CEC says extra cost will be offset by lower bills, but critics not convinced
California is the verge of becoming the first state to require that all new homes be equipped with solar panels. But the mandate will add thousands to the cost of new construction, although supporters say homebuyers would save money in the long run.
The five members of the California Energy Commission (CEC) are expected on Wednesday to adopt the latest round of the state’s Building Efficiency Standards, which are updated every three years.
The proposal calls for installing solar photovoltaic (PV) systems on every house, condominium and apartment building that receives a building permit. Homes that are shaded by trees or taller buildings, as well as houses with roofs too small to accommodate a PV system, would be eligible for exceptions or alternatives to the mandate.
The rule would go into effect Jan. 1, 2020, and does not need to be approved by the Legislature.
“This is really just another step, an important step but a step nonetheless, along a trajectory that is long established in California to reduce the greenhouse gas emissions associated with our buildings and to improve our air quality,” said Andrew McAllister , a CEC commissioner who helped put together the proposed rule.
The CEC estimated the mandate would increase the construction costs of a single-family house by $10,538 , although contractors in the San Diego area have put the costs at about $20,000 , depending on the size of the home.
The commission said the extra cost would be offset by the savings homeowners would pocket due to lower monthly utility bills. The CEC estimated the savings to come, on average, to $16,251 over the 30-year life of the home.
McAllister said the CEC has worked with a variety of stakeholders, including builders and members of the industry’s supply chain, as well as environmentalists.
“We’ve projected this for long enough and everybody’s comfortable with solar,” McAllister said. “It’s a mature market and it’s totally doable. The builders are ready and able and actually excited in many cases to build these high-performing solar homes.”
Some, perhaps, but not all.
“I would be in favor of future housing being pre-wired to accommodate PV but I’m certainly not in favor of willy-nilly requiring that it be installed,” said Ian Gill , managing partner of Silvergate Development LLC , a San Diego company specializing in multifamily and mixed-use projects. “I think that should be a market-driven, feasibility-driven decision by homeowners.”
Borre Winckel, the president and CEO of the Building Industry Association of San Diego County , estimated less than 20 percent of all new construction on single-family units in the county includes solar.
“We’ve been working with the commission for years on this,” Winckel said, going back to the Schwarzenegger administration. “We knew it was coming. The political will is for it to go forward. There’s not much we could do. The only thing we can tell the consumer is that their housing costs will go up, but their utility bills will come down.”
The CEC’s vote comes as real estate prices in California in general and San Diego in particular keep climbing. The median price for a new home in the San Diego area hit $619,500 in March .
Gill said in 2016, about 10,000 permits were issued in the San Diego area for new construction but only about 2,000 were targeted at single-family construction. By contrast, in the mid-1990s, Gill said, about 80 percent of the permits issued were for single-family homes.
“That’s just one more reason why housing is so expensive here,” Gill said. “It’s a terrible situation and the government keeps adding more regulatory constraint that further exacerbates the affordability problem. It’s absolutely unbelievable to me.”
McAllister said when the CEC develops new standards for buildings it is obligated to make sure they are cost-effective.
But should the free market determine whether new homes come equipped with solar installations?
“I think the free market in many ways has spoken and made solar a viable option,” McAllister said. “And our job as government officials is to balance the private and public interests. And there’s a clear public interest in cleaning up our air and reducing our greenhouse gas emissions. So that’s the direction we’re going.”
Among California’s clean energy mandates is Senate Bill 350 , passed in 2015 , which requires the state to double statewide energy efficiency savings in electricity and natural gas end uses by 2030.
Environmental groups such as the Sierra Club and the Natural Resources Defense Fund have come out in favor of the updated code, saying it helps pave the way for greener homes.
The solar industry, as one would expect, strongly supports the new standards.
The California Solar and Storage Association estimates about 15,000 new homes each year in the state are equipped with solar installations. On average, about 80,000 homes are built in California each year.
“So we’re going to see about 65,000 more solar homes starting in 2020 based on this policy alone,” said Kelly Knutsen, the association’s director of technology advancement . “These are tens of thousands of new homes that will represent a significant increase in the solar market in California.”
The rule would come at a time when solar needs a boost.
After steady year-over-year growth, solar jobs in California declined 14 percent in 2017 due in part to changes in net metering rules and a maturing market .
In January, President Donald Trump imposed tariffs of up to 30 percent on solar panels made abroad. About 80 percent of U.S. solar companies rely on imported parts.
In addition, solar installers have estimated the recently imposed tariffs on imported steel and aluminum can raise the price on the racking system on a home by about $100 to $200, depending on the size of the installation.
Passing the rule would be “really good news for California,” said Barry Cinnamon, CEO of San Jose-based Spice Solar , which specializes in residential installations. “Anything that’s going to expand the market and increase awareness is great.”
Gary London , an economist and real estate analyst in San Diego, said he was less concerned about the cost of the rule than its potential effect on developing better PV solar technology.
“The factors of production that go into the cost of a house is land, labor, material and capital,” London said, with land being the most expensive component. A requirement for PV solar installations on new homes “is a drop in the bucket” by comparison, London said.
“What I worry about is that with the force of regulation, it’s going to have an impact of perhaps stifling innovation because the (solar) industry will say, well, you have to have it anyway so why don’t I just charge you more for it and use less-efficient units? That’s my fear.”
Knutsen did not have the same concern.
“Any time you have a growing market, you get technology advancements because people want to build their widget and they want to have something that’s competitive and more people will buy that,” Knutsen said. “You also have this effect where when more people are doing something, it just become more efficient. You get economies of scale.”
If passed, the updated building code would also include stricter efficiency standards on lighting, ventilation, windows, walls and attics for non-residential as well as residential structures. The proposal would also include an option to promote solar paired with battery storage systems in the home.
San Diego Union-Tribune