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Implications of California Mandating Solar on New Homes by 2020

California has become the first state to require new homes be built with solar power systems. Bloomberg says, “California just sent the clearest signal yet that rooftop power is moving beyond a niche market and becoming the norm”.

California is a trend setter, so Bloomberg might be right on the money. Its graph on the fast rise of solar in the decade ending in 2017 makes the case very emphatically.

The law applies to single-family homes and multi-unit residential buildings less than four stories high. It requires those built after January 1st, 2020 to be outfitted with a PV solar energy system.

The mandate is one of four key Building Energy Efficiency Standards released by the California Energy Commission.

  1. Solar PV systems with smart inverters with optional battery storage
  2. Demand/Response compliance options including battery storage and heat pump water heaters
  3. Healthy indoor air through controlled home ventilation and filtration
  4. Tighter home envelopes with house wrap, more insulation in the attic and walls, efficient windows and more

Implications of Mandating Solar Power in CA

The immediate impact was a rise in solar stock prices (Sunrun rose 15%, e.g.) and a fall in prices for residential construction companies.

No wonder. A lot more solar power systems are going to be sold. The demand for a new home might fall, while the costs are likely to rise.

Positive Implications

Carbon emissions will be reduced: California’s goal is a 40% reduction in carbon emissions by 2030. This legislation will produce small steps in that direction each year.

Utility costs will fall for solar homes: The CEC expects homes equipped with solar to save $19,000 over the projected 30-year life of the systems.

Negative Implications

New home cost will rise: The CEC states that average cost of these solar energy systems will be $9,500. The average home in CA uses a 2.5kW to 4kW system.

At current prices of $2.80 to $3.22 per watt, the Commission is estimating the average system to be 2.95kw to 3.4kW, so the estimation seems low on the upper end. Systems for homes with 4+ bedrooms are often more than 4kW, so cost for them might rise to the $11,000 to $13,500 range.

Jimmy Pethokoukis, American Enterprise Institute economic policy analyst told CNBC:

This is great for wealthier homeowners, but for everybody else it’s one more reason to not go to California or to leave ASAP.

Maybe that’s part of the California Energy Commission’s design! 😉

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