California Requires Solar Panels on All New Homes

California Requires Solar Panels on All New Homes

California took the final step last week to be the first state in the nation to require solar panels on new homes. The California Building Standards Commission unanimously upheld a May 9 decision by the California Energy Commission to change the state’s Green Building Standards Code to require solar panels on homes up to three stories. The requirement goes into effect January 1, 2020.

Under the new requirements, builders must take one of two steps: incorporate solar panels in individual homes, or build a shared solar-power system serving a group of homes. Homeowners may either own the system outright, or lease on a monthly basis. Opponents of the measure said the addition of solar panels to new homes will increase the cost of new homes and reduce the number of new homes built. Home affordability is already an issue in California, one of the tightest housing markets in the US.

Expected Impact

Indeed, analysts estimate the new requirement to add $8,000 to $12,000 to the cost of a home. Based on a 30-year mortgage, the Energy Commission estimates that the standards will add about $40 to the owner’s average monthly payment. However, the additional mortgage costs are expected to be more than offset by monthly savings of approximately $80 on heating, cooling and lighting bills.

In addition, a new rate structure next year will charge California customers based on the time of day they use electricity. So homeowners with energy-efficiency features, particularly storage batteries, will avoid higher costs. Solar also enables new homebuyers to enjoy greater protection against future rate increases.  State officials noted that residential solar makes communities more efficient and resilient to natural disasters. These benefits are expected to grow in the future as climate change makes catastrophic weather events – drought and wildfires, in particular – more common and severe.

California law requires at least 50 percent of the state’s electricity to come from noncarbon-producing sources by 2030. Solar power has increasingly become a driver in the growth of the state’s alternative energy production. With approximately 80,000 new homes built each year, the new building rules are expected to increase residential solar production significantly.

Windmill’s View

Although Windmill Capital Management is not in the residential solar market, we applaud the new rules. Growth in residential solar is a good predictor of commercial and industrial solar growth as business owners and operators become more familiar with the financial and environmental benefits. In addition, solar, as one of the most common forms of distributed energy, helps focus more attention on problems with the electrical grid and the benefits of all distributed power systems, including cogeneration.