On May 9, the state of California took an unprecedented step intended to move solar panels firmly into the mainstream of energy generation. The California Energy Commission, voted unanimously (5-0) to require solar panels on almost all new homes built after Jan. 1, 2020.
Bloomberg reports that the policy will apply to single-family and multifamily residences that are three stories tall or less. Houses that are built in very shady areas can receive an exemption. Carl Reichardt, a San Francisco-based analyst for BTIG, LLC, told Bloomberg that homebuilders may pass on costs to customers, and that large homebuilder companies like KB Home and Meritage will fare better than smaller builders, because the large firms have been offering solar homes for years.
Brent Anderson, a spokesman for homebuilder Meritage Homes Corp., told Bloomberg, “With home prices having risen as much as they have, I think home buyers would find it a little distasteful to be forced to pay more for solar systems that they may not want or feel like they can’t afford. Even though, in the long term, it’s the right answer.”
California has some of the highest home prices in the country. Data from the National Association of Realtors showed that in 2017, Anaheim, San Francisco, and San Jose took the top three spots for the most expensive real estate markets in the country, with median prices of existing single-family homes of $750,000, $815,000, and $1,070,000, respectively. Southern California’s median home prices increased 8.4 percent in March 2018 from the year before.
The New York Times reports that the new solar rule will add $8,000 to $12,000 to the cost of a home. The Orange County Register pegs the total cost of all new energy standards as adding $25,000 to $30,000 to the cost of building a new home. The Los Angeles Times reports that while California has added more new homes to the housing stock than in years past, experts still believe the growth is not enough to keep pace with population growth.
MIT’s Technology Review expressed the concerns with the plan’s high cost in an article titled, “California’s rooftop solar rule is a pricey path to emissions reductions.” The author, James Temple, noted, “this feel-good change to the building code is a questionable public policy for cutting greenhouse-gas emissions.” It is estimated that new homeowners will see energy savings that should balance out the additional home cost – according to The New York Times, residential homeowners should save $80 a month on energy bills, and the added cost would add about $40 to an average monthly payment of a 30-year mortgage. However, Severin Borenstein, a University of California economics professor, told Temple that “these savings are effectively subsidized by other ratepayers without solar panels, net metering and solar tax credits.”
California’s drive to increase solar adoption may pay off on that front – while the national share of energy generated via solar panels was about one percent in 2017 according to the Energy Information Administration, it accounted for 9.98 percent of California’s in-state generation in 2016.