population growth.

Experts suggest the cost of adding solar on new homes in areas such as the San Francisco Bay region where real estate prices are already high may not impact homebuyers as much. But it could prove to be more challenging for new homeowners in communities with lower housing costs such as Fresno in the Central Valley.

Regardless, the state estimates the proposed solar standards applying to most homes and many commercial structures could save California residents and businesses hundreds of millions of dollars in energy costs over the next decade.

The California Building Industry Association, or CBIA, estimates only 15 to 20 percent of single-family homes built today statewide have solar panel installations. Some cities in the state have solar panel rooftop mandates on new buildings, including San Francisco.

Homebuilder concerns

Bob Raymer, the technical director for the CBIA, said the trade group shared some concerns about the new standards with regulators early in the process. For example, there were initial concerns about homes where there might be insufficient sunlight and how the proposed requirements would apply along with concerns about impact of limited roof space.

The new solar mandate does provide alternatives or certain exemptions for homes or residential buildings when they are shaded due to trees or nearby structures. There are also special rules that apply for homes with roof space lacking sufficient room for a solar installation.

At the same time, the building association pushed for the 2019 mandate to allow the option of community shared solar or battery storage systems as part of a partial or total offset to the site solar requirements. The group also supported a compliance credit program for battery storage systems.

Tesla, known for its electric cars, provides energy storage solutions for solar installations and electrical upgrades in homes. The California company submitted comments last September to the state energy commission and its staff to encourage the adoption of a battery credit.

Tesla on solar mandate

"Creating a battery credit enables the adoption of a new and valuable technology to compete on an equal playing field with all technologies," wrote Francesca Wahl, a business development and policy senior associate at Tesla. "Batteries can offset all technologies and should not be viewed as offsetting any single measure, efficiency or renewables."

In fact, the state solar mandate does allow for what's known as compliance credits for home builders installing battery systems such as the Tesla's Powerwall. They can use the credit to offset the size of a solar array.

"This solar mandate is one of the policies that our state can do to help bring the cost of storage down," said Kelly Knutsen, director of technology advancement for California Solar and Storage Association, an industry association of over 500 contractors, manufactures and distributors.

Knutsen points out that the number of residential solar projects in California – mostly homes – has soared 24-fold in over 10 years, from about 28,000 projects in 2007 to just over 688,000 at the end of 2017. The state data is based on solar projects from customers served by the three largest investor-owned utilities in California: PG&E, Edison International's Southern California Edison unit and Sempra's San Diego Gas & Electric subsidiary.

Short of 'net zero'

The new homes won't be required to be completely off the grid using 100 percent solar. Doing so would require solar storage batteries at night when sunlight isn't available.

That said, CSSA has been advocating that the energy commission adopt a mandate of "full net zero energy homes, which would mean you would generate as much energy as you're using," said Knutsen. He added that the state has essentially backed off that goal and "we're somewhat disappointed but we are making progress because they are requiring solar for the first time and they do have a storage option."

Nevertheless, the state's solar mandate may encourage more homebuilders in California to allow homeowners to purchase or lease solar systems in new homes, similar to current programs offered by such homebuilders as Lennar. The Florida-based homebuilder's SunStreet Energy Group operates in at least 10 states, including California, and puts solar roof installations on many of the new homes the company builds.

"I don't think you would have gotten something through the commission without active participation of the homebuilders," said Gallagher, the solar industry official.

Falling solar system costs

Meanwhile, the cost of solar systems for homes has dropped by approximately 70 percent in the last six years, according to Gallagher. Similarly, the costs for commercial and industrial solar installations have fallen steadily in the past decade.

As the costs for solar technology have declined, though, there's been a surge in power generated from solar installations and sometimes a glut of energy so large other states essentially get it for free.

Last month, there were periods in the afternoon when California had more than 60 percent of all power demand met by solar power, according to the California Independent System Operator, the entity that runs most of the electricity grid for the state.

USC's Sanders said with the current solar power generation that the state already has installed means there have been situations in the middle of the day when California experiences a surplus of solar energy. On top of it all, she said said many utilities are locked up in long-term power purchase agreements.

"At some point, demand is going to have to shift to support so much solar energy ... or we're going to have to implement a whole lot of storage to facilitate us even being able to use that solar energy," Sanders said.

Finally, experts say having solar homes generate most or all of their own power also could eventually help California in the face of extreme weather events such as wildfires that destroy portions of the grid or even potentially in other disasters.

"If you look at what's happened in Puerto Rico and other places, they have some huge sections that are out of power due to the hurricanes," said Rocky Mountain Institute's Corvidae. "Wider solar adoption can create greater resilience for extreme weather events that we're starting to see crop up."

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